2022 Small Business Entrepreneurs of Color
A look at the state of entrepreneurs of color in 2022
Each year, Guidant reaches out to the resilient, hardworking small business owners of America. We learn who they are, what their lives as small business owners are like, what their plans for the future are, and how their business has weathered current affairs. We are especially interested in helping underserved minorities and their businesses thrive, including owned by women and entrepreneurs of color. Together, this information makes up the Small Business Trends report.
Who are Entrepreneurs of Color in 2022?
Entrepreneurs of color, like most small business owners, were motivated by a desire to be their own boss (57.58%). Like our average respondent, they were also dissatisfied with corporate America (45.45%) and wanted to pursue their passion (33.33%). Entrepreneurs of color were equally likely to start a business when they lost their job (20.20%), or an opportunity presented itself (19.19%), such as being offered the chance to buy a business. Slightly fewer respondents than average considered delaying retirement a factor, with only 18.18% of respondents saying they weren’t ready to retire compared to the average of 22.68%.
Multiple research sources have shown us that the COVID-19 pandemic disproportionately affected people of color, and unfortunately our data aligns with this. People of color were 12% less likely to identify as “very happy” (26.26% compared to 38.94% on average) and 6% more likely to identify as somewhat unhappy (16.16% compared to 10.21% on average). With that said, entrepreneurs of color still primarily identified as somewhat happy (41.41%), with 67.67% identified as somewhat or very happy.
On a scale of one to five, with one being “very unhappy” and five being “very happy,” the average respondent was 3.95. The average for entrepreneurs of color was 3.65.
The age distribution of entrepreneurs of color more closely resembles women than it does the average segment. The predominant generation is Gen X, with 48.67% of respondents, followed by Boomers, at 36.28% of respondents. Millennials made just over 14% of respondents, and Generation Z (Zoomers) made up less than 1%. We expect to see the percentage of Gen X business owners grow in the coming years.
Diversity in Business
Entrepreneurs of color made up 15% of our total respondents.
Of those, 24.35% identified as Asian or Asian-American. 21.74% identified as Black of African-American. An equal number of respondents identified as Hispanic, Latino, or Spanish-Origin (21.74%). Indigenous American business owners made up 6.96% of respondents, whereas Middle Eastern or North African business owners made up 7.83% of respondents. Finally, Native Hawaiian or Pacific Islander business owners made up 3.48% of respondents.
At least 13.91% of our respondents also identified as multiracial.
Of the respondents of color, 71.68% identified as male. Just over 22% identified as female. Less than one percent identified outside the gender binary, and the remainder of respondents preferred not to answer.
While previous year’s surveys indicated a rise in diversity of small business owners, there is little data to support that trend this year. Whether this reflects the effects of the pandemic or the difference in this year’s sampling methods, we cannot say. Guidant aims to increase the number of people who succeed in small business, especially and including entrepreneurs of color, women in business, and other underserved minorities. We sincerely hope the diversity of these figures will increase in the years to come.
It’s popular to draw political lines based on race, but our data doesn’t support that practice. Forty-two percent of entrepreneurs of color didn’t feel represented by any major political party. Just over 34.29% identified with the Democratic party, whereas 21.90% identified with the Republican party. Less than one percent identified as Libertarian, and no respondents identified with the Green party.
What are Small Businesses Like in 2022?
Running a business is challenging, and entrepreneurs of color have been hit hard by the pandemic and Great Recession. Just over half of businesses (56.82%) reported themselves as profitable. The remaining businesses (43.18%) reported as not profitable.
While this can seem relatively dire, it’s important to keep in mind that more than half of businesses surveyed were less than 5 years old (54.55%). A notable chunk weren’t even open yet (9.09%). Given that it can take business three or more years to become profitable within some verticals, the lack of profitability may not be as bad as it sounds.
Of the remaining businesses, 20.20% were 6 to 10 years old and 8.08% were 11 to 15 years old. Three percent of businesses were between 16 and 20 years old. Five percent of businesses were 20 years old or older.
Sixty-two percent of entrepreneurs of color owned independent businesses as opposed to franchises. Compared to the average, they were more likely to have started the business from scratch (35.48% compared to the 27.22% average) than buy an existing business (26.88% compared to 31.76% on average).
Franchisees of color were more likely to purchase a new franchise location (30.11%) than purchase an existing location (13.98%), which is expected for the franchise segment.
The most popular industry for entrepreneurs of color was Retail (storefront, eCommerce, etc.; 17.35%), which agrees with the average. The second and third most popular industries were Food and Restaurants, and Business Services with a tie at 11.22%. Other industries of note were Health, Beauty, and Fitness Services (9.18%), Residential and Commercial Service (9.18%), and Care Services (7.14%). The remaining fourteen industry categories were all less than 6%.
The majority of our respondents of color (73.74%) are looking to grow or sustain their current business in 2022. Just over 13% are looking to open an additional location or service. A similar percentage of respondents are looking to sell their business. These numbers are in line with this year’s average respondent.
The top three business priorities among entrepreneurs of color for 2022 were increasing staff (49.49%), expanding or remodeling their business (46.46%) and investing in digital marketing (39.39%). More business owners of color (20.20%) report wanting to invest in business services technologies — such as payroll, accounting, inventory, or other business SaaS products — than average (14.37%). There were no significant differences between entrepreneurs of color and the average for the remaining categories.
Hiring During the Great Resignation
As expected, more than half of respondents reported that recruiting and retention was one of their top three challenges this year. The second most reported challenge was lack of capital and cash (39.39%). The third most reported challenge was changing operations in the face of COVID-19 (32.32%).
While these were also the top three challenges reported by all segments, it’s worth noting that business owners of color reported having difficulty with cash 8% more than our average sample. This disparity is present in previous years’ data, reaching as much as 10%.
Roughly 72% of respondents felt that hiring was somewhat or very difficult. Twenty-five percent felt the difficulty was the same as previous years, and only 2.82% felt hiring was somewhat easy compared to other years. This aligns with our average respondent data.
As with every segment, entrepreneurs of color reported having difficulty primarily due to the low number of applicants (40.79%). They also reported that many candidates don’t have the needed work experience (26.32%), or that competition from other employers is complicating the hiring process (25.00%). Despite competition from other employers remaining in the top three reported reasons, entrepreneurs of color were 5% less likely to report it compared to the average (30.43%).
Though we surveyed regarding the most difficult positions to fill, no single position type stood out as more or less difficult, implying the effect of the Great Resignation across all skillsets and verticals.
Entrepreneurs of Color Respond to the Great Resignation
In response to the challenges with retention and recruitment, business owners of color have largely increased compensation (66.67%). They are also making efforts to improve retention (35.90%) and expand recruitment (25.64%). Other notable methods of fighting the effects of the great resignation were increasing benefits (19.23%) and offering hiring bonuses (17.95%). There were no significant differences between the strategies of entrepreneurs of color and our average segment.
What Skills Do Candidates Lack?
The five most essential employee skills reported by entrepreneurs of color were communication, teamwork (both at 50.62%), adaptability (40.74%), sales and customer management (29.63%) and critical thinking (27.16%). Time management (25.93%) and specific trade skills (23.46%) were also notable. The remaining 15 skills were all chosen less than 15% of the time by respondents. Despite being essential, more than a third of respondents reported that candidates commonly lack these skills.
Is the Pandemic Still Affecting Entrepreneurs of Color?
The majority of entrepreneurs of color feel the pandemic is not yet over (54.08%), though 25.51% are unsure. Dishearteningly, entrepreneurs of color are less likely to think they will survive (77.55% compared to 85.36% on average) and are more likely to be unsure about their survival (18.37% compared to an average of 13.10%).
Entrepreneurs of color are also less optimistic about small business as the pandemic matures. Forty percent are somewhat or very unconfident in small business (compared to an average of 34.88%), and only 35.45% are somewhat or very confident (compared to 46.74% on average). The remaining 24.55% were neutral on the topic.
When it comes to political effects on small business, entrepreneurs of color are closer — though not perfectly aligned — with the average. About 31% of business owners of color are somewhat or very confident about small business (a difference of about 6%), and 44.55% are somewhat or very unconfident (a difference of only 2%). Where is the remaining 4% going? The neutral category. Entrepreneurs of color are slightly more neutral or unsure about the political climate concerning small business.
The Future of Entrepreneurs of Color
The pandemic and the Great Resignation have had serious effects on the small businesses owned by people of color. We urge organizations supporting the growth of small business to develop resources directly for this segment, and all sub-segments within.
While it seems clear that the worst of the COVID-19 pandemic and the Great Resignation are behind us, small business has never been easy. If you’re an aspiring small business owner, Guidant can help you get started. If you’re a small business owner ready to make your life easier, now is the time.
Your new life is right around the corner.
Together, we can get your business off the ground — no matter where you are in the small business process.