Mind the Gap: How to Accurately Account for Small Businesses in the Inner City

By Kim Zeuli

Kim Zeuli is the senior vice president and director of the research and advisory practice at the nonprofit Initiative for a Competitive Inner City (ICIC), where she designs and oversees a research agenda to promote business development and job growth in U.S. inner cities. She holds a master's degree and a doctorate in applied economics from the University of Minnesota. kzeuli@icic.org | @icicorg

Jul 7, 2014 | Smart Cities | 1 comment

Policymakers and economic development professionals understand that small businesses are important engines for economic growth. In inner cities, small businesses particularly are important because they create jobs and wealth for populations that may lack many alternative employment opportunities. But small businesses in inner cities are difficult to identify and track, which makes it challenging not only to create effective policies and programs that help small businesses grow, but also to understand the impact of policies on small businesses.

For example, for more than two decades, Massachusetts’s public transit system, the MBTA, ran through two of Boston’s lowest-income neighborhoods, Dorchester and Mattapan, with very few stops. The MBTA has reconfigured the “Fairmont/Indigo” line to include six new and renovated stations along this corridor. Local advocates have argued that the new stations will be a boost to the inner city economy. The Boston and Garfield Foundations engaged ICIC to measure the impact of the transit line changes on businesses within the Fairmont corridor. ICIC teamed up with Northeastern University’s Dukakis Center to conduct a thorough inventory and analysis of the existing businesses.

We found that commonly used databases contained inaccurate and missing information on small businesses in Boston’s inner city. When we compared public and commercial databases, we found that city and state databases did not include 43 percent of the businesses listed on a leading commercial database. Further, a walking inventory of commercial districts along the Fairmont corridor revealed that 30 percent of the businesses in the commercial database no longer existed and 380 “new” businesses were not included.

This data gap has significant consequences for small businesses in the inner city. The “missing” businesses may lose out on potential contracting opportunities with large anchor organizations such as universities, hospitals and corporations. ICIC has worked with numerous anchor organizations on procurement strategies in cities across the U.S. and we have found that identifying small businesses within certain industries is a major challenge.

The many “buy local” consumer campaigns that have sprouted nationally also may be overlooking some small businesses and perhaps those that need it most. If such campaigns cannot find all of the businesses in a city, some small businesses will be unintentionally excluded from their directories and from new customers.

Finally, these businesses may not have the chance to take advantage of local business programs designed to support urban entrepreneurs. From management education to accessing alternative forms of capital, ICIC research finds that these programs are critical to inner city business growth. Given our own experience over the past fifteen years identifying small businesses for our urban business initiatives, Inner City 100, Inner City Capital Connections and as a national partner on the Goldman Sachs 10,000 Small Businesses initiative, we understand the significant challenges associated with this task.

In an effort to develop better inner city business datasets, ICIC has developed a multi-pronged approach or, a “Roadmap for Inner City Business Data Collection”.

  • Collect data from public and commercial sources. Firm-level business data can be obtained from a number of public and commercial sources, though the scope and quality of data vary by source. Small business data typically will be included in city, county and state databases. Commercial datasets may also be purchased from InfoUSA, Dun and Bradstreet/Hoovers and the National Establishment Time-Series Database, among other sources.
  • Compare the sources to highlight inconsistencies. If it is not possible to compare the complete small business databases for a city, a statistically significant sample may be used to get a sense of the scope of inaccuracies.
  • Conduct a website search of companies and update business information. Comparing even basic data between databases and websites can help determine the degree of information discrepancies in a city or community. However, it is important to note that many small businesses may not have active websites. In the Boston study, ICIC found that only 37 percent of the businesses in the sample had active websites.
  • Carefully consider surveying the businesses—conventional surveys often are not effective for small business populations. In an ideal world, researchers would survey all existing businesses in the target geography to create an accurate dataset. However, a combination of factors – including limited business data/contact information and cost – may make this impractical. Moreover, the response rate to surveys is usually low. A 50% response rate would be considered extremely high. 
  • Initiate a walking inventory of businesses, if possible. A visual check to confirm database information is the best way to ensure the accuracy of basic business information. Yet, as with surveys, this can be cost- and labor-intensive.
  • Explore the creation of an online interactive directory that pulls data from governmental databases, small business intermediaries and businesses. In addition to public and online databases, local CDCs and Main Street organizations can serve an important role in data collection. Establishing relationships with these organizations can help with efforts to aggregate data and maintain comprehensive records of the local business community.


Moving forward, new databases need to be established that collect timely and accurate information on small businesses to ensure the effectiveness and reach of the programs and initiatives that support urban small businesses. We hope the multi-pronged data collection strategy outlined above will help other organizations collect better inner city firm data across the U.S.

Discussion

Leave your comment below, or reply to others.

1 Comment

  1. Not only is this a challenge in large cities, it is also a challenging process in smaller “urban” cities where the primary language of business owners is not English. I look forward to reading the “Roadmap” document.

    Reply

Submit a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Read more from the Meeting of the Minds Blog

Spotlighting innovations in urban sustainability and connected technology

Change the Rules of Housing and Let Tiny Houses & ADUs Flourish

Right-sized living is far from a new idea. The architect Le Corbusier was a pioneer, from his cabanon at the Cote d’Azur to the super-efficient and well-designed density of Unite d’Habitation. This was a good idea then, as it is now. This is a classic case of the importance of the underlying rules of the game – the land use regulations, zoning, and building codes that guide our built environment. These more technical matters aren’t nearly as sexy as the shelter porn in Dwell magazine. But you can’t have one without the other.

5 Ways to Democratize Access to Clean Energy Technology

California recently became the second state to pass a 100% clean energy standard, three years after Hawaii passed a similar law. As the fifth largest economy in the world, California has a tall order to fill in terms of making the transition to clean energy. How can California, and other states that wish to follow suit, fulfill this ambitious task? They will need to provide affordable, relevant, and accessible energy options to every one of its residents, prioritizing those who have historically been overlooked and left out of the clean energy conversation due to economic circumstance or social inequity.

7 Recommendations from Health and Transportation Focus Groups

Planners, engineers, and public health professionals all speak different languages. They may even use different terms to express similar ideas: for example, a planner may recommend tactical urbanism to improve neighborhood walkability, whereas an engineer may ascribe experimental countermeasure terminology to the same scenario, and a public health professional may view the solution in terms of an intervention. And community members may find all these terms unintelligible. In our focus groups, we heard that practitioners need to “get people on the same page” because of the differences we carry in our heads about transportation concepts.