According to the U.S. Small Business Administration (SBA), small businesses (500 or fewer employees) make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees. 62% of new jobs created between 1995 and 2020 were generated by small businesses and, according to a 2019 SBA report, small businesses accounted for 44% of U.S. economic activity. Small businesses also drive career and opportunity growth and reinvest in their communities at higher rates than large enterprises.
As important as small businesses are for the economy, they are also overwhelmingly white. As of the 2020 Census, 86% of U.S. based firms were majority-white owned, with Black-owned businesses comprising only 3%.
In Birmingham, AL, local non-profit Prosper is working to alter their last-place Black business ownership ranking through targeted analysis and action. Fourth Economy worked with Prosper to establish a baseline understanding of the conditions and barriers to opportunity, engaging a range of stakeholder groups to co-create solutions and develop a set of strategies for advancing equity in the city’s small business ecosystem.
Establishing a Baseline
In approaching Fourth Economy, Prosper wanted to know: Who is involved in the small business ecosystem of Birmingham? What are organizations and individuals doing currently to improve socioeconomic inequities? What are other cities doing in this space that strengthens their Black business ownership rate? How can we quantify a ‘good’ ecosystem?
Reviewing data from sources such as the Annual Business Survey and County Business Patterns, we were able to come to a variety of early conclusions that served as the groundwork for the remainder of the planning effort. Data revealed that the largest share of Black business owners (28%) in Birmingham are within the Health Care/Social Assistance sector, and another 29% were lifestyle-oriented businesses. Data also spoke to perceptions of a lack of business growth. The number of Black-owned businesses in Birmingham did grow over the last decade, but the disparity in business ownership remains extreme. For every 10,000 metro residents, there are only 21 Black-owned businesses compared to 238 white-owned businesses. Achieving parity would see more than 7,000 additional Black-owned businesses in the metro. This data allowed us to form a picture of current conditions and aspirational benchmarks to plan for.
Identifying and Engaging Partners
While one can gather insights through research, an outsider can only have so much knowledge and access into the ins-and-outs of a community and its characteristics, dynamics, and unique circumstances. Robust stakeholder engagement not only provides deeper insights, it establishes trust through transparency and provides opportunities to identify individuals or groups who can become catalysts for advancing strategies later on.
In Fourth Economy’s work with Prosper, 25 interviews with individual stakeholders helped further our understanding of the history and causes behind Birmingham’s low rate of Black business ownership. Stakeholders ranged from business owners to funders, civic leaders to community advocates. Generations of systemic racism and racial stratification, disparities in quality of life and place across neighborhoods, and access to critical resources such as capital and storefront space all proved to be limiting factors. While many of these limiting factors were anticipated at the outset of the project - stakeholder input provided valuable insights and context that are essential to finding the right solutions to overcome barriers specific to Birmingham, rather than making “one size fits all” recommendations.
With this information in hand, the planning effort moved to conduct multiple ‘Build Sessions,’ Fourth Economy’s ideation sessions, which empower those who are directly impacted to participate in building solutions. Additionally, numerous stakeholders participated in a ‘Vision Session’ to outline an achievable vision for Birmingham’s path towards solving this generational issue. Crafting a shared vision of success is more than just an idle word-smithing exercise. It allows a range of stakeholders to develop a shared language for articulating what success looks like.
Research, analysis, and stakeholder input are synthesized to inform the strategies and recommendations that will be most effective in realizing the shared vision. For Prosper, the plan’s recommendations, broken down by timeframe, end up creating three primary avenues for impact, examining how the business support ecosystem, the local and state governments, and the metropolitan community of Birmingham as a whole can work to shift a longstanding issue of business ownership disparities. Actions for this plan include:
Measuring Impact and Outcomes
Prosper’s organizational goal to create more equity in business ownership across Birmingham yielded a variety of complex actions needed to overcome generations of inequity in economic opportunity and socioeconomic mobility across races. After Fourth Economy honed in on key strategies for making an impact on this goal, 6 key areas were identified to track metrics of success. These areas of focus, and the metrics used to comprehend success, include:
The Fourth Economy team typically suggests metrics that are easy for clients to track internally, such as the Census American Community Survey or Quarterly Workforce Indicators. These publicly available data sources allow clients to consistently check their performance according to certain metrics not only in their own jurisdiction, but also compared to other benchmark communities.
Human-focused solutions help ensure that a plan’s recommendations can be not only impactful, but equitable for populations who have perhaps been negatively affected by prior planning efforts, programs, and policies. For Prosper, the task of crafting solutions proved immensely tricky considering the city’s history of racial inequities and modern context of disparities in business ownership and numerous social indicators. Each community will have its own, unique ecosystem that presents barriers to and opportunities for change. Our Equitable Community Planning Framework can be used to guide individuals and organizations in understanding the work to be done, identify and engage partners to plan for successful outcomes, co-create strategies, and measure the outcomes.