The Capital One Insights Center has released new research that sheds light on how business ownership can drive personal wealth creation for Black and Hispanic entrepreneurs and their communities – and ultimately close the racial wealth gap.
“For many Black and Hispanic entrepreneurs, owning a business can be a tremendous opportunity to build wealth and narrow the racial wealth gap,” said Shena Ashley, President, Capital One Insights Center and Vice President, Community Impact and Investment. “In Richmond, about 35 percent of Black and Hispanic business owners saw at least $188,000 in personal wealth growth over the course of their business ownership, the same as the median wealth for white U.S. households. With the support of a coordinated business ecosystem, sustained funding and educational resources, these businesses were able to make a real difference in closing the racial wealth gap for themselves.”
The study, conducted in partnership with Boston Consulting Group (BCG), surveyed more than 1,000 business owners and residents in Richmond, Virginia, along with 21 interviews with community organizations and found unlocking wealth is possible – but under the right conditions.
The report’s key findings include:
- Successful businesses have shown that it is possible to unlock wealth under the right conditions. Approximately one-third of Black and Hispanic business owners in Richmond experienced personal wealth growth of at least $188,000 over the course of their business ownership.
- Wealth growth is not a guarantee. Wealth growth by Black and Hispanic business owners was roughly half of non-business owners from 2017/18 to 2022.
- Size and scale matter for long-term personal wealth and business success. Businesses that survive the initial start-up years or grow to greater than $500,000 in annual revenue generate greater wealth.
- Business success depends on three critical conditions. Access to and acumen around initial and growth funding, right-sized skills and capabilities and a supportive business ecosystem are key variables to business success and personal wealth generation.
Based on these findings, the research highlights potential levers that could help entrepreneurs, financial institutions, business and community organizations and policymakers close the racial wealth gap.
“Working to level the playing field for all small businesses in Richmond requires a multi-faceted and long-term strategy that consists of dedicated investments, available resources and policy,” said Andy Navarette, Executive Vice President, Head of External Affairs, Capital One. “Public, private, nonprofit and government sectors must come together to explore innovative ways to increase Black and Hispanic entrepreneurs’ access to capital and make concerted, harmonized efforts to level the playing field for diverse business owners, in Richmond and around the country.”
In order to unlock personal wealth creation for Black and Hispanic entrepreneurs at scale, the report recommends…
1) continued exploration of innovative ways to increase capital; 2) public, private and nonprofit support; 3) financial management and digital tools; 4) collaboration among organizations within the business ecosystem; and 5) trust-building between funders and communities of color.
“Being a small business owner in any community is a challenge. When it comes to minority small business owners and closing the staggering racial wealth gap, challenges such as unequal access to capital and business support systems often make their journey even tougher,” said Kedra Newsom Reeves, Managing Director and Partner at BCG and Co-Lead for The Center for Inclusion and Equity. “This research makes clear that while wealth growth through business ownership is achievable, public and private organizations play an integral role in supporting underserved communities and the budding entrepreneurs within them.”
From August to October 2022, we surveyed 1,015 current and former business owners and residents of Richmond, Virginia and conducted interviews with 21 community organizations that provide support to local business owners. We focused on businesses in Richmond, Virginia, using wealth creation rather than longevity as a measure of success.
Our survey covered current and past business owners from Black or Hispanic backgrounds, against the general population in Richmond. Responses include active businesses started between 1970 and 2021; former businesses started between 1974 and 2022; businesses up to $10 million in annual revenue, with a sample average revenue of $2.9M; and businesses from service, retail and manufacturing industries. Nearly all the owners surveyed launched their business before 2020, meaning they survived the economic impact of the pandemic.
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About Capital One Insights Center
The Capital One Insights Center combines Capital One research and partnerships to produce insights that advance equity and inclusion. As a nascent platform for data and dialogue, the Center strives to help changemakers create an inclusive society, build thriving communities and develop financial tools that enrich lives. The Center draws on Capital One’s deep market expertise and legacy of revolutionizing the credit system through the application of data, information and technology.
Learn more about the Insights Center here.
About Boston Consulting Group
Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage and drive positive societal impact.
Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.
The North America Center for Inclusion and Equity (CIE) works with organizations to help build inclusive cultures, deliver social impact, create business value and drive measurable change for all underserved groups. We serve as the home for diversity, equity and inclusion thought leadership, partnerships and engagements for BCG’s North America region. The CIE brings together more than 250 DEI experts covering the full range of industries and across all core business functions. We support companies to eliminate systemic bias, spark broader social transformations and generate a competitive advantage.