In May 2020, McKinsey issued a report stating while the COVID-19 pandemic was shaking up small businesses across the board, it was disproportionately affecting minority-owned small businesses. Reasons cited were that the country’s 1.1 million minority-owned small businesses often face underlying challenges, making it tougher for them to run and scale successfully, plus they are likelier to work in industries most distressed by the global crisis. Think food services, retail and personal and laundry services, for instance.
At the same time, the Cox Small Business Survey found that 90% of minority-owned small business owners have high hopes regarding growth in the next year. The good news is that slightly more than 60% have returned to or exceeded pre-pandemic financial levels.
Rather than letting COVID-related business slowdowns get the best of them, many have invested stimulus money in technology solutions, enabling them to survive and compete in a world forever changed by 2020.
Let’s explore key areas of growth accelerated by the pandemic, some barriers minority-owned small businesses face, along with how enterprises can support this integral sector of the U.S. economy.
Investing in Technology Crucial
Of the 72% of respondents obtaining personal stimulus money, including funds from the Paycheck Protection Program (PPP), most (81%) poured investments back into their business, predominantly with technology. This included adding ecommerce platforms, touchless payments and contactless delivery such as curbside or buy online, pick up in-store (BOPIS).
Although these investments might have seemed challenging and expensive to add at the time, adopting such technology was a wise move. Between March 2019 and June 2020, adoption of touchless payments, which includes contactless cards, mobile wallets and QR codes, increased 150%. A National Retail Federation and Forrester study showed many Americans tried contactless payments for the first time in 2020. Further, it revealed that most retailers saw no-touch payments increase since January 2020, with 94% of those activating touchless payments capabilities expecting its usage to increase.
Not to mention click-and-collect orders — like curbside and BOPIS — increased 202% during the first three months of the pandemic.
Without a doubt, minority-owned businesses reached out to their customers — and continue doing so — using new, innovative ways. They did what they needed in terms of integrating new technology into the fold to keep their businesses moving forward. And more than half of those surveyed intend to continue using this new tech — and perhaps invest in more.
Dealing with Minority-Specific Business Barriers
Although, perseverance and technology investments have paid off for many in the minority-owned business community, the pandemic presented hardships, some of which they were all too familiar with before 2020.
In trying to get their business off the ground, two-thirds of Cox survey respondents, especially owners aged 18-29 years, cited their biggest challenges as access to funding (59%), growing their customer base (52%) and planning and structuring their business (41%).
Separately, the 2020 Small Business Credit survey, fielded in Q3 and Q4 of 2020, showed bank financing varies significantly based on owner race and ethnicity. Companies with non-Hispanic black ownership are half as likely (23%) to obtain bank funds than non-Hispanic white owners (46%). Further, twice as many white business owners (30%) use business credit cards in their first year of operations compared with 15% of black business owners.
Although disparities continue, certain movements help. During the pandemic, for instance, a nationwide grass roots effort to shop small, buy local and support minority-owned companies rather than throw dollars at some of the larger companies, including big box retailers, helped these companies stay afloat.
However, ensuring these businesses thrive requires a shift in how larger enterprises support them by bringing them into the fold to close the gap. This should not be a one-and-done effort. Larger corporations should embrace minority-owned businesses because the process has the potential to increase their supplier and customer base — and is the right thing to do.
Looking to Larger Enterprises for Support
More than half (55%) of the minority business owners surveyed want to participate in improved supplier diversity programs and more minority-targeted grants and funding opportunities from larger corporations. A diverse supplier is a business 51% or more owned and operated by underrepresented individuals or groups like minority-, women-, veteran- or LGBQT-led organizations.
An inclusive procurement strategy, in which minority groups are represented, promotes diversity and increases the pool of potential suppliers — which can improve product and service quality while reducing costs. These minority groups want a seat at the table rather than being invited to bid on a project or proposal reactively.
Some big enterprises, including General Motors, Target, UPS and Coca-Cola, include minority-owned businesses in their supply chains. Coca-Cola, for instance, had a goal of spending $1 billion dollars annually by the end of 2020 to increase its pool of diverse suppliers.
The Cox survey further discovered that 45% of respondents would like more mentorship or advisory programs led by experienced business executives. They crave the experience executives from larger, more seasoned companies can offer, because these individuals can provide invaluable feedback and suggestions to help improve day-to-day operations and increase growth.
Supporting Minority-Owned Businesses Key to Economic Growth
Small businesses, including minority-owned companies, are the backbone of our communities. In 2020, there were approximately 31.7 million small businesses in the United States, comprising more than 99% of all American businesses. This includes approximately 5.2 million self-employed minorities.
Most of the Cox-surveyed minority businesses owners are hopeful business will improve and finances will be sound. Although the pandemic brought on hardships, it equally ushered in opportunities through new technology like ecommerce platforms, touchless payments and contactless delivery that relied upon sufficient internet bandwidth.
They also relied on their communities and larger enterprises to rally behind them and invest in their livelihood and growth. No business, large or small, knows what’s coming down the pipeline. But they can shore up their knowledge and services and invest in technology to help increase the likelihood of future success.
Minority-owned businesses have unique challenges that existed long before the pandemic. However, 2020 opened our eyes and showed us communities and enterprises can and should do what they can to support them because our world is increasingly diverse. The businesses we work in are increasingly diverse. The technology we rely upon is increasingly diverse. As such, the companies we support should be increasingly diverse as well.
Murray Goldstein serves as the VP, Marketing and Sales Operations for Cox Communications, Inc.‘s business services division. He has primary responsibility for driving holistic marketing efforts across advanced marketing analytics, brand and creative, consumer insights, digital marketing, media buying and placement, content and social as well as sales compensation, policy and operations.