Structural Barriers to Small Business Success
Map Demonstrates How Structural Racism Limits Business Opportunities in the Top 100 Metropolitan Areas
Entrepreneurship is often thought of as an arena of equal opportunity. The idea that through hard work and diligence, anyone can build a better future for themself and their family is a powerful narrative of hope that has propelled generations of Americans to start their own businesses. However, the reality is more complicated. Entrepreneurs of color, including Black, Latine, and Asian entrepreneurs, face significant structural barriers to building successful businesses in ways that white entrepreneurs do not.
Structural racism consists of interlocking systems of power that disadvantage some racial/ethnic groups and advantage others. Access to capital is one of the greatest obstacles that BIPOC entrepreneurs face in starting and growing their businesses. The racial wealth gap means that entrepreneurs of color are less able to save up funds to start a business or rely on the wealth of their family and friends for startup capital. Additionally, business owners of color face higher loan denial rates and, when they receive loans, are charged higher interest rates than their white counterparts.
Similarly, businesses located in communities of color contend with the effects of structural racism. Businesses in Black-majority neighborhoods are smaller and grow more slowly, even among those that enjoy high consumer ratings. Communities of color face hazardous environments, segregated schools, and higher instances of crime.
These are just a few of the many ways structural racism affects the business landscape. They are part of the reason that people of color have rates of entrepreneurship far lower than their relative share of the U.S. population. Given these disadvantages, is there a way to better understand how race and place are related to business success?
About the Tool
Structural Barriers to Small Business Success, a joint project by Small Business Majority, ICIC, and One Visual Mind, illustrates these inequities. Combining information from public and private data sources, including the American Community Survey and business data provider Data Axle, our tool enables users to better understand the business ecosystems in the communities where they live. Users can see how business presence (number of businesses) and business revenue vary by business owners’ race and the racial composition of the neighborhoods where businesses are located. They can explore patterns in industry, revenue, and employment size in fine spatial detail in the 100 largest metropolitan areas. Additionally, users can explore metro- and state-level summaries of business revenue by business owner race/ethnicity and by racial/ethnic and economic characteristics of a neighborhood.
Findings
Our tool shows that:
- Business owners of color are generally over-represented among businesses with very low revenues. However, this varies among metropolitan areas and industries.
- Compared to their counterparts in predominantly white neighborhoods, the typical businesses in neighborhoods of color are more likely to have very low revenues. This, too, varies among metropolitan areas and industries.
- Larger businesses (businesses with more employees) offer higher average weekly wages. Scaling businesses in under-resourced communities and communities of color could help increase wages and improve the lives of residents of these communities.
Our aim is to provide policymakers and community organizers with community-specific insights to support thriving businesses in under-resourced communities and communities of color. We invite you to explore our interactive tool!
Partners
Support for this tool was provided by the Robert Wood Johnson Foundation (RWJF). The views expressed here do not necessarily reflect the views of RWJF.