Minnesota’s economy has a competitive advantage — its fast-growing minority business community.

Our state already has more than 47,000 minority-owned businesses, which employ more than 70,000 people with an annual payroll of $1.7 billion. With smart investment in business development, that could grow considerably.

A prospectus from Catalyst, a consortium of seven minority-business support organizations in Minnesota, offers specifics. For example, increasing the sales of minority-owned businesses by just 5% would translate into 10,309 new jobs and $287.2 million in additional income.

A 2018 survey of 451 minority-owned businesses in Minnesota conducted by Russell Herder shows the strength that these entrepreneurs bring to our state’s economy. Forty percent of their businesses increased sales during 2017. Sixty-one percent projected a positive growth in sales in 2018, and 49% planned to increase employee pay.

Despite their strength, there are challenges. One-third of the survey participants still find it hard to obtain capital, which raises the specter of employee layoffs and business closings. To prevent such results, we need to act now while keeping the following points in mind.

Minority business ownership promotes self-sufficiency and stable families in communities of color. For instance, consider the homeownership rate for clients of the Metropolitan Economic Development Association (MEDA), one the Catalyst organizations. In the general Minnesota population, minority homeownership is 42%. Among MEDA clients, however, it is 67%.

While there’s room for other approaches to minority-business development, the surest path to reducing poverty and building wealth over the long term is entrepreneurship. Supporting people to take on this role is not a social service; it’s a market-based, bipartisan strategy for creating jobs and boosting personal income. Far from being a handout, minority-business development is a “hand up.”

Furthermore, effective business development targets the unique needs of minority-business owners. While business development in general is a clear win for Minnesota, a “one size fits all” approach will not work. To get the highest return on our business-development investment, we need to target the specific challenges and opportunities that are most often faced by minority entrepreneurs.

A 2018 report from the Initiative for a Competitive Inner City offers a useful framework for doing this focused on the “three M’s”:

• Management education. Blacks and Latinos in particular are less likely to enter business school. Black business owners are also less likely than majority business owners to have family members who are self-employed. Mentoring, consulting services and technical assistance can fill such gaps.

• Money. Biases in bank lending can lead to credit denials, smaller loans and higher interest rates for minority-business owners, particularly in inner city areas. In addition, minority businesses are often isolated from venture capital networks. We can help to overcome these barriers by attracting funders for loan packages that give minority entrepreneurs the capital they need.

• Markets. Contracts with government agencies and corporations help any business to mitigate risk and build a steady revenue stream. Business development can help minority-owned businesses grow the capacity to take on larger contracts.

Finally, it’s clear that minority-business development is a win for all Minnesotans. In March, Gov. Tim Walz and Lt. Gov. Peggy Flanagan conducted a nine-city tour to tout a budget they describe as “the single greatest investment in Greater Minnesota in the history of our state.” This is a two-year proposal for spending $49.5 billion on tax credits, rural broadband expansion, aid to county governments and other measures to boost local economies.

Minority-business development complements this goal well, especially as Greater Minnesota becomes more racially and ethnically diverse. These entrepreneurs can develop agriculture-related businesses along with the kind of manufacturing and service operations that populate main streets in our smaller towns. Minority-business development has the potential to fill vacant storefronts in Mankato and Ely as well as in Minneapolis and St. Paul.

Growing sustainable minority-owned businesses is Minnesota’s secret sauce for future prosperity. By strengthening and supporting entrepreneurs of color, we can bank on market principles to create better outcomes for us all.


This article is a joint effort with the Catalyst consortium: MEDA, NEON, Community Reinvestment Fund, African Development Center, Latino Economic Development Center, Asian Economic Development Association, and African Economic Development Solutions. Chief author is Gary L. Cunningham, president and CEO of MEDA.