As Small Business Week came to a close, I found myself reflecting on the super-performers of small business -- minority-owned businesses, or more accurately, “emerging majority businesses.” Investing in this small but mighty segment of small business would pay huge dividends to our economy. In fact, if policymakers and the ecosystem of business support organizations focused on just two important goals: 1) increasing the share of minority-owned businesses bringing in $1 million or more revenue and 2) bringing the share of minority-owned employer businesses to parity with White-owned employer businesses, we could add 13 million new jobs and more than $3 trillion to our economy respectively.  

Many people are unaware of the outsized role that small business plays in our economy. A whopping 99.9 percent of US businesses are small businesses, employing nearly half of the U.S. workforce and generating two-thirds of new jobs (USCC, SBA).  Within the small business universe, it’s “emerging majority owners” who are leading in new business startup rates. This is important because new business creation has been declining in the US, especially by White creators, and because business ownership offers a critical pathway to economic self-sufficiency and wealth creation necessary for maintaining a thriving economy. 

Latinos lead in new entrepreneurship creation with growth rates of 54% according to a 2022 Kaufman report, followed by Asian Americans at 36%, White entrepreneurs at 33% and African Americans at 28%. While Latinos lead in new business creation overall, African American women outpaced all women business creators with 50% growth from 2014 to 2019.  According to the Minority Business Development Agency, minority-owned businesses represent 29% of all firms and generate $1.8 trillion in receipts, with employer firms generating 9.9 million jobs.  

Despite these contributions, minority business owners face considerable obstacles to building their businesses and generating their full wealth potential. Minority-owned businesses generally start and stay small, are overrepresented in low barrier to entry low-revenue industries, account for a small percentage of employer firms, are notoriously undercapitalized, and less able to tap into powerful door opening networks and procurement opportunities than their White peers, even after controlling for creditworthiness and other factors. It’s no surprise then that just 2% of minority firms generate gross receipts of more than $1 million, a gap of 10:1 with their white counterparts. Just 11% of minority firms had paid employees compared to 85.6% of White-owned firms.  

The magnitude of change needed to achieve revenue and employer firm parity will require new thinking, innovations to existing systems, and creative solutions. Here are some solutions: 

• Surface, pilot, and test innovations to finance for minority-owned businesses seeking funding including alternative creditworthiness measures, use of technology to deploy capital more fairly and efficiently, and developing hybrid capital tools that minimize debt and maintain minority ownership.  
• Be intentional about scaling minority-owned businesses with growth potential, by developing mergers and acquisition strategies that help transferring companies from White to Minority ownership, and by working with minority entrepreneurs and adapting procurement processes and payment schedules to enable more minority entrepreneurs access to the public and private sector contracting opportunities.  
• Simplify Business Certifications, by creating a single minority business certification for public private national and local opportunities. 
• Invest in institutions successfully serving minority entrepreneurs and their businesses. Many entrepreneurship support organizations face similar challenges to capital and capacity as do the businesses they serve, especially those run by minority leaders (See Prosperity Now’s CDFI Playbook). We must invest in and support Community Financial Development Institutions (CDFIs) and other entrepreneurship support organizations led by and serving minority-owned businesses to access historic government infrastructure, environment, and technology funding and contracting opportunities, including alliances of Black and Brown affinity group leaders such as the Community Builders of Color Coalition.  

Any of these and other solutions must be accompanied by measures that address the root causes of racism and prejudice preventing minority-owned businesses from achieving parity with their White-owned counterparts (see policy solutions from Prosperity Now’s Inclusive-Entrepreneurship.pdf ) including narrative change that positions emerging minority entrepreneurs as the dynamic, resilient, economic engines and opportunity investments they truly are.   

We are projected to become a “majority minority” nation by 2040. If our policymakers and the broader business support organizations collectively rally around these two ambitious goals—increasing the share of minority-owned firms employing people and bringing in more than $1 million in revenue to parity with White-owned firms—we would go a long way toward closing the wealth divide and building the shared prosperity our nation so desperately needs. Our collective future rests on it.