White men are now the minority of business owners in the U.S., per new study
The shift is thanks to a rise in women- and POC-owned ventures. Still, they don’t get the support they need to thrive.
MORE IN THIS SECTION
For the first time, white men now make up the minority of business owners in the United States through a transformation driven by rapid growth in women and Latinx-owned businesses.
This historic shift has considerable implications for the country’s finance and innovation infrastructure.
White men-owned small businesses make up 41% of the 30.5 million total owners of small businesses in America. There are about 11.6 million women-owned businesses, with 65% of them owned by white women, and 6.5 million businesses are owned by men of color.
What many economic observers anticipated for years has finally become a palpable reality: women and #Latinos are the majority of #businessowners in the United States.— BeLatina News (@be_latina) May 25, 2021
This, logically, leaves white men as the minority for the first time in history.https://t.co/jS7UfZIjrx
These statistics are based on a recent analysis by venture capitalist Seth Levine and author Elizabeth MacBride. Levine and MacBride conducted their study with the help of Stanford University researchers, using two sets of U.S. Census Bureau data from 2017, those for employer and non-employer businesses.
Jerry Porras, Lane Professor of Organizational Behavior and Change and the co-director of the Latino Entrepreneurship Program, said that the change is a “really powerful opportunity” for the nation to become more prosperous in the future, especially during the pandemic recovery.
Porras told Forbes that this new group of owners are entrepreneurial and dedicated, but the “ecosystem is not conducive to supporting their success.”
Women-owned businesses have been steadily rising for decades now. Between 2018 and 2019, women opened up more than 1,800 businesses per day.
In the past five years, women-owned businesses have grown at two times the rate of the overall population, and women of color have been starting businesses at 4.5 times the rate of the overall population, according to American Express State of Women-Owned Business.
Latinx owned businesses have also been blossoming, with a growth rate of two to four times the rate of the overall population since 2015, which is when Porra’s organization began surveying them.
Latino business owners are the fastest-growing group of entrepreneurs in the U.S.— Support Latino Business (@SupportLatino) May 19, 2021
Over the past 10 years, the number of Latino business owners grew 34%, vs. 1% for all U.S. business owners.
Stanford University: https://t.co/NvUfxtvtxo#MBE #SupportSmallBusiness pic.twitter.com/8NjNgCwB09
Porras estimates that there are 1 million new Latinx owned businesses founded every five years.
Porras also added some context to the numbers, suggesting that becoming a business owner is a “key part of Latino culture,” and that many Latinos in the U.S. are naturally drawn towards entrepreneurship.
He also explained an even more relevant factor — Latinos are not always able to generate wealth in ways that are typically expected — going to college and climbing the corporate ladder is often not accessible to them for a myriad of systemic reasons.
This large-scale demographic shift in the composition of America’s entrepreneurial class has been largely unrecognized, mainly because the U.S. Census Bureau analysis is focused on employer businesses, where white men are a declining proportion of owners, but still comprise about 60% of all business owners.
Additionally, narratives about business owners primarily focus on a small minority of fast-growing tech companies.
But businesses that only employ a founder, but are still subject to federal tax — have been growing in both number and influence. Technological advances have made it easier to run a small business without hiring people.
And to a certain degree, experts do argue that women and people of color are often excluded from the opportunity to expand their businesses. The option and ability to define their businesses in a separate category helps keep them small.
But this is not necessarily a positive, according to Makisha Boothe, founder and CEO of Colorado-based SistahBiz, a global network that helps Black women solopreneurs and microbusinesses build scalable, sellable businesses.
Boothe argues that assigning people of color owned businesses into a category that, by definition, keeps them tiny, only serves to keep them there.
As the regulatory burdens on small companies grow, the competitive landscape can become even more challenging. This is what her organization helps Black women-owned businesses with. For example, SistahBiz runs Black Girl Therapy gatherings, and spends a lot of time preparing women of color to succeed with bank loan applications.
Research has revealed that people of color have a harder time receiving bank loans and other forms of finance.
During a recent panel discussion with Sen. John Hickenlooper and U.S. Rep. Joe Neguse, Boothe said that her clients “get put in the solopreneur zone.”
.@SenatorHick: "Anyone with a good idea who's willing to put in the work should be able to access the resources they need to open up shop, regardless of their background or location." pic.twitter.com/tRKmlTdyvj— The Hill (@thehill) May 23, 2021
“It’s connected to access to capital. They simply don’t have the budget for bureaucracy and they don’t have the startup funds to move from solopreneur to boutique agency,” she said.
The problem with overlooking this demographic shift in the broad landscape that includes the smallest and youngest businesses, it hinders systems from evolving so they can grow, and it keeps the U.S. economy and that of other nation’s from reaping the benefits of that growth and creativity.
“Some business, academic and government leaders only see traditional firms with payroll as 'real' businesses, adopting a 'go big or go home' mindset. They tend to believe that only businesses that fit into a specific box are worthy of attention and significant resources,” said Elaine Pofeldt, author of the Single Person Million-Dollar Business.
Mother of four Nicole Brown created @izzyandliv, an e-commerce store selling clothes & decor designed by and for women of color, to take her mind off the stress when her baby was in the NICU. Today, it brings in nearly $7M. https://t.co/BFxPAmWcg0 pic.twitter.com/TwKLtVV3hV— Elaine Pofeldt (@ElainePofeldt) November 1, 2020
Long Pettine, founder of San-Diego based Ad Astra Ventures, which runs workshops for women entrepreneurs, said that the system desperately needs to adapt to support these business owners.
For example, Pettine explained to Forbes, that on average, men and women business owners have very different attitudes towards risks. Men tend to define it only along financial lines, whereas women will consider risk across more avenues, including their relationships or to their companies’ missions.
Women are forced to conform to patriarchal financial worlds that primarily reward the abilities to sell and project confidence, which can lead to many women faltering when speaking to venture capitalists.
“They may not come across as authentic in pitches,” Pettine said.
When it comes to Latinx-owned businesses, many of them suffered during the early months of the pandemic largely due to the lack of federal aid they received. The programs were designed for small businesses that already had relationships with banks.
Here's how likely minority-owned businesses are to be DENIED from PPP loans:— Vice President Kamala Harris (@VP) May 5, 2020
Native Hawaiian or Pacific Islander-owned: 91%
This is not what an equitable COVID-19 response looks like. I'm working to fix it.
But for many of today’s founders — more than 80% — don’t receive any external financing. Their exclusion from established systems of finance correlates with historic patterns of business creation and structural racism.
“The pandemic demonstrated the key realities. 28% of the white owned businesses secured PPP loans. 18% of the Latino-owned businesses secured them,” said Porras.
It is unknown how much potential is lost when entrepreneurs who don’t fit the mold are unable to climb the ladder of success, due to convoluted economic barriers.
It’s likely that the nation has missed out on many innovations and job creations because the systems have not yet adapted. So many families have lost their chance to build generational wealth and the sense of freedom and health that financial security provides.