Reimagining Technical Assistance: Shifting the Support Landscape for Main Street

Executive Summary

Microbusinesses make up almost 90 percent of the nation’s businesses and represent an even higher proportion of small businesses in low-wealth communities.1 Their potential as an economic force is growing. According to the Kauffman Index of Main Street Entrepreneurship, a leading indicator of small business entrepreneurship activity in the United States, growth in the number and share of established microbusinesses is the primary driver for the upward movement of the 2015 index.2 In spite of their numbers, these businesses tend to fly below the radar screens of investors and policy-makers. Microbusinesses represent a powerful economic force and can be a critical path to economic opportunity and financial inclusion. They are sources of job creation, wealth creation and intangible sources of social and cultural capital, all of which are imperative for thriving, equitable communities and sustained economic development. Their potential for impact as engines of both wealth-creation and employment-growth is undeniable: business owners are significantly wealthier than their wage-earning peers. 3 And these businesses could grow to employ far more than the 26 million people across the United States that they presently employ.4

Microbusinesses grow and hire when they get the right mix of capital and support: prior AEO research found a 30% difference in average annual revenue growth for a sample of businesses that got support compared to their peers that did not.5 In fact, with the right mix of resources and support systems, employment from microbusinesses in low-wealth communities alone could grow by well-over 10 percent. 6

When business owners in low-wealth and distressed communities are shut out of opportunities, the consequences ripple throughout the country and our economy. So, what is stopping these businesses from reaching anything close to their full potential? What can community organizations, investors and policy-makers do to unleash this powerful force?

With generous support from Capital One, AEO sought to understand opportunities to improve the support landscape for microbusinesses in low-wealth communities so that they can grow and hire. To do this, we started by seeking a deeper understanding of the needs of small business owners and aspiring entrepreneurs. We then looked at the current state of training and business development services targeted at business owners and aspiring entrepreneurs in low-wealth communities. We also identified programs and initiatives focused on supporting entrepreneurs more broadly. We interviewed leaders of both established and new nonprofits. We evaluated available data on the efficacy and costs of training and services to enable individuals to start and grow businesses. Last May, we convened the leadership of more than 80 non-profit lenders and service providers to share perspectives on the state of technical assistance and to engage in dialogue around what might change. Since then, we’ve focused on questions of availability of and access to products and services that can effectively and efficiently meet the needs of business owners and aspiring entrepreneurs in low-wealth communities by continuing to identify and evaluate opportunities to incorporate low-cost tools; to partner with emerging and proven product and service providers and to identify opportunities for testing and efficient replication of potentially high impact new models.

Along the way, we’ve met a lot of passionate individuals working hard to make dreams come true in their communities. Their passion and commitment is inspiring and energizing. This report and our subsequent efforts are intended to amplify the impact of their passion and hard work.