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% 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.”
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