As financial services professionals, we must understand the broader landscape of socio-economic trends in our country. The recession and economic upheaval of the last few years has illuminated the significance of small business owners in the U.S. Their economic impact has manifested in the American economy in several ways.
According to the U.S. Department of Commerce, small business owners employ nearly half of all private sector employees. The Department of Small Business Administration notes that small businesses pay 43% of total U.S. private payroll. And the Department of Labor notes that small businesses have generated 65% of net new jobs in this country from 1993 through 2009.
With statistics like these, one could argue that small businesses are the backbone of America’s economy, and we have a duty to ensure that they survive and thrive so that our economy can do the same.
A trend that should not be ignored is the growth of minority small business owners. The U.S. Census Bureau’s 2007 Survey of Business Owners indicates that the number of minority-owned businesses has increased at more than double the rate of all U.S. businesses between 2002 and 2007. Because almost 23 % of all businesses in the U.S. are either minority-owned or equally minority/nonminority-owned, the growth of these firms is equally important to our country and our national economy.
While many of us focus efforts on working with small business owners to help them protect their businesses and families, we often roll minority-owned businesses into the overall effort with little focus paid to the unique differences between these two broad markets. If we recognize the importance of minority-owned businesses to the larger business landscape, then we should work to understand what the unique differences are among and between them. Once understood, we need to work with multicultural small business owners, first by educating them on how they can plan for their business’s long-term survival and success, and then by helping them to put those plans into action. In doing so, we are helping not just the long-term health of these businesses, but of our national economy and our country as a whole.
To this end, Massachusetts Mutual Life Insurance Company launched a study, Business Owner Perspectives: 2011 Insights in an Uncertain Economy, one of the first of its kind to look at the attitudes, motivations and concerns of small business owners in the United States, with a specific focus on multicultural business owners. In short, the study found that there are similarities among all small business owners as well as unique findings among each cultural group surveyed.
Motivations for starting a business
For this study, Mass Mutual interviewed both ethnic and non-ethnic business owners. The multicultural groups surveyed are African Americans, Asian Indians, Chinese, Koreans, and Hispanics. We see several differences between general population business owners and multicultural business owners in the reasons why they started their businesses. For example, non-multicultural business owners were significantly more likely than multicultural owners to report as a major reason for owning their businesses is that they had taken it over from family members who had retired, become disabled or died.
Multicultural business owners also were significantly more likely to cite giving back to their community as a major reason why they went into business (49 % multicultural versus 21 % for general market business owners). Further reasons for starting their businesses that were more highly rated among multicultural business owners included having something tangible to pass on to their children (48 % versus 35 %), and to be their own bosses (72 % versus 57 %). These differences in what motivated cultural business owners to start their businesses are important for understanding what they value and ultimately what their goals are, enabling financial professionals to address what matters most to them.