• Startup
  • Payroll/Taxes
  • Human Resources
  • Employee Benefits
  • Business Insurance
  • Compliance
  • Marketing
  • Funding
  • Accounting
  • Management
  • Finance
  • Payment Processing
  • Taxes
  • Overtime
  • Outsourcing
  • Time & Attendance
  • Analytics
  • PEO
  • Outsourcing
  • HCM
  • Hiring
  • Onboarding
  • Recruiting
  • Retirement
  • Group Health
  • Individual Insurance
  • Health Care
  • Employment Law
  • Tax Reform
Thumbnail

Business Owner Diversity: A Look at Certified Business Enterprises in the U.S.

Management
Article
03/28/2018

Small businesses are referred to by many as the backbone of the American economy. The Small Business and Entrepreneurship Council has stated that firms with fewer than 20 employees made up nearly 90 percent of all businesses in 2014. And if you add in non-employer businesses, America’s smallest operations made up 97.9 percent of the total workforce in the same year.

With their ability to create jobs, inject financial stability into communities, and combine innovation and creativity in ways larger competitors often can’t, small businesses and the people who run them are a part of what makes America so unique. And what is the key to small business success, according to some experts? Diversity.

To learn more, we collected data to understand the impact minority- and female-owned businesses are having in the U.S. – from cities and states where minority and female entrepreneurs are having the strongest impact to regions that could use more of their presence. Want to know which major cities are making a mark on business owner diversity? Read on to see what we discovered.

Business Melting Pots

minor majority_business-diversity

Source: See Methodology

Of the states where data was accessible on the representation of minority business owners, three emerged as clear leaders in their communities: Maryland, Delaware, and Arkansas.

In Maryland, we found more than 40 minority owners, on average, per every 100,000 residents across the state. Despite facing higher taxes and even a higher cost of living, small business opportunities in Maryland are often boosted by the state’s proximity to Washington, D.C., and the availability of government contracts. Having your business certified by the National Minority Supplier Development Council (NMSDC) can also have its benefits, and in Maryland, that includes earning funding from the Video Lottery Terminal (VLT) fund from six casinos. According to our study, Capitol Heights, Beltsville, and Brentwood were among the top cities in the state recognized for their diverse business owner presence.

While Delaware and Arkansas also ranked as having higher representations of minority-owned businesses per 100,000 residents, we found nine states without easy-to-access reporting on minority business owners in their region, including Arizona, Alabama, and Idaho. Parts of Arizona still offer certifications to minorities and women as “disadvantaged” business owners, but the full impact of these programs remains unclear.

Bridging the Gap

minority masses

Source: See Methodology

According to our research, Capitol Heights, Maryland, had the highest average number of minority-owned businesses, while New York City ranked as having the highest average number of minority business owners among the country’s most populated cities. With roughly 5.3 minority business owners for every 1,000 residents, Capitol Heights’ diversity presence doesn’t end with small businesses. Earning relatively high marks for its sense of community diversity, the multiformity of race and gender in the city represents a multitude of cultures and heritage.

Similarly, Chicago and Austin also ranked among the most populated cities with the highest averages of minority-owned businesses. San Jose, which represents Silicon Valley (the tech industry capital of the U.S.), has seen its highs and lows in the quest to truly diversify the playing field. Inclusion in the tech industry has seen more progress in certain cities (and companies) compared to others, and continued efforts to expand the face of technology among entrepreneurs is considered a top priority for some organizations.

Minority Americans in Business

comparing the numbers

Source: See Methodology (link to methodology)

While some states with high percentages of minority-owned businesses also reflect an above average percentage of minority residents compared to the state population, our study revealed other states have fostered a strong presence of minority business owners despite having a below average minority ratio overall.

Maryland and Delaware earned top spots for the highest number of minority-owned businesses per capita in America, and both had an above average ratio of minority residents. In Arkansas, which ranked third overall with 17.7 minority-owned operations per every 100,000 residents, the ratio of minority residents was lower than the national average. Experts suggest this success may be owed in some parts of the state to the booming economy supported by big name brands (including Walmart and Tyson Foods) having established corporate hubs in the area. Other analysis suggests the growing number of established organizations lending their support to minority entrepreneurs could be helping to move the needle forward. In 2017, state officials announced the Minority Business Enterprise Program in Arkansas would be expanded to include female-owned businesses as well.

Of the other top 10 states in the country for the number of minority-owned businesses per capita, only Washington (25 percent) and Colorado (16.5 percent) had a below average population of minority residents.

Female Power

women in charge

Source: See Methodology (link to methodology)

In 2015, men made up an estimated 71 percent of all business owners in the U.S. While that figure might appear to leave little room for women in the entrepreneurial workforce, the percentage of female-owned small businesses is on the rise. Since 2007, the number of female-owned firms in the U.S. has increased by 68 percent – a faster rate than the overall business average of just 47 percent.

That progress can be seen more clearly in states like Maryland, Rhode Island, and Washington, which had the highest percentages of female-owned businesses for every 100,000 residents. In Maryland, the cities of Sykesville, Kensington, and Annapolis had the highest representation of female business leaders.

Emerging Trends

community of women

Source: See Methodology

New York City ranked as our top and most populous city for minority business owners and took the top spot for female entrepreneurs across the country.

In 2016, research conducted by Dell Technologies declared New York City the best place in the world to be a female business owner. From better business funding, certifications, grants, and mentorship programs, as well as policies and initiatives designed to help attract them, female entrepreneurs have shown significant progress in New York. Opportunities for classes and networking events help ensure the pipelines for female business owners stay full with the next wave of entrepreneurs.

Beyond New York, Austin, Sykesville, and Atlanta were the most recognizable for their presence of female business owners, while San Jose, California, landed one of the bottom slots. Known as a hotbed for the tech industry, women continue to struggle to find solid footing in Silicon Valley.

Measuring Up

the big picture

Source: See Methodology

With a slightly above average female population statewide, Maryland ranked as the top state in the country for female-owned businesses per capita. With 17.5 female-owned operations for every 100,000 residents, women can participate in the state’s Video Lottery Terminal (VLT) to receive business-funding lottery proceeds as well as specialized financing and incentive resources. In 2017, crowdfunding platform iFundWomen Maryland (similar to GoFundMe and Kickstarter) launched and aimed at connecting female-owned businesses to other avenues for financial backing. More than just small businesses and startup operations, the wealthiest women-led operations in Maryland – including Shapiro, BFPE International Inc., and Media Works Ltd. – are worth millions of dollars and together employ hundreds of residents across the state.

Following Maryland, Rhode Island (14.8 female-owned businesses per 100,000 residents), Washington (13.4), and Vermont (13.1) housed the highest percentages of female-owned firms in the U.S.

Building Better Ventures

minority women and leadership

Source: See Methodology

The percentage of female entrepreneurs who own and operate their own businesses continues to grow, but the percentage of minority women opening the doors to their own ventures is growing even faster.

Between the 2007 and 2012 census, the number of firms owned by Asian-American women increased by more than 44 percent, while businesses owned by African-American women spiked by nearly 69 percent in the same time frame. Growing at an even faster rate, the percentage of Hispanic women-owned operations increased by over 87 percent in just five years. Combined, the total number of female-owned firms is increasing even faster than male-owned operations.

Based on our research, the states with the largest number of minority female-owned businesses per capita were Delaware, Maryland, and Mississippi. With more than 20 minority women-owned businesses in Delaware for every 100,000 residents, New Castle, Bear, and Newark had the highest percentages across the state. Other cities with high percentages of minority women-owned operations included Largo, Maryland, and Flowood, Mississippi.

Strength in Numbers

minority women

Source: See Methodology

Keeping their diversity streak going, New York City and Chicago ranked as having the greatest average of minority female-owned businesses across the most populated cities in the U.S.

In New York City, state officials set a new goal in 2017 aimed at supplying MWBEs (minority- and women-owned business enterprises) 30 percent of all contract dollars by 2021 and to award $16 billion in city funding by 2025. For women of color in cities like Chicago, recognizing the small (but growing) population of other minority female business owners serves as inspiration for some. While still largely underrepresented in the economic landscape, many of these women haven’t just established their own entrepreneurial identities – they’re also making a point to help other women do the same. By creating opportunities to network with one another, provide mentorship, and help showcase the path to success, minority women-owned firms may be able to help others by sharing lessons and continuing to grow their presence in their communities.

Minority Women at Work

female-owned businesses

Source: See Methodology

Across the country, minority women represent nearly 23 percent of the total population. While the ratio of minority women in Delaware (20.7%) is lower than the national average, the state ranked first overall for the number of minority women-owned businesses in America. In 2012, Delaware established the Office of Supplier Diversity to help promote the diverse array of minority, veteran, and women-owned small businesses across the state in addition to specialized work contracts. Other state-specific resources in Delaware for minority women-led firms (and women-led firms in general) include the Wilmington Delaware Women in Business forum, the National Association of Business Women Delaware, and Delaware Black.

Maryland (17.6 businesses per every 100,000 residents), Mississippi (11.1), and Washington (5.1) also rated among the best states for minority female-owned businesses. In Mississippi, the MDA (Mississippi Development Authority) connects women and minority entrepreneurs to key industry partners in both the public and private sectors to help create networking events and identify subcontracting opportunities. Washington offers similar resources, including the Washington State Office of Minority and Women’s Business Enterprises (OMWBE), which connects women and minority women to loan opportunities and contract bidding.

Your Partner in Growth

There’s no denying the impact small businesses have on the U.S. economy. Despite the challenges owners may face along the way or the competition they endure from bigger ventures, their efforts help create jobs, funnel money back into their communities, and create greater financial stability. In recent years, the number of minorities and women supporting the economy as small business owners has increased exponentially, as well.

Paychex has all the solutions you need to take your company wherever it needs to go. No matter how big or small your operation, Paychex offers everything from payroll to human resources and retirement resources. We combine just the right amount of innovation with business solutions to help you find the perfect level of support. To learn more, visit us at Paychex.com.

Methodology

We collected data from the following sources: Alaska DOT Unified Certification Program, Arkansas EDC Minority & Women-Owned Business Directory, California DOT DBE Firm Search, COLORADO UCP DBE AND ACDBE Directory, Connecticut DOT Small Minority Business Center, Delaware Offices of Supplier Diversity, Florida Office of Supplier Directory: Certified Vendor Directory, Georgia Certified Vendor Directory, HDOT CBE Search Directory, Illinois DOT UCP Search, IDOA Certified Business Search Directory, Iowa DOT DBE Listing, Kansas Certified Business Search Directory, Kentucky MWBE Certified Listing, Louisiana DOT United Certification Program, Maine Weekly DBE Vendor List, The MDOT Directory of Certified MBE, DBE, SBE and ACDBE Firms, Massachusetts Directory Of Certified Businesses, Detroit Business Certification Program (DBCP) Business Register, MNUCP DBE Directory, Mississippi Minority Business Registry, Missouri Office of Minority & Women Owned Businesses, Montana DBE Directory, Nevada DOT Certified DBE Vendors List, New Hampshire DOT Certified DBE Directory, New Jersey Unified Certification Program: Vendor Certification, New York M/WBE, LBE, and EBE Certified Business List, North Carolina Directory of Firms, Ohio Unified Certification Program Search Results, Oregon COBID Certification Directory, PA UCP Directory, Rhode Island Office of Diversity, South Carolina SMBCC, South Dakota Department of Transportation Roster of Certified DBE Firms (Highway construction only), Tennessee Department of General Services: Diversity Business Certified Directory, Texas: Austin Finance Online: City of Austin, Vermont DBE Directory, Virginia SBSD Directory Listing, Washington OMWBE, Wisconsin DBE UCP Directory, Wyoming DOT DBE Directory.

The Department of Small & Local Business Development (DSLBD) defines the Certified Business Enterprise (CBE) Program as one that “provides contracting preference for local businesses so they can better compete for DC Government contracts and procurement opportunities.”

Data collected includes information updated in 2017, at the time of access. However, the business owner records in the data may have been added in earlier depending on when the person entered the CBE program.

We used data regarding minority-owned, female-owned, and minority female-owned certified enterprise businesses. We only had access to the corresponding data for 41 states. Only certified businesses with addresses in the corresponding states were used. (There were a few instances of businesses located in other states that weren’t utilized.)

Access was unavailable and, therefore, not utilized for the following nine states: Alabama, Arizona, Idaho, Nebraska, New Mexico, North Dakota, Oklahoma, Utah, and West Virginia.

Cities with less than five minority-owned, female-owned, and/or minority female-owned certified enterprise businesses were excluded due to sample size.

Population ratios for minorities, women, and minority women were calculated from U.S. census 2016 data.

Sources

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.