Learn how you can strengthen the local economy and boost the creation of jobs in your local community by supporting, advocating, and doing business with minority-owned businesses.
About Deonna Barnett
Deonna is a small business strategist and consultant with expertise in business planning, financial management, operations management, event planning, and marketing strategy development. She has trained over 800 local entrepreneurs, helping to raise over $500,000 in micro financing. She’s a graduate of The Ohio State University with experience in both the for-profit and non-profit sectors as a former non-profit executive.
This event was held at Cultivate in September 2020.
- About business D&I
- Why does diversity matter?
- Challenge of minority-owned businesses
- Review of the Black economic journey
- How you can get involved
- Open Discussion
So, today what we are talking about is fostering community in with through business diversity and inclusion, and I like to talk a little bit about business diversity and inclusion just to start off to get a foundation for it. Why does diversity matter? A challenge for minority-owned businesses. A review of the Black economic journey. How you can get involved and then have a discussion.
D&I in Business vs. Business D&I
So, let’s get started with diversity inclusion in business versus business diversity and inclusion. I am just going to set the framework so, generally, when you hear someone say diversity inclusion in business, they’re talking about workplace and infrastructure in the people within that business.
When I speak of business diversity inclusion, I’m going to be referring to the ownership and management of that business being of people of diverse backgrounds.
What is Business Diversity & Inclusion?
So, what it’s business diversity inclusion?
It is the acceptance, recognition, and solicitation of business owned, managed and controlled by members of a social and/or economically disadvantaged population group that could be women, minorities, and also veterans, the LGTBQ community, and the disabled.
But our focus today is minority-owned businesses, so let’s talk about that, they’re about 4 million, minority-owned businesses here in the U.S with annual sales of close to $700 billion dollars, and minorities make up 32% of the population, although they only 18% of population owned business and it might already own business over the years, the minority-owned business has expenses 35% growth; however they received revenue of 16% decline in revenue.
Why does Business Diversity Matter? And why you should care?
So, why does this diversity matter and why should you care?
Why does Business Diversity Matter to our Community?
So, the bigger picture of why business diversity matters in your community is that it really does strengthen the economy and it does that by creating jobs, reducing poverty by increasing household income through those jobs, and providing access to goods and services that support the quality of life and then of course, over all this, all of these things help build your community.
Why Does Business Diversity Matter to your Business?
Why does it matter to your business? Well, in business if you are working with diverse suppliers or partnering with diverse businesses, you are indirectly enhancing customer relationships because you can gain a different perspective and understanding through those relationships that you build with your diverse suppliers and partners. This can help improve marketing strategies by being able to communicate with diverse customers which then enhance and improve your sales and revenues.
You can also manage costs by working and collaborating and partnering with diverse businesses how do you do that?
Well, diverse businesses have many different businesses have different operating systems and infrastructures depending on how businesses are set up. Their prices may be lower because their operation, don’t do not require as much as a large corporation, which may not be managed by a diverse business.
Which, if you can manage your costs, you can drive and increase your profits, and then of course working with diverse businesses gives you an option of exploring the different goods and services that diverse businesses offer.
And lastly working with diverse businesses can help drive in your neighborhood, in your community, and within your business.
A Closer Look at Challenges Faced By Black-Owned Business
There are different minority groups within the minority-owned business population or community but today we’re going to take a closer look at the black-owned business and the challenges that they experience.
So, here are some statistics, there are about 2.5 million black-owned businesses, and 150 billion in annual revenue, which you can see was a lot slower than the full minority-owned business population.
Black-owned businesses make 3.56 million jobs, which is about a fifth of our workforce here in the U.S only 96% like to say before we stamp but 96% of these black-owned businesses are not employer firms, meaning that they do not have any employees. So, if only 15% of black-owned businesses hired one person that would be an infusion of 600.000 jobs in our economy. Again, lower the unemployment rate, reduce poverty and have a direct impact on your local community.
So, what is the problem again?
So, for black-owned businesses, there are fewer businesses owned by black-owned businesses, by black-owned, by black individuals, like to say fewer employees, by these businesses and smaller revenues.
Let’s take a look at some disparities in the black-owned business, there are 13% of our population is black Americans but only 4% of those businesses have employees, whereas 60% of the population is made of white Americans and they own 82% of businesses with employees. Let’s take a look at some of the businesses that black own and white own and compared.
So, this is a chart from the tapestry of back ownership in America released by the Association of Enterprise opportunity which has a full ATO. So this chart shows a list of businesses and compares them with black owners and white owners and then it compares the revenues of those two businesses owned by black, owned by white. So, for instance, for independent artists, writers, and performers 4% of these industries are owned by black scope, percent owned by white.
You’ll see that there’s a difference in revenues there 27,000 black, 42,000 white and you’ll see a lot of the same as you go down the list of painters, plumbing, office administrative services, home health care, full-service restaurants, .4% owned by blacks and 1% owned white and you’ll see that the revenues of black are a lot less than those on by white’s 29,337 versus 850,000 so, I encourage you if you get a chance to pull up the tapestry of black ownership in America by ATO and take a look at that report and it shows you in-depth the disparities by black-owned businesses and some of the challenges and it also give some solutions.
But to understand why there are disparities, we have to go back in history, a little bit to understand the black economic Journey.
So, come back with me for a second and I’m going to start way back. I’m gonna start in the 1800s and what I want to start with is that black businesses have always existed, they existed even during slavery, there were freed slaves who own businesses and they were enslaved blacks who own businesses if they got permission from their owners, or if it’s supported their I should say masters, they were able to own businesses and then 1865 when slavery was abolished, black went to go look for jobs and they started more businesses but they did it start experiencing even more discrimination with laws that are put in place, like Jim Crow and Plessy versus Ferguson enforcing segregation, but encouraging that all are equal and 1900 through 1930, this was considered the golden age of black business, you started seeing cities and towns develop and businesses owned by blacks, flourishing at that time there was equal pay for the same type of job so there were blacks and whites who have the same job.
They got paid pretty much the same, however, limitations on prosperity and economic advancement grilled and intensified blacks were limited to low-paying jobs but again we did have those cities and towns where they came to get it to create multiple black-owned businesses and a great example of that would be Black Wall Street, you might hear of that. In Tulsa Oklahoma, they had multiple types of businesses and that community supported itself, unfortunately, that town was bombed and destroyed based on the economic opportunities and advancement that was happening there and that was all related to the racial tension and the racism and discrimination.
Then we move into the era of the Great Depression and the Great Depression was one of the results of the Great Depression or I should say, the reasons for the Great Depression, was that business owners were selling at really high prices and paying their employees very low wages. So, employees and consumers were not able to pay for the goods and services that were coming out of these businesses. Now, you know a whole idea of capitalism and things like that, they are trying to establish and profit from capitalism.
The blacks that did have low-paying jobs, were forced out of those jobs by unemployed whites. So, unemployed whites were taking low-paying jobs and the black unemployment rate began to rise and triple. Sometimes, blacks were killed for their low-paying jobs, and then, all of this spurred the Great migration up to the north to find jobs to create more business and all of this kicked off the rights movement. I’m getting somewhere, follow me.
So, World War Two started in a black one to support their country but they face discrimination and tried to serve in the military and provide goods and services to the military and so a guy named Phillip Randolph, went to President Roosevelt. Say “Hey you’re about to go on this march? We’re going to protest all this discrimination because tried to serve our country we want to provide goods and services to our military and we’re getting Roblox from left to right,” and so, President Roosevelt said; “You know what we’re going to do is we’re gonna put in place this executive order it in that order we’re going to prohibit discrimination against the government since jobs to serve in the military and contracts we’re going to make sure that these black businesses get contracts with the government to serve our military.”
So, that order was put in place and then all of the protests and the push for equality in economics for the Civil Rights Act in 1964 and that movement and as a result of that, an executive order relating to what business which was 11246 in 1965, it required that there be goals set to support black-owned businesses in contracts and of course set goals in governments. So, if you have heard of certifications in place for MBEs, this is kind of where all of that spurred form? If you can get certified we can recognize you as indeed a black-owned business and then our agencies will set goals to ensure that you get the opportunities that you qualify for an eligible form.
History – 1965 to Present
So, since the Civil Rights Movement, there’s been continued opposition to civil rights laws, discrimination, and banking access to capital continue disinvestment in black communities. You can see that today, there are areas in the cities all across the country where that are heavily populated by blacks, but there’s not a lot of investment in those areas. There has been continued economic advancement by social groups, like NAACP and others. There has been a lot of progress with black-owned businesses, but not quite equal yet.
So, let’s talk about the challenges today and you can gather these challenges by those types of streets of black-owned and American-owned by ATO.
The Wealth Gap
There are three areas and three main challenges that black business owners face today and that is The Wealth Gap. You’ll notice that most black businesses. They get started with their own money because there is not enough generational wealth to get businesses started.
So, home values are a lot lower than white. And home ownership is one of the stepping stones to generating wealth or real estate or property.
Household incomes are lower and the black community tends to have more family obligations as far as taking care of the elderly and children because of the cost to have that all taken care of.
There is a Credit Gap, So, the black population there has lower credit scores than the white population and that is the result of lower pay, your acids, and collateral if you go to get a loan, the approval rate for black-owned businesses is a lot slower than the white-owned businesses.
And then, there’s this Trust Gap, where black-owned businesses do not trust getting qualified, having their treatment and then there’s trust from other communities towards the black community, not believing that they are good enough to do the jobs.
So, these are the three main challenges which there are details each that black-owned businesses are experiencing today.
- And as a result of this, not being able to go to the bank and get money as easily as other groups. Business black-owned businesses are adequately funded, they are less stable and they have a lower survival rate.
- Black business owners implicitly respond to this bias by not going after resources because they think that they’re not getting it anyway, such as applying for funding.
- And this creates a runway problem, the runway problem says that there are all these great ideas and goods and services that could be developed but they never come to fruition because they don’t have the resources to make it.
Responses to PPP & EIDL
And this is, I had an opportunity to work with small business owners during covid relief and still doing so, and a lot of black business owners were my clients to support them and get their funding. Nationally, there have been reports and news articles explaining and showing how blacks were shut out of Federal Aid programs and the reasons were because they had few know debit employees, you need to have employees to get some of the funding inadequate documentation.
If they did have employees, they may not have all the payroll reports to support it and then low public awareness. There wasn’t a huge push and advertisement communication to the black-owned businesses community to gather these resources. So as I was supporting these black-owned businesses to get this one of the top responses to why they didn’t apply for this funding was because they weren’t, they not aware, they did not need it and that was an interesting answer because even if you felt like you didn’t need it you would apply just because you don’t know what was to come but in some circumstances that were the reply. So I thought that was your interesting reply and then I didn’t think I would qualify. So I didn’t even try it off.
So, in addition to those business owners who did try and got shut out, there was a good number of black-owned businesses that didn’t even try to go after it.