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Minority Business in Philadelphia: A Glass Half-Empty or Half-Full?

January 4, 2017

On September 1st, 2016, the Census Bureau released the results of its first annual entrepreneurship survey, which presents a variety of data on the success of small businesses in American cities, including statistics regarding minority-owned businesses. Philadelphia, a majority-minority city ranking as one of the top ten U.S. metro areas by population, now has to evaluate the information presented by the survey and choose between a half-full or half-empty perspective on the results. On one hand, Philly.com’s Diane Mastrull takes a half-empty approach in her coverage of the report. She notes:

“As bragging rights go, Philadelphia can’t claim many. Of the top 10 major metropolitan areas, it ranked ninth in minority-owned businesses, with 15.7 percent. No. 1 was Miami at 39 percent. Philadelphia was also ninth in female-owned businesses, with 18.5 percent. Atlanta had the biggest share, 24.5 percent. Philadelphia lagged in new businesses, considered less than two years old, with 7.8 percent. Miami had the biggest share, 11.1 percent.”

On the other hand, however, a trend of progress continues in this sector both nationally and in Philadelphia, and an argument can be made for viewing the glass as half-full. Philadelphia is a large and growing minority business city that has shown a significant increase in those businesses since 2007. The city, which has undeniable racial disparities to overcome, is keeping pace with some national trends and making slow, but steady, progress.

Nationally, growth of minority businesses has thrived over the last decade, increasing the small business sector by 38% and 8 million minority-owned firms since 2007. During the recession, minority-owned businesses in Philadelphia prospered despite an overall decline in non-minority business growth. This trend is consistent with growth seen in recently published census reports from 2002 to 2007, where minority-owned small businesses grew at nearly four times the rate of non-minority small businesses.

Philadelphia and other major cities are on the rise for minority-owned businesses and have been for a number of years. One study has shown an increase from $1 trillion to $1.4 trillion (34% increase) in income for minority firms over a five-year period, impressive growth by any standard. The Chamber of Commerce of Philadelphia noted the improvements within the minority business community, citing that although progress is incremental, improvements made across the board move the needle in the right direction.

To evaluate Philadelphia’s individual progress, a comparison can be made with other cities in the country. Forbes’ recent Diversity Index analysis ranked Philadelphia number three among cities with the most vibrant minority start-up ecosystems. Using an analysis of 18,000 minority start-ups, the study examined variance among owner ethnicity and variance of revenues given owner ethnicity. The top five grossing minority businesses in Philadelphia in 2015 had a combined $82 million in revenue across the healthcare, engineering, and technology sector. When measured by annual revenue, however Philadelphia ranks 24th of the 25 fastest-growing minority business cities, just above Detroit, a city half its size. Average earnings for Philadelphia’s small businesses are about half of those in Sacramento, the 23rd-ranked city. For one of the top-ten largest cities in the country, advocates for minority business growth may not celebrate such a ranking.

No matter how you interpret the data, growth in Philadelphia’s minority small business environment must be a priority moving forward. The city’s progress follows the national trend, but further efforts are necessary for a city seeking to excel. With this in mind, organizations and individuals alike can find many ways to encourage accelerated growth. The Department of Commerce, for instance, established the Office of Neighborhood Economic Development to partner with community and economic development organizations seeking to encourage new and retain existing businesses. Private organizations such as minority-focused entrepreneur accelerators can find, fund, and support new ideas in development. Individual small business owners, coupled with community leaders and property owners, should recognize their roles as potential catalysts for community growth of the minority start-up ecosystem. Collaboration through communication networks among these entrepreneurs could be key to sharing hard lessons learned and encouraging start-up success.

Progress in line with national trends warrants optimism, but there is undoubtedly room to improve. If Philadelphia wants to serve as a model for minority-owned business growth, it needs to continue discovering new avenues that foster momentum for minority businesses in the city.

Contact Information

Fels Institute of Government
University of Pennsylvania
3814 Walnut Street
Philadelphia, PA 19104

Phone: (215) 898-2600
Fax: (215) 746-2829

felsinstitute@sas.upenn.edu