1. Equity Gap and Small Business Ownership
Alabama Microenterprise Network (AMEN)
August 28, 2018
Nancy S. Lee
Interise
© 2017, Interise. All rights reserved. Permission required for reproduction and distribution.

2. Small Business Ownership
AGENDA
Racial Wealth Gap
Small Business Ownership
Discussion of Alabama Small Business Ecosystem 2

3. Whites have 10x more wealth than African- Americans and Latinos
Wealth Gap Statistics
Whites have 10x more wealth than African- Americans and Latinos
Over 25% of African-Americans have no or negative wealth
The gap is more pronounced in urban areas
Median wealth of white households in Boston is $247,500, while it is almost zero for African-Americans
By 2046, the wealth of African-American and Latino households could be 1% of white households 3

4. Wealth a Common form of Capital for Small Business Owners
Sources of capital for small business owners
Personal savings
Home equity
Family and friends
Personal credit cards, loans
Lines of credit 4

5. Comparison of Wealth Gap and Income Gap
Median income for African-Americans and Latinos is half that of whites
Median wealth for African-Americans and Latinos is one-tenth that of whites
The Income Gap worsens the Wealth Gap
over one’s lifetime and inter-generationally. 5

6. Homeownership as a Form of Wealth
68% of whites own homes
42% of African-Americans own homes
43% of Latinos own homes
Black and Latino homeowners are more likely to be underwater due to subprime lending
92% of African-American wealth is in their homes compared to 58% of white wealth 6

7. Trust Gap and Capital Gap
Leading to a Trust Gap, minority business owners are more likely
To be declined a loan
To receive a smaller loan amount
To pay higher interest rates
African-American business owners are 3x as likely to report lower profits due to limited access to capital 7

8. Bootstraps are Not Enough Median Household Wealth Comparisons8

9. Small/Micro Enterprises in Alabama
58,000 employer small businesses in Alabama (fewer than 500 employees)
26% have 10 or more employees
74% have 1-9 employees
52% have <5 employees
Disparity in Business Ownership and Population
12% are minority-owned
31% of population are racial minorities
1% of businesses is Latino-owned
4% of population identify as Latinos
Source: ACS 5 Year Estimates and 2016 Annual Survey of Entrepreneurs 9

10. Size of Minority Owned Businesses in Alabama
Over 80% have 9 or fewer employees
Over 60% have 5 or fewer employees
Source: ACS 5 Year Estimates and 2016 Annual Survey of Entrepreneurs 10

11. © 2016, Interise. All rights reserved.
There is good news: Building capacity among minority business owners helps close the racial wealth gap.

12. Outcomes for Business Owners
African-American business owners have 12x more wealth than non-business owners
Businesses create local jobs
Minority business owners are more likely to hire minorities
Interise impact data shows minority alumni grow revenue and jobs at a higher rate
Businesses stimulate the economy in low- and moderate-income communities 12

13. Capacity Building and Training
Capacity building programs
Provide fundamental business knowledge
Impart understanding of strategy
Change CEO behavior over time
Term comes from international development
Move communities from “aid” to “trade”
Training build skills and technical assistance addresses a specific issue 13

14. Procurement and Business Growth
Contracting with anchor institutions, corporations, and government can lead to business growth
Supplier diversity programs
SBA 8(a) Business Development Program
US Dept. of Commerce Minority Business Development Agency (MBDA)
Interise Leadership in Local and Equitable Anchor Procurement (LLEAP) 14

15. Establishes a common goal and builds trust
LLEAP
Systems approach to increasing mutually beneficial contracting opportunities
Establishes a common goal and builds trust
Business owners
Anchor procurement leadership and staff
Capital providers
Capacity builders
Surface mental models (deeply held beliefs) that become leverage points to realign the system 15

16. Common Procurement Mental Models
MWBEs are unknown quantities/too small.
I’m judged on short term results of best product, best price.
Small Business
Why do anchors need my financials/so much paperwork?
Because the company is certified, it should be awarded contracts.
Multiple Stakeholders
Don’t tell me what to do.
It’s always been done this way. 16

17. 2 workshop series with commitments to change the system Boston Pilot
Piloting LLEAP
2 workshop series with commitments to change the system
Boston Pilot
Meet the anchors where they are for change
Boston higher education anchors
The Boston Consortium
Dallas on March 20, 2019
Systems Thinking Training
Observe LLEAP in practice 17

18. Questions and Discussion
slide title
Questions and Discussion
Nancy S. Lee
Sr, Manager Research & Evaluation
Bernard Johnson
Director National Partnerships
© 2016, Interise. All rights reserved. 18