California must recognize diverse small-business owners

Forty-five percent.

That’s the slice of the small business pie owned by Hispanics or racial minorities in California. Considering that California’s 4.2 million small businesses provide nearly half of all the private sector jobs in the state, it seems like a pretty important group to understand.

That’s why it’s odd that a recent report commissioned by my office, “The State of Diverse Businesses in California,” is the first time that the State of California has taken a deep, quantitative look at these businesses.

The 108-page economic report studies businesses owned by Asians, Hispanics, African Americans and Native Americans and details the makeup and economic, fiscal and social impact of these diverse small firms in California.

My office exists to represent and elevate the voices of California’s 4.2 million small businesses. As our name implies, advocacy is a core part of what we do. But you can’t advocate for folks who you don’t know, people who you don’t intimately understand.

That’s why we commissioned this report in response to Gov. Gavin Newsom’s September 2022 Executive Order N-16-22 that directed state agencies and departments to take additional actions to embed equity analysis and considerations in their mission, policies and practices.

As part of a competitive proposal process, the California Office of the Small Business Advocate chose the state’s largest minority chambers to lead the project: the California Asian Pacific Chamber of Commerce, the California African American Chamber of Commerce, and the California Hispanic Chambers of Commerce. The team chose Beacon Economics as research lead and Small Business Majority to lead a roster of community-based partners, and to collect data directly from California businesses and business organizations. “The State of Diverse Businesses in California” is the result.

I’m excited that Beacon Economics will be presenting this report at CA FWD’s California Economic Summit this week in Indian Wells.

I’ve been talking about and to and on behalf of minority-owned business communities across the span of my career. So, I am happy to say that even I learned a lot.

Key findings from the report include:

Minority small businesses support 2.56 million jobs annually across California.
Minority small business contribute nearly $193 billion in economic output per year, which is greater than the annual gross domestic product of 18 U.S. states.
Minority small businesses in California generate $28.7 billion in tax revenue each year.
The trade, transport and utilities are the business sectors with the highest concentration of small minority firms (defined as employing 20 employees or less) with over 300,000 minority firms. (Sector includes wholesale trade, retail trade, transportation and warehousing, utilities).

State-level data has always proven especially difficult to pinpoint and region or county-level data even more so. Through this report, we can also see diverse business-owners more clearly on a local level. This means we can do a better job of advocating on their behalf…and they can do a better job of advocating for themselves to local stakeholders.

For example, this map about Distribution of Diverse Businesses by Region from Page 42 of the full report:

But these findings also show that while diverse businesses continue to proliferate, they rarely manage to scale. High percentages get stuck as nonemployee firmor microbusinesses compared to white-owned businesses.

As an economic development professional, I know that removing systemic barriers to access would help boost more of them into the “employer firms” category and drive jobs and tax revenue, bolstering the state economy.

As a Black business leader myself, I know it’s about more than the economics: it’s about boosting community pride and the potential for human development amongst individual small business-owners and their families. This report is a first step…but an important one.

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