Business Ownership

Business ownership can create wealth for owners and employment in communities. Increasing business ownership, and especially small business ownership, may strengthen the local economy and create jobs.  However, this opportunity is not equitably distributed.[1] Structural difficulties like lack of access to business loans and wealth disparities contribute to inequitably distributed business ownership.[2] Additionally, minority-owned businesses are more likely to be smaller businesses and are also more likely to have been negatively affected by the COVID-19 pandemic (layoffs, furloughs, and/or closures).[3]
 
Business ownership in San Diego County was assessed according to the 2018 Annual Business Survey (ABS)[4],[5] and the 2018 Nonemployer Statistics by Demographics (NES-D),[6],[7] which cover employer and nonemployer businesses for 2017. ABS data come from surveying a sample of businesses and do not include all existing businesses, and NES-D data are based on administrative data for all taxpaying nonemployer businesses. A nonemployer business is one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes. Nonemployer businesses are generally small. Some examples include real estate agents and independent contractors. According to the U.S. Small Business Administration, businesses may be classified as "small businesses" to qualify for federal programs if they meet revenue and employee size standards that vary by industry.[8] Small businesses may be counted as a nonemployer or employer business in this analysis.
 
The ABS collects demographic information of employer business owners using a self-reported survey and NES-D collects demographic information of nonemployer business through administrative records.  Demographic information, including sex, ethnicity, and race, is summarized for each business using the demographics of up to four people owning the largest percentages of the business. Businesses may be counted in more than one race and ethnicity group if the sole owner or majority owner reported more than one race or if a majority combination of owners reported more than one race. Similarly, businesses may be tabulated in more than one sex group. For these reasons, the sub-group data may not add up to the total.
 
The ABS and NES-D define minority as people who are Black or African American, Asian, Hispanic or Latino, American Indian or Alaska Native, or Native Hawaiian or Pacific Islander. Although San Diego County has a majority-minority population, minority-owned businesses were underrepresented (Figures 1-2). Only 23.8% of employer businesses and 38.9% of nonemployer businesses were minority-owned in 2017, compared to 54.7% of the overall county minority population (Figure 2). 
There were also large differences in business ownership by sex (Figure 3). Although about half the population were women, 41.6% of nonemployer firms and only 19.8% of employer firms were owned by women in 2017. Interestingly, there was a greater percentage of equally female/male owned employer businesses than nonemployer businesses (15.6% vs. 1.7%, respectively).
Some of these disparities may be addressed through the Small Business Administration (SBA), which aims to help create and maintain small businesses. The SBA offers many resources, including federal contracting assistance, loans, and community navigators. Additionally, the SBA assists small businesses in recovery from the COVID-19 pandemic.[9] The Minority Business Development Agency is another organization that provides similar support, focusing on connecting Minority Business Enterprises (MBEs) to private lenders, promoting MBEs to buyers (helping secure contracts), and positioning MBEs to expand their client base.[10] Local government and nonprofit programs across San Diego County include distributing small business relief funds,[11] providing loans and financing,[12] and offering consulting services to help businesses obtain grants[13] and navigate the county’s business community.[14] Some other local initiatives to boost minority-owned businesses include Microenterprise Home Kitchen Operations (MEHKOs),[15],[16] the Social Equity Cannabis Program,[17] and a yearly Tourism Accelerator Program for small businesses.[18]

Data Information
Data Sources: 2017 American Community Survey 1-year Estimates, 2018 Nonemployer Statistics by Demographics series, 2018 Annual Business Survey.
  • Persons of Hispanic or Latino ethnicity may belong to any race group. All categories except Hispanic or Latino include persons for whom race is known but ethnicity is non-Hispanic or unknown. Multiracial and Some Other Race Categories are not used as categories in the ABS nor NES-D tabulations.
  • Some data was withheld by the Census Bureau to avoid disclosing data for individual companies; data are included in higher level totals.
  • For population estimates, minority is a sum of all race/ethnicity categories except for non-Hispanic White.
  • 6,800 (2.3%) of Nonemployer businesses and 4,176 (6.1%) were unclassifiable in 2017. Businesses are unclassifiable by sex, ethnicity, and race if they have no owners with 10% or greater ownership of the stock or equity in the business.
  • The sum of categories in the population column equals the total because people are tabulated under one category. Data may not be comparable to business counts because businesses may be tabulated in multiple categories.
References
  1. Fairlie, R. (2018). Racial inequality in business ownership and income. Oxford Review of Economic Policy, 34(4), 597–614. https://doi.org/10.1093/oxrep/gry019
  2. Winston, A. (2021). The Contribution of Minority Business Enterprises to the U.S. Economy. Minority Business Development Agency. Retrieved from https://www.mbda.gov/sites/default/files/2021-09/The%20Contribution%20of%20MBEs%20to%20US%20Economy%20Report%20%20-%20September%202021.pdf
  3. McKinsey & Company. (2020, May 27). COVID-19’s effect on minority-owned small businesses. Retrieved September 12, 2022, from https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-19s-effect-on-minority-owned-small-businesses-in-the-united-states
  4. The Annual Business Survey (ABS) obtains information on employer businesses through yearly surveys and sampled 300,000 businesses yearly between 2019-2022. Annual Business Survey: https://www.census.gov/programs-surveys/abs/about.html
  5. U.S. Census Bureau. (2018). AB1800CSA01 - Annual Business Survey: Statistics for Employer Firms by Industry, Sex, Ethnicity, Race, and Veteran Status for the U.S., States and Metro Areas: 2018. (2018). https://data.census.gov/table?q=AB1800CSA01&g=310XX00US41740&tid=ABSCS2018.AB1800CSA01
  6. The Nonemployer Statistics by Demographics series (NES-D) obtains information on nonemployer businesses through existing individual-level administrative records. Nonemployer Statistics by Demographics: https://www.census.gov/programs-surveys/abs/technical-documentation/NESDmethodology.html
  7. U.S. Census Bureau. (2018). AB1800NESD01 - Nonemployer Statistics by Demographics series (NES-D): Statistics for Nonemployer Firms by Industry, Sex, Ethnicity, Race, and Veteran Status for the U.S., States, and Metro Areas: 2018. Retrieved from https://data.census.gov/table?q=AB1800NESD01:+Nonemployer+Statistics+by+Demographics+series+(NES-D):+Statistics+for+Nonemployer+Firms+by+Industry,+Sex,+Ethnicity,+Race,+and+Veteran+Status+for+the+U.S.,+States,+and+Metro+Areas:+2018&g=310XX00US41740&mode=results
  8. Table of Small Business Size Standards. U.S. Small Business Administration. Retrieved from, Table of size standards | U.S. Small BusinessAdministration (sba.gov)
  9. U.S. Small Business Administration. (n.d.). Learn about SBA federal resources. https://www.sba.gov/local-assistance
  10. Minority Business Development Agency. (n.d.). Who We Are. Retrieved September 21, 2022, from https://www.mbda.gov/who-we-are/overview
  11. Stimulus Grant Program, Small Business Stimulus Grant. (n.d.). San Diego County Official Website. https://www.sandiegocounty.gov/stimulusgrant/#:~:text=The%20Small%20Business%20Stimulus%20Grant,entities%20impacted%20by%20COVID%2D19
  12. Find resources for your business. (n.d.). The City of San Diego Official Website. https://www.sandiego.gov/business-resources
  13. Connect SBDC. (n.d.). Small Business Development Center. https://connect.org/sbdc/
  14. Doing Business Here. (n.d.). San Diego Regional EDC. https://www.sandiegobusiness.org/doing-business-here/
  15. Environmental Health and Quality, Home Kitchen Operations. (n.d.). San Diego County Official Website. https://www.sandiegocounty.gov/content/sdc/deh/fhd/food/homekitchenoperations.html
  16.  “A Microenterprise Home Kitchen Operation (abbreviated "MEHKO") is a permit category for a food facility that is operated by a resident in a private home.” Microenterprise Home Kitchens (MEHKO). (n.d.). San Diego Food System Alliance. https://www.sdfsa.org/mehko
  17. Planning & Development Services, Socially Equitable Cannabis Program. (n.d.). San Diego County Official Website. https://www.sandiegocounty.gov/content/sdc/pds/Cannabis.html
  18. San Diego Tourism Authority’s Tourism Accelerator. (n.d.). San Diego Tourism Authority. https://www.sandiego.org/about/tourism-accelerator.aspx
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Updated February 7, 2024