The Big Picture: A Larger View of the Small Business Market: Tapping the Power of Big Data Analytics

Executive Summary

Main Street is a critical engine of the American economy. Small businesses create jobs and wealth, and are sources of social and cultural capital—all of which are imperative for thriving, equitable communities and sustained economic development. When business owners in low-income and distressed communities are shut out of the American Dream, they aren’t the only ones who suffer; so do their communities and the broader economy.

Despite the importance of Main Street businesses to dynamic neighborhoods and community revitalization across the United States, no one has had a clear picture of the universe of small businesses in low-income communities and the economic potential it represents. This lack of understanding has serious consequences. When the lens through which needs, opportunities, and risks are identified does not include the “big picture” of a broad national context, opportunities for investment are missed, and opportunities for innovation and more effective allocation of resources can be overlooked.

In 2014, the Association for Economic Opportunity, with generous contributions of talent and resources from IBM and Dun & Bradstreet, undertook the first of its kind “Big Data” analysis of the size and structure of the universe of small businesses in low-income communities.

The analysis yielded seven key insights:

Implications for the Community Development Sector

This paper represents an important first step in understanding this critical market sector, demonstrating that Big Data analytics can play an important role in advancing the understanding of small businesses in low-income communities. The data can support the efforts of investors, community development organizations, and policy makers to foster financial inclusion and distributed economic opportunity.

Specifically, we see three main opportunities:
1. Small businesses in low-income communities are a powerful economic force, generating $1.87 trillion in annual revenue.
2. At a time when banks are pulling back from lending in low-income communities, community development practitioners must develop a deeper understanding of the needs of small business owners for capital and support services, and of the experiences of the 2.2 million small businesses that attempt to gain access to capital and services each year.
3. This data, and future big data analytics, can be used by investors, policymakers and community development practitioners to not just advance the understanding of small businesses in lowincome communities but also support the efforts to foster financial inclusion.

Small businesses play a critical role in the economic development of low-income communities. Because they tend to hire locally, they create a ripple effect of economic growth that is especially important in low-income communities. They create new jobs, help business owners and their employees build wealth, and provide much-needed services to the community while ensuring that its money stays in the community and supports the local economy.

Moving forward, AEO will work with partners to explore ways to use this data to develop deeper understanding of the market as well as to identify policy proposals to promote increased financial inclusion.

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