This report, which contains the results of a scientific national phone survey of small business owners (2 to 99 employees) conducted in March 2013, is designed to inform policy discussions about retirement security and serve as a basis for evaluating proposals that address the needs and concerns of small business owners.

For small business owners of color, entrepreneurship remains a critical wealth-building tool providing a pathway to self-determination and the middle class. In Oakland and nationally, entrepreneurs of color face significant barriers in starting and scaling their business due to the racial wealth gap, among other barriers.The city of Oakland knows the unique barriers its residents and entrepreneurs of color face. It released a 2018-2020 Economic Development Strategy with a racial equity lens, and a notable goal is to shrink the racial wealth gap through asset building in local communities of color. To support the city’s 2018-2020 Economic Development Strategy, The Greenlining Institute assembled a Small Business Advisory Group comprised of local small business leaders committed to advancing the needs of Oakland’s entrepreneurs of color. With this white paper, the SBAG provides the city a menu of recommendations to achieve the ambitious racial equity and small business goals included in its 2018-2020 Economic Development Strategy. This white paper includes specific recommendations for the city to foster a healthy and more inclusive small business ecosystem that allows entrepreneurs of color to thrive.

Business incubators and accelerators have emerged as a popular strategy to support the growth of entrepreneurial ventures, especially in the high-tech sector. They are designed to address the networking, education and capital challenges all entrepreneurs face. These challenges are most acute for women and minority tech entrepreneurs, suggesting that incubators and accelerators could have the greatest impact on their ventures. Yet, women and minorities are not participating in high-tech incubators and accelerators at the same rates as their white, male counterparts. Given the growing commitment, by both public and private sectors, to increase the numbers of women- and minority-owned high-tech businesses, a critical step will be to make incubators and accelerators more inclusive of diverse entrepreneurs. In addition, because these organizations, particularly accelerators, are attracting many young entrepreneurs, the underrepresentation of minorities among the entrepreneurs they support is especially concerning given that 43 percent of millennial adults are people of color ("Millennials in Adulthood," 2014). Given this demographic trend, helping incubators and accelerators to become more racially inclusive is important to ensure that all future tech entrepreneurs are given the same level of support.

The United States has an enviable entrepreneurial culture and a track record of building new companies. Yet new and small business owners often face particular challenges, including lack of access to capital, insufficient business networks for peer support, investment, and business opportunities, and the absence of the full range of essential skills necessary to lead a business to survive and grow. Women and minority entrepreneurs often face even greater obstacles. While business formation is, of course, primarily a matter for the private sector, public policy can and should encourage increased rates of entrepreneurship, and the capital, networks, and skills essential for success, especially among women and minorities. In particular, this discussion paper calls for an expanded State Small Business Credit Initiative and an enlarged and permanent New Markets Tax Credit to encourage private sector investment in new and small businesses. These capital initiatives should be complemented with new federal support for local business networks, and for local skills acquisition initiatives, to make it more likely that small businesses will form, survive, and grow. For the United States to continue to grow, to innovate, and even more importantly to generate jobs, we need to expand our rate of business formation and improve the prospects for survival and growth of young and small businesses. Increasing the rate of minority and female entrepreneurship may help to reduce the race and gender wealth gaps, to reduce income and wealth inequality, and to increase social mobility. With the United States becoming more heterogeneous, increasing business formation by minority and female entrepreneurs is critical to improving the rate of entrepreneurship overall. Thus, if we are to grow as a country, create jobs, and make progress on correcting income and wealth inequality, we need to help minority and female entrepreneurs succeed.

Minority-owned businesses play an increasingly important role in the U.S. economy. The nearly one million (996,248) minority-owned businesses with paid employees contribute $1.2 trillion in revenue and eight million jobs to the economy. Minority-owned businesses are especially important to inner cities—economically distressed urban neighborhoods characterized by high poverty and high unemployment rates— and minority wealth building. Building wealth for people of color in inner cities requires not only maximizing employment, but also supporting the development of more entrepreneurs in these neighborhoods and helping them grow their businesses. Entrepreneurship is a wealth building strategy and pathway out of poverty (Bradford, 2003; Gentry and Hubbard, 2004; Quadrini, 2000; Sutter, Bruton, and Chen, 2018). Supporting entrepreneurs of color in inner cities will build wealth and decrease unemployment and poverty in urban areas that need it most.

One barrier to economic development can be the overwhelming and expensive process of compliance with regulatory requirements for small businesses. A Pink Zone — an area where the red tape is lightened — is the locus for implementation of lean strategies and improvements, and it identifies an area where new protocols are pre-negotiated and experiments are conducted, all with the goal of removing impediments to economic development and community-building. This paper provides ideas, tools, and strategies to create and sustain Pink Zones to foster entrepreneurship and small business growth.

America’s traditional economic development policy has raised important questions about equity, especially for new entrepreneurs. Entrepreneurs and small businesses bring economic stability into communities. To encourage economic development brought, it is imperative that the impact on small businesses and entrepreneurs be considered upfront when evaluating new ordinances and regulations. At the same time, public-private partnerships with established community businesses can help finance new ventures, as can establishing revolving community loan funds.

Small businesses are the lifeblood of the economy in the United States. Based on data from the U.S. Census Bureau, the Office of Advocacy at the U.S. Small Business Administration documented that small businesses accounted for over 92% of the net new jobs creation between 1989 and 2003. The smallest among the small businesses (those employing fewer than 20 employees) accounted for 85% of the net new job creation over the same period. In essence, the vast majority of the new jobs created in the economy come from the very small businesses. Of the total 21.8 million jobs created between 1989 and 2003, small businesses under 20 employees created 18.6 million jobs, small businesses with between 20 and 500 employees created 1.5 million jobs, and large businesses and companies (with over 500 employees) created only 1.7 million jobs. Similarly, while small businesses created net new jobs in 12 of those 14 years, large businesses eliminated more jobs than they created in 5 of those 14 years.

The Maine Center for Economic Policy (MECEP) was retained by the Portland Independent Business and Community Alliance to collect and analyze data related to the economic impact of businesses in Portland, Maine. The primary purpose of the study was to quantify the impact of locally owned businesses compared to national chains on the local economy. MECEP's analysis found that in general every $100 spent at locally owned businesses generates an additional $58 in local impact. By comparison, $100 spent at a representative national chain store generates $33 in local impact. Stated differently, MECEP found that money spent at local businesses generates as much as a 76% greater return to the local economy than money spent at national chains. These findings are consistent with similar studies conducted in other states and can vary by business type.

We document a negative correlation, at business cycle frequencies, between the net job creation rate of large employers and the level of aggregate unemployment that is much stronger than for small employers. The differential growth rate of employment between initially large and small employers has an unconditional correlation of -0.5 with the unemployment rate, and varies by about 5 percent over the business cycle.