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When it comes to the number of minority-owned businesses, the Twin Cities are decidedly not above average

Even when you control for Minneapolis-St. Paul’s relatively low overall minority population, the percentage of businesses that are owned by people of color is low.

Aster and Abraham Dalu at their business, A&A Reliable Home Health Care, which they launched in 2014.
Courtesy of Abraham Dalu

Business owner Abraham Dalu came to Minnesota for the work — not the weather.

The toxicologist was born and raised in Oromia, a region of Ethiopia in East Africa. In pursuit of religious freedom, he fled the former Soviet Union, where he was studying on a government scholarship, to the United States as a refugee in the 1980s. He earned a doctorate in toxicology and made a career for himself doing research in a federal lab and for private companies.

After he was laid off from his job during the recession, Dalu and his wife Aster, a registered nurse, decided to start their own home health care company in the Twin Cities. A&A Reliable Home Health Care was up and running in 2014.

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The Twin Cities metro falls in the bottom half for its share of entrepreneurs like Dalu — people of color who own businesses with employees — even when you control for MSP’s relatively small minority population — according to MinnPost’s analysis of the first Annual Survey of Entrepreneurs by the U.S. Census Bureau, the Ewing Marion Kauffman Foundation and the Minority Business Development Agency. The survey offers a snapshot of who owns businesses across the U.S.

Fewer minority entrepreneurs

While minorities represent about 22 percent of the Twin Cities metro’s population, minority-owned businesses represent just 7 percent of all employer firms, MinnPost found. The largest share of minority-owned firms in the Twin Cities belong to Asian Americans, according to the survey, which was conducted in 2014.

Compared to some metros like it — with around a quarter of their populations members of minority groups — MSP doesn’t fare that well. About 12 percent of Portland and St. Louis metro area employer businesses are owned by minorities, while their populations are 25 percent minority. Cincinnati’s population is 19 percent minority, and 8 percent of its employer businesses are owned by minorities.

Considering the size of their minority populations, the rate of minority business ownership in the Twin Cities metro area is similar to that of Providence, Rhode Island and Buffalo, New York, MinnPost found.

In San Jose, Miami and Los Angeles and many other cities, minorities own a greater share of employer firms, even when you control for greater minority populations.

Minority-owned firms with employees in select major U.S. metro areas
Just 7 percent of businesses with employees are owned by minorities in the MSP metro area, while minorities make up 22 percent of the metro's population.
U.S. Census Bureau

The Survey of Entrepreneurs supplements the Census Bureau’s Survey of Business Owners (which comes out every five years). Unlike that survey, the new one focuses on firms that employ people, meaning small one-person shops and firms that serve as side-gigs tend to be eliminated.

Bruce Corrie, a professor of economics at Concordia University-St. Paul, thinks Minnesota can do a better job of removing barriers to minority business ownership.

Corrie cited a 2015 study by Samuel Myers, a professor at the Humphrey School of Public Affairs, that used loan application data to find discriminatory lending practices at many Twin Cities banks.

At the state level, there are equity grants to fund minority business development through the Department of Employment and Economic Development, Corrie said, but on the whole, he thinks the state could do more to help minority business, including awarding more government contracts to minority businesses.

“We could be the best in the nation. We are the pioneers in many areas, many interesting areas in minority business development,” he said, citing Somali and Hmong business training in the Twin Cities and business and cultural districts Little Mekong and Little Africa in St. Paul.

With some of the biggest economic disparity gaps between whites and minority groups in the country, Corrie said growing Minnesota’s minority business community is in the interest of all Minnesotans.

“As (these companies) grow, they have the potential to solve these equity issues that have been troubling us, and at the same time strengthen Minnesota’s economic base,” he said.

Women-owned businesses

The entrepreneurs survey also offers insight into the number of firms with employees that are owned by women — which is a relatively low 18 percent in the Twin Cities. That looks bad, considering women make up about half the population, but isn’t much lower than the national number — 19 percent.

Nationally, the survey finds that employer firms owned by women make less money, are smaller, and employ fewer people who make less money, on average, than firms owned by men, said Arnobio Morelix, a senior research analyst at the Kauffman Foundation. While those findings don’t account for any differences in industry men and women’s businesses might operate in, they’re still telling.

“That’s a pretty big gap,” Morelix said.

Survey offers hope

However few employer businesses are owned by minorities and women in the Twin Cities, the Annual Survey of Entrepreneurs offers some hope.

For the state of Minnesota, it found newer businesses tend to have a more diverse group of owners than older businesses: 13 percent of Minnesota employer businesses less than two years old are owned by minorities, compared to 3 percent of businesses between 11 and 15 years old. Just 1 percent of Minnesota businesses more than 16 years old were owned by minorities.

Similarly, 21 percent of businesses less than 2 years old at the time of the survey were owned by women, while 14 percent of businesses between 11 and 15 years old and just 6 percent of businesses in operation for more than 16 years were owned by women.

While the data can’t tell us whether minorities and women started more businesses in the two years prior to the survey than in previous years, or whether those findings actually reflect a different trend — like more minority and women-owned employer firms folding before they’ve been around more than a few years — other research suggests the former.

Changing face of entrepreneurs

According to an index by the Kauffman Foundation, the share of minority business owners in the U.S. has increased, from 14 percent in 1996 to 28 percent in 2014. In that timespan, the share of immigrant business owners nearly doubled, from 11 percent to 21 percent. For women, the results showed less progress: their share held steady around a third.

“We really see a changing face of the new entrepreneur in that data,” Morelix said.

An analysis of the 2012 Survey of Business Owners by Corrie and Myers found that the number of minority and female businesses in Minnesota was growing.

If that’s the case, that’s exciting because new companies play a big role in job creation, wealth creation and opportunities for mobility — “not only for the entrepreneur but for the people they hire,” Morelix said.

Just two years after it started, the Dalus’ home health care company employs more than 40 people from all sorts of backgrounds. It serves people from many backgrounds, too, but one of his company’s particular strengths is in providing culturally sensitive care, especially to immigrant populations, Abraham Dalu said.

“When they know that we understand their culture, we understand in some cases their language, it (puts us in a) position to respect who they are,” building trust between clients and health care workers, he said.

Dalu is also an active member of the Oromo Chamber of Commerce of Minnesota, which now boasts around 50 members and represents businesses large and small.

“People should start shifting how they think about immigrants. Instead of draining the economy they are building the economy,” Dalu said. “I’m really proud of what we’re doing here to build — to be a part of the growing economy here in Minnesota.”