How to Address Philadelphia’s Low Density of Businesses
Panel discusses barriers to business creation and growth
Small-business experts and advocates in Philadelphia gathered in June to discuss a confounding reality of the city’s economy: Although the number of small companies, which provide income and wealth for many families, has increased significantly in recent years, such businesses remain sparse compared with other cities—especially firms with Black, Hispanic, and female owners.
On June 10, the panel, convened by The Pew Charitable Trusts to build on demographic research about businesses, delved into the barriers that both minority and nonminority owners face in Philadelphia. That includes difficulty obtaining capital and a lack of knowledge, connections, and collaboration that could help them expand their businesses and build assets.
“There is a negative impact on the whole economy when these [diversity] numbers are low,” said Brian K. Oglesby, president of the Eastern Minority Supplier Development Council, a Philadelphia-based nonprofit that helps connect business owners of all races and genders to contracts nationally and globally. “When we don’t have enough diversity in the business community, we don’t have innovation, resilience, and exchange of ideas that make opportunities across the board.”
Other panelists were Kersy Azocar, president and CEO of Greenline Access Capital, a community development finance institution focused on Latino entrepreneurs; Jodie Harris, president of the Philadelphia Industrial Development Corp. (PIDC), a public-private economic development corporation; and Lee Huang, a Philadelphia-based expert on city and regional economic policy. For the discussion, small and midsize businesses were defined as those with fewer than 500 employees. That accounts for about 94% of all private employers in the city, according to the U.S. Census Bureau’s County Business Patterns database.
Barriers of many kinds
The concentration of businesses in a specific area, known as business density, provides a useful point of comparison. Pew’s research has found that Philadelphia ranks low in the number of Black-, Hispanic-, and female- owned small businesses per 1,000 residents, even after a 39% increase from 2012 to 2022. Panelists pointed to local business taxes and regulations that are tough for small businesses but may be especially so for Black, Hispanic, Asian, or female owners, who are less likely to have the experience or network of supports needed to overcome the expenses.
“In addition to challenges we already know, like taxes and access to capital, we [see a lack] of understanding about things like hiring employees, not just contract workers. That issue is bigger than we think,” Azocar said, adding that the city’s siloed permitting processes don’t help.
Harris said such difficulties are particularly challenging for owners who lack the self-assurance or guidance to deal with them. “If you’re a very small business, you may not have somebody in your family who owned a business and can provide advice or support,” she said. “There is a lack of mentorship there, and also a really strong lack of confidence to ask for what you need.”
Panelists also highlighted another major barrier for small-business owners: time. Watching every dime and performing multiple jobs often leaves no time for pursuing help or strategizing a new direction, multiple speakers said.
Sectors and sales beyond Philadelphia
Data shows that minority-owned firms in Philadelphia, on average, generate lower sales revenue than do their peers in other cities. That’s partly because they tend to be concentrated in lower-grossing, lower-paying sectors such as retail, food, and health care, with mostly local or neighborhood customers, as opposed to higher-grossing finance, tech, and professional industries with many potential customers beyond the region.
“Sometimes people think about tech or finance to generate more revenue,” Azocar said. But real estate could be more feasible or accessible for many of them, she said. “We have a program where, if you’re a restaurant, for example, you can have an additional source of income by owning real estate … and producing income from it.”
Oglesby said diversifying a supply chain nationally or globally can be an effective way for a small or midsize business to grow within its own sector, citing a beauty salon that branches into selling or sourcing hair-care products and related chemicals outside the region. “We can grow businesses to be more competitive in the global marketplace,” he said.
Handholding, capital, and cooperation
The discussion elicited various strategies that the city and private support organizations could employ to increase the number of small businesses with minority and female owners and, by extension, the total overall. Several panelists agreed on the need to go beyond business workshops and instead engage in one-on-one “handholding,” in Azocar’s words.
“Owners feel like, ‘It’s my baby, and nobody is going to do it like I am.’ It’s hard to tell them that if you have a new person to help you, you can expand your services and revenues,” she said.
Oglesby emphasized the need for a collective or collaborative support system for small and midsize businesses across the 11-county Philadelphia metro area that is capable of providing material, equipment, or human support, not just advice. Noting the recent launch of the Greater Philadelphia Growth Partnership, he said that city officials should cooperate with suburban counterparts to support businesses wherever they are, “instead of saying we’re Philly and we don’t cross City Avenue and don’t cross the river.”
Harris said PIDC’s lending arm, known as a community development finance institution, offers a variety of loan products but nothing specifically for small firms seeking a line of credit up front to win a supply contract.
Lenders, investors, and grantmakers play a critical role, she added. “There needs to be more collaboration and discussion about the types of capital that moves small businesses from point A to point B.”
Thomas Ginsberg works on The Pew Charitable Trusts’ Philadelphia research and policy initiative.
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