2024 Small Business Entrepreneurs of Color

A Look at the State of Entrepreneurs of Color in 2024

In the ever-changing world of small businesses, understanding the experiences of entrepreneurs of color is not just beneficial — it’s imperative. Guidant reaches out annually to small business owners nationwide, gathering detailed insights into their challenges, successes, and aspirations.

This year’s study provides a deeper exploration into how election-year dynamics and political preferences are shaping the experiences and decisions of entrepreneurs of color, as well as assessing the broader economic effects on their businesses.

Supporting the success of underserved communities is fundamental for Guidant, especially for businesses operated by women and entrepreneurs of color. We are excited to disclose the trends and experiences of these entrepreneurs.

Index

What are Small Businesses Like in 2024?

Business Types

In our study, we explored the variety of business types operated by entrepreneurs of color, categorizing them into four distinct segments.

The data reveals a mix of entrepreneurial ventures: 34 percent of respondents have started new independent businesses, demonstrating a strong inclination toward building something uniquely their own. Another 21 percent are running existing independent businesses, indicating a stable presence in the marketplace.

Franchising also plays a significant role, with 33 percent of participants initiating new franchise locations attracted by the established systems and brand recognition. Meanwhile, 13 percent have purchased existing franchise locations, leveraging the continued success of proven business models.

This array of business types showcases the varied approaches entrepreneurs of color are taking to carve out their success in today’s economic environment.

Profitability and Growth

Profitability remains a challenge amidst inflation and high interest rates; although some businesses have managed to thrive post-COVID, many continue to grapple with achieving profitability as consumer spending lags. Notably, when excluding businesses that have been operational for only two years, only 56 percent are profitable, underscoring the ongoing struggle in this economic climate.

Despite challenges, 53 percent of businesses are currently reporting profitability. This figure is a testament to the resilience and determination of these entrepreneurs. The remaining 47 percent of businesses are not yet profitable.

Looking ahead to 2024, these entrepreneurs have laid out a variety of plans for growth, reflecting their optimism and strategic focus. Twenty-six percent of business owners plan to increase their staff, indicating confidence in expanding operations and scaling their businesses.

Digital marketing is another significant area of investment, with 18 percent of entrepreneurs aiming to enhance their online presence, which is vital for reaching broader markets in today’s digital-first economy.

Additionally, 17 percent plan to expand or remodel their businesses, while investments in accounting and tax services are a priority for 12 percent of the respondents. Lesser yet strategic investments include traditional marketing (9%), information services technology (7%), payroll services (7%), and technology to support remote work (4%). A small fraction (1%) is looking to outsource services to offshore companies, exploring cost efficiencies and global talent advantages to boost their operational dynamics.

These plans collectively demonstrate a robust initiative toward growth and adaptation despite evolving economic challenges.

Top Industries

Our findings reveal an array of top industries where entrepreneurs of color are making significant inroads. Retail emerges as the leading sector, accounting for 18 percent of businesses, where entrepreneurs leverage consumer goods’ widespread appeal. Close behind, the health, beauty, and fitness services sector captures 17 percent, highlighting a strong consumer focus on wellness and personal care. The food and restaurant industry also shows a robust presence at 10 percent, reflecting the perennial appeal of culinary ventures.

Meanwhile, residential/commercial services, construction/contracting, and business services each represent eight percent of the total, indicating a solid foothold in sectors that demand specialized knowledge and skills.

The variety in these sectors exemplifies how entrepreneurs of color are tapping into multiple opportunities to start and scale their businesses amidst fierce market competition.

Top Challenges

We’ve identified a series of top challenges that entrepreneurs of color face in their business endeavors, reflecting the hurdles that can impact growth and sustainability. The foremost challenge, cited by 23 percent of respondents, is the lack of capital or cash flow, which underscores the fundamental issue of funding necessary for operations and expansion. Close on its heels, 21 percent of entrepreneurs report struggling with inflation and price increases, which complicate financial planning and operational costs.

Recruiting and retaining staff is another significant challenge, affecting 19 percent of the participants, highlighting the difficulties in building and maintaining a reliable workforce.

Marketing and advertising pose a hurdle for 12 percent, indicating the need for effective strategies to enhance visibility and customer acquisition.

Administrative work and time management are also notable challenges, reported by 10 percent and six percent respectively, reflecting the operational complexities small business owners face.

Additionally , five percent each notes difficulties with supply chain issues and managing or providing benefits, pointing to the operational and employee management challenges in today’s economic landscape.

These challenges collectively depict the multifaceted difficulties entrepreneurs of color navigate as they strive to establish their foothold in various industries.

Economic Confidence

The study also sheds light on the economic confidence among entrepreneurs of color, revealing a nuanced landscape of optimism and concern. Twenty-six percent of respondents feel somewhat confident about the economic outlook, matching the percentage who remain neutral at 26 percent.

However, only a small fraction, five percent, express very high confidence, suggesting caution and reserve among the majority. On the other end of the spectrum, 12 percent of entrepreneurs indicate that they are very unconfident, and 30 percent are somewhat unconfident — reflecting substantial concerns about future economic conditions.

Recruitment and Retention

Our data reveals varied experiences in the area of recruitment and retention among entrepreneurs of color, highlighting challenges as well as strategies employed to navigate these hurdles.

Regarding hiring difficulty, 11 percent of respondents find it very difficult, while 23 percent consider it somewhat difficult, cumulatively reflecting a significant challenge for nearly a third of the entrepreneurs. However, there’s a slight relief compared to last year, with a nine percent decrease in those who found hiring very to somewhat difficult.
The majority, 31 percent, report no change in the difficulty of hiring, while a minority finds it easier, with 10 percent considering it somewhat easy and five percent very easy.

In response to these recruitment challenges, entrepreneurs have adopted various measures to ease hiring difficulties. The most common strategy, implemented by 27 percent of business owners, is increasing compensation, aiming to attract more candidates and compete effectively in the labor market.

Improving retention efforts for current employees is also a key focus, with 17 percent enhancing practices to keep existing staff engaged and reduce turnover rates. Additionally, 11 percent have expanded their recruitment advertising to cast a wider net, and nine percent have increased employee benefits to bolster their value proposition to potential hires.

Other noteworthy measures include collaborating with educational institutions (8%), expanding training programs (7%), and offering hiring bonuses (6%). The adoption of remote work options and filling hard-to-fill positions with internal employees, both at four percent, also reflect adaptive strategies to address ongoing recruitment and retention challenges.

These efforts demonstrate the proactive steps taken by entrepreneurs of color to ensure they attract and retain the talent necessary to drive their businesses forward in a competitive market.

Who are Entrepreneurs of Color in 2024?

Motivations

The study dives into the motivations that drive entrepreneurs of color to start their own businesses, revealing a mix of personal aspirations and external circumstances.

A significant 28 percent of respondents embarked on their entrepreneurial journey primarily to be their own boss, seeking autonomy and control over their careers. Dissatisfaction with corporate America also emerges as a notable factor, cited by 21 percent of the participants, reflecting a desire to escape the constraints of traditional employment settings.

Pursuing a passion motivates 18 percent, indicating that many are driven by the opportunity to turn what they love into a viable business. Additionally, nine percent each were motivated by an opportunity that presented itself or inspiration for a new business idea, showcasing how situational factors can spur entrepreneurial initiatives.

Other motivations include not being ready to retire (8%), being laid off or having their job outsourced (7%), and life-changing events such as divorce or the death of a loved one (1%), underscoring the diverse and sometimes challenging paths that lead individuals to venture into business ownership.

These findings illustrate the complex tapestry of factors that influence entrepreneurs of color to forge their own paths in the business world.

Happiness

One pivotal aspect of examining the well-being of entrepreneurs of color is their self-reported happiness levels. This measure provides insight into the overall satisfaction and emotional well-being that these entrepreneurs experience amidst the unique challenges and opportunities they face.

A majority of the surveyed entrepreneurs — totaling 68 percent — report feeling either somewhat or very happy. This suggests that many find rewarding aspects in their entrepreneurial journey, possibly due to successful business outcomes, strong community support, or personal fulfillment. Only a small fraction (3%) feel very unhappy, indicating potential struggles with issues like financial stress or barriers to accessing business resources.

However, the data also highlights that 11 percent of the entrepreneurs are somewhat unhappy, and another 19 percent feel neutral, neither happy nor unhappy. This subset may reflect those who face ongoing challenges or are still evaluating their satisfaction with their business ventures.

Age

The age distribution among entrepreneurs of color illustrates a generational diversity within the entrepreneurial sector, with Generation X holding the majority at 55 percent.

This indicates that Gen Xers are likely at a prime stage for entrepreneurship, benefiting from substantial experience and resources. Following are the Baby Boomers, making up 25 percent of the total. Millennials represent the smallest segment at 20 percent, yet they demonstrate a growing interest in entrepreneurship.

Trend analysis reveals significant changes over time in the age dynamics of entrepreneurs of color. Millennials have experienced a five percent increase in their representation, suggesting a burgeoning interest as more enter the age range conducive to starting businesses. Generation X has seen a nine percent increase, solidifying their strong presence in the entrepreneurial community. In contrast, there has been an 18 percent decrease in Baby Boomer entrepreneurs, aligning with broader demographic shifts toward retirement.

These trends highlight the evolving landscape of entrepreneurship across different age cohorts, influenced by changes in economic conditions, societal expectations, and technological advancements.

Diversity

The field of entrepreneurship within communities of color demonstrates substantial diversity, particularly observed in the variations of gender and race among entrepreneurs.

Gender distribution within this group shows a predominance of male entrepreneurs, who constitute 68 percent of the total. Females represent 32 percent, indicating a gender gap where men outnumber women more than two to one in entrepreneurial roles. This disparity highlights potential barriers that female entrepreneurs of color might face, such as access to capital, networking opportunities, and industry biases.

Racial diversity among entrepreneurs of color is broad, showcasing a tapestry of backgrounds contributing to a rich entrepreneurial culture. “Black or African American” business owners make up the largest racial group at 36 percent, followed closely by “Hispanic, Latino, or Spanish-origin” entrepreneurs, who account for 31 percent. “Asian or Asian-American” individuals represent 21 percent, while smaller proportions are seen in other groups: “Middle Eastern or North African” at six percent, “Native Hawaiian or Pacific Islander” at four percent, and “Indigenous American” at two percent.

Education Levels

The educational attainment among entrepreneurs of color is notably high, with 40 percent holding bachelor’s degrees, reflecting a well-educated demographic within the community. This high level of formal education not only equips these entrepreneurs with essential knowledge and skills but also suggests a significant trend toward higher educational standards in the business sector.

Further analysis reveals that 34 percent of these entrepreneurs have master’s degrees, emphasizing the role of advanced specialized knowledge in entrepreneurship. Associate’s degrees and high school diplomas are held by 12 percent and nine percent respectively, showing that while higher education predominates, there is still a spectrum of educational backgrounds. At the top of the educational ladder, six percent possess doctorates.

This diversity in educational achievement among entrepreneurs of color highlights the potential benefits of advanced education in fostering business innovation and success.

Election Year Insights

Political Affiliation

The political affiliations among entrepreneurs reflect a broad range of affiliations, with 31 percent identifying as Democrats — a number that has seen a dramatic 38 percent decrease since the previous year. This notable decline may suggest changing perspectives and priorities within the entrepreneurial community, influenced by the evolving socio-economic landscape. Meanwhile, 29 percent of entrepreneurs align with the Republican Party, suggesting that conservative economic principles and policies have substantial traction among these business owners.

Additionally, a majority — 37 percent — declare themselves as unaffiliated, indicating a preference for non-partisan approaches, potentially favoring practical business strategies over political ideology. A smaller segment, three percent, aligns with the Libertarian party, favoring minimal governmental interference in business. This diverse political spectrum among entrepreneurs of color reflects a complex interplay between their business operations, personal values, and broader political ideologies, highlighting a trend toward greater political independence and nuanced engagement with political issues.

Political Confidence

The political confidence among entrepreneurs of color presents a view of their outlook on the political environment’s impact on their business operations. Data indicates that a substantial portion of these entrepreneurs exhibit reservations about the political landscape, with 13 percent expressing very unconfident sentiments and an additional 26 percent feeling somewhat unconfident. This collective 39 percent of entrepreneurs who lean toward a lack of confidence might be concerned about political stability, policies, and regulations that could affect their business environment negatively.

Conversely, 31 percent of the entrepreneurs have a more positive outlook, with 24 percent somewhat confident and seven percent very confident in the political framework surrounding their businesses. This confidence could stem from favorable political policies or effective advocacy and representation. The largest group, however, comprising 30 percent, stands neutral, neither swayed by optimism nor pessimism about the political climate.

Presidential Vote

In a survey conducted in December, entrepreneurs of color expressed their presidential preferences, revealing a closely contested landscape among the leading candidates. Joe Biden emerged as the top choice, with 35 percent of the respondents indicating their support for him. Close behind, Donald Trump garnered 33 percent of the vote.

The poll also highlighted the presence of other significant figures in the race, with Nikki Haley receiving 12 percent of the vote. This indicates a notable faction within the entrepreneurial community that aligns with her political views and potential policy proposals. Ron DeSantis followed closely with 11 percent, suggesting his appeal among those looking for new conservative leadership. Robert F. Kennedy Jr. captured 10 percent of the votes, highlighting his influence among entrepreneurs of color who may resonate with his advocacy and perspectives. This data reveals the community’s multifaceted political preferences, mirroring a broad spectrum of values and priorities impacting their voting decisions.

Summary

In summary, the insights gathered from Guidant’s annual survey illuminate the complex interplay between political dynamics, economic conditions, and the entrepreneurial spirit among business owners of color.

This year’s findings are particularly poignant, reflecting the critical influence of election-year politics on business decisions and sentiments. Entrepreneurs of color are navigating these waters with resilience, despite facing unique challenges that differ significantly across demographics and industries.

Guidant’s commitment to inclusivity and support for underserved communities is more crucial than ever. By continuing to provide resources and advocacy, Guidant aims to play a pivotal role in ensuring that these entrepreneurs not only survive but thrive.