Michael K. Frisby
WASHINGTON, DC – The Association for Enterprise Opportunity (AEO) today released a report affirming the financial stake that Main Street and neighborhood businesses have in low-income communities: an estimated 11.2 million, or 43 percent, of small businesses are in low-wealth communities, creating $1.87 trillion in annual revenue.
While it’s become increasingly evident in recent years that small businesses are a key part of the U.S. economy, the report, “A Larger View of the Small Business Market,” provides the first comprehensive picture of the critical role of small businesses in underserved communities. Dun & Bradstreet, along with IBM, generously supported the two-year study, which began in 2014, in collaboration with AEO.
“Main Street is a critical engine of the America economy,” says Connie Evans, AEO’s President and CEO. “And the numbers now confirm what we have always believed: small businesses, especially microbusinesses, are the lifeblood of low-income neighborhoods. They need our continued support. When business owners and entrepreneurs in low-income and underserved communities are shut out of the American Dream, they aren’t the only ones who suffer. So do their communities, the American economy and the nation. We must encourage investments in small businesses and microbusinesses.”
According to the report, the vast majority of small businesses in low-income communities are microbusinesses that employ up to four employees. Of the 11.2 million small businesses in low-income communities, 10.2 million, or 90.7 percent, are microbusinesses. Of those microbusinesses, 3.4 million, or 30 percent, are sole proprietorships.
They are “a powerful economic force,” the report says, with median annual revenue of $110,000, generating an estimated $1.87 trillion in annual revenue. Of that amount, microbusinesses generate $1.34 trillion, or 72 percent, of the total.
AEO released the report today in conjunction with “EconoCon25,” AEO’s national conference and 25th anniversary celebration, running May 18, 2016, to May 20, 2016, at the Hyatt Regency on Capitol Hill in Washington, D.C. The conference includes a discussion of how to improve services to business in low-wealth communities.
According to the report, small businesses exist in low-income areas in every state, but the highest concentrations are in California, Florida, Texas and Georgia. An overwhelming majority, or 85 percent, of small businesses in low-income areas are in metropolitan areas.
The median age for those small businesses is eight years, but about 33 percent, or more than 3.7 million, have been established in the preceding five years. Most are in the capital-light industries of services, retail and construction.
In Houston, Texas, Roxanna Collazo, a bilingual teacher, had a dream of opening a bilingual day care center. This past December, she received funds from a local community development financial institution (CDFI), purchased an existing day care center in an Hispanic neighborhood in Houston and today the school enrollment has grown to 80 students from 53. “As a business owner, as a woman, and, more than anything, as a Mexican immigrant…that’s the one thing that I pride myself in—that we have made an impact and we are going to be making a bigger impact on our children,” she says.
In a given year, about 2.2 million small businesses in low-income communities are seeking credit. “We must support small businesses in low-income communities to foster financial inclusion,” says Ms. Evans. “Small businesses play a critical role in the economic development of low-income communities because they tend to hire locally, creating a ripple effect of economic growth in the community, uplifting the lives of community members, from single mothers to millennials.”
Small businesses play a critical role in economic development and helping business owners and employees build wealth. When Bobby Ayers, a long-time small business owner for more than 25 years in Sarasota, FL, started an online virtual home makeover tool, she kept a fish bowl on her kitchen table with the titles of different jobs in the bowl, from CEO to VP sales. Each day, she’d ask her young son and daughter to pull a piece of paper from the bowl and solve a company problem. Today, they’re both successful entrepreneurs. “They watched the sacrifices,” Ms. Ayers says. “They’re both so successful. They know nothing is handed to them.” Her company now has nine employees and generates $157,000 in annual revenues.
AEO and its members will work within the microbusiness industry to improve the plight of Main Street and neighborhood entrepreneurs and business owners. AEO will continue to collect and study data and work to establish policies that will channel resources and technical assistance to microbusinesses, utilizing innovative technology to meet the needs of business owners, their communities and their families.
(To schedule a print or broadcast interview with AEO’s Connie Evans, please contact Michael K. Frisby at email@example.com or 202-625-4328. Download report
About Association for Enterprise Opportunity (AEO)
The Association for Enterprise Opportunity (AEO) is the voice of innovation in microbusiness and microfinance in the United States. For 25 years, AEO and its more than 450 member/partner organizations have helped millions of entrepreneurs contribute to economic growth while supporting themselves, their families and their communities. AEO members and partners include a broad range of organizations that provide capital and services to assist underserved entrepreneurs in starting, stabilizing and expanding their businesses. Together, we are working to change the way that capital and services flow to underserved entrepreneurs so that they can create jobs and opportunities for all. Learn more about The Association for Enterprise Opportunity at http://www.aeoworks.org/