Press Release: New Report Reveals Systemic Barriers Holding Back California’s Diverse-Owned Small Businesses

New Report Reveals Systemic Barriers Holding Back California’s Diverse-Owned Small Businesses

SACRAMENTO, CA (September 18, 2024) — A new research report commissioned by the California Asian Pacific Chamber of Commerce, California Hispanic Chambers of Commerce, and California African American Chamber of Commerce highlights significant challenges faced by small enterprises in California owned by racially and ethnically diverse individuals.  Despite their substantial presence—making up nearly half of California’s 4.1 million  businesses—the research found that Diverse-owned Small Businesses (DSBs) face barriers such as limited access to capital, high barriers to entry to lucrative sectors, and challenges to scaling and growth. As a result, DSBs contribute less than their proportionate share of California’s economy, and the number of minority-owned firms lags other states, when measured relative to population.

The new report, completed by Beacon Economics and funded by Southern California Gas, San Diego Gas and Electric, and Kaiser Permanente, is the second in a pioneering series launched by the California Office of Small Business Advocate (CalOSBA) in 2023.  The report uses comprehensive datasets from the American Community Survey and the Bureau of Economic Analysis to assess the economic, fiscal, and community impacts of DSBs.  It identifies systemic barriers that hinder the growth and potential of these businesses, a problem aggravated but not solely caused by the COVID-19 pandemic.

“The findings indicate that DSBs face unique challenges that require tailored investments, technical assistance, and policy interventions to unlock their full economic potential,” said Pat Fong Kushida, President and CEO of the California Asian Pacific Chamber of Commerce – one of the three project conveners.  “The new report underscores the need for targeted strategies to address the diverse needs within this vital segment of California’s business community.”

“Our research has shown that the same employment barriers that disadvantage many marginalized communities often prevent minority businessowners from being able to scale up their businesses,” said Christopher Thornberg, Founding Partner of Beacon Economics.  “To effectively address these barriers and ensure long term success, it is critical to root future public policies and initiatives in data and research.”

A sample of the key findings from the 2024 report:

• DSB’s economic contribution was approximately half of its employment figures. In 2019 and 2020, California’s minority-owned small businesses contributed $443 billion and $414 billion, respectively, to the state’s economy, representing 8% of its total output. These businesses support 3.6 million jobs annually, equating to 15% of state employment, and their contribution to GDP in 2020 surpassed the economic output of 23 other U.S. states.
• DSB’s remain a source of untapped potential for California. Supporting their growth would translate into significant new job, business, and tax growth across the state. However, this report shows diverse small businesses are having a difficult time scaling and growing when compared to other US states.  For instance, California has fewer minority-owned small businesses relative to its population than Florida, New York or Texas.
• There is significant potential for DSBs to boost their revenues and economic impact by integrating into the government procurement supply chain. Aligning state policies with DSB sectors can create mutual benefits, enhancing both business growth and overall economic development;
• Addressing the significant data gaps that exist about DSBs through direct surveys and systematic monitoring will enable effective policy development and enhance DSBs’ economic impact.

“This very detailed health check on diverse small business provides clear evidence that these firms face persistent systemic barriers, including limited access to capital and high entry barriers in lucrative sectors, which hinder their growth,” said Julian Canete, President and CEO of the California Hispanic Chambers of Commerce.  “Despite these challenges, this research shows that DSBs demonstrate significant entrepreneurial drive crucial for California’s economic vitality and diversity.”

“We are extremely grateful to the leaders of Kaiser Permanente, Southern California Gas, and San Diego Gas and Electric for their financial and technical support that enabled us to unpack the widespread impact that our diverse small businesses are having in California.  This work would be impossible without them,” said Ahmad Holmes, President and CEO of the California African American Chamber.

To obtain a copy of the full report, click here.