Without Minority Representation In Accounting Firms, Minority-Owned Small Businesses Are At Risk

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&l;span&g;In the U.S., the minority-owned small business sector is growing swiftly. Between 2007 and 2012, the number of &l;a href=&q;https://www.mbda.gov/news/2015/08/us-minority-owned-firms-continue-outpace-growth-nonminority-owned-firms&q; target=&q;_blank&q;&g;minority-owned businesses&l;/a&g; increased by&l;/span&g; &l;span&g;39%&l;/span&g;.&l;span&g;&a;nbsp;During the same period, the number of non-minority businesses shrank by 5%. Minority-owned small businesses are key to a thriving U.S. economy, but are we creating yet another system of inequality when it comes to their success? &l;/span&g;

&l;span&g;For small-business owners, access to advice is one of the most fundamental drivers of success. There is no advisor more important for a small-business owner than an accountant: a trained professional who is well-versed in managing a business&a;rsquo; financials and can offer guidance on key business decisions. Only&l;/span&g; &l;a href=&q;https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf&q; target=&q;_blank&q;&g;&l;span&g;half of small businesses&l;/span&g;&l;/a&g;&l;span&g; survive the first five years, yet with access to the right advice and technology that can help them better understand their financial position, their odds of success increase.&a;nbsp;&l;/span&g;&l;span&g;There are challenges facing accountancy, however, that could stand in the way of minority communities receiving this vital advice. &l;/span&g;

&l;span&g;A lack of racial diversity is plaguing the accounting profession. In 2017, minorities represented only &l;/span&g;&l;a href=&q;https://www.xero.com/blog/wp-content/uploads/2017/12/report-v4.pdf&q; target=&q;_blank&q;&g;&l;span&g;17% of all employees&l;/span&g;&l;/a&g;&l;span&g; and less than 5% of all partners at accounting firms. If entrepreneurs from minority communities don&a;rsquo;t see themselves represented in the advisor population or fear that their unique challenges will not be understood, there is a danger that they may be less likely to seek support and help, which leads to higher failure rates. Representation is a key to minority success across multiple industries. Take the education system as an example: Low-income African American students who have at least one African American teacher in elementary school are&l;/span&g; &l;a href=&q;http://releases.jhu.edu/2017/04/05/with-just-one-black-teacher-black-students-more-likely-to-graduate/&q; target=&q;_blank&q;&g;&l;span&g;significantly more likely&l;/span&g;&l;/a&g;&l;span&g; to graduate high school and consider attending college. There is a direct correlation. &a;nbsp;&l;/span&g;

&l;span&g;Considering that challenges around financial management are one of the&l;/span&g; &l;a href=&q;https://www.xero.com/content/dam/xero/pdf/Xero-Make-or-break-report.pdf&q; target=&q;_blank&q;&g;&l;span&g;main reasons that small businesses fail&l;/span&g;&l;/a&g;&l;span&g;, it is imperative that every entrepreneur gets support when it comes to understanding their business&a;rsquo; financial position. Advice is key when it comes to areas like understanding cash flow — when it&a;rsquo;s strong, and when it could be time to take on extra financing. A great advisor can significantly increase the odds of success for small business owners.&l;/span&g;&l;span&g;&a;nbsp;So, what would stop a small business owner making this connection? &l;/span&g;

&l;span&g;It is human nature for people to feel more comfortable around others with shared life experiences. It is a principle that Carlos C. Lopez founded a business on. As CEO of&l;/span&g; &l;span&g;Latino Tax Pro (a partner of Xero)&l;/span&g;&l;span&g;, he leads an organization that provides training and education for tax preparers looking to serve the Hispanic market. The continued success of Lopez&a;rsquo;s business 34 years later serves as strong evidence that small business owners in minority communities look for professional service providers from the same ethnic background. &l;/span&g;

&l;span&g;The relationship between a small business owner and an advisor is similar to the deeply personal relationship between a doctor and patient. In general, people are more comfortable with a doctor who is more like them, speaks their language and is from the same ethnic background. It&a;rsquo;s human nature, but if we understand and recognize that, we&a;rsquo;ll be able to be more successful.&l;/span&g;

&l;span&g;To increase the number of minority accountants, the accounting profession must change. Unfortunately, firms aren&a;rsquo;t evolving enough to attract and create the right environment for diverse accountants. But this presents a unique business opportunity for forward-thinking firms looking to specialize in an underserved small business sector. &a;nbsp;&l;/span&g;

&l;span&g;While many accounting firms have well-meaning programs in place to encourage a diverse workforce, some may have not yet found a successful, long-term approach. Moving the needle in terms of racial diversity in the accounting profession is going to take organizations being open to discussion and willing to put leadership in place that will make change happen. It&a;rsquo;s also going to take diversity and inclusion programs that take a hard look at the unique challenges of a particular group and address them in new and meaningful ways.&l;/span&g;

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&l;span&g;You only have to look at a few key figures to realize how instrumental minority-owned small businesses are to the success of the U.S. economy. Over the last decade, Latino entrepreneurs alone have started businesses at a pace&l;/span&g; &l;a href=&q;http://www.gahcc.org/fileadmin/files/Hispanic_Demographics/2015/Geoscape_HispanicBusinessOwners_FINAL_2015.pdf&q; target=&q;_blank&q;&g;&l;span&g;15 times&l;/span&g;&l;/a&g;&l;span&g; the national average. Over the past two decades, the number of firms owned by women of color&a;nbsp;&l;/span&g;&l;a href=&q;http://about.americanexpress.com/news/pr/2017/state-of-women-owned-businesses-2017-report.aspx&q; target=&q;_blank&q;&g;&l;span&g;grew 467%.&l;/span&g;&l;/a&g;&l;span&g;&a;nbsp;Minority-owned businesses were also a vital source of economic stimulation during the recent Great Recession. During this period, a net &l;/span&g;&l;a href=&q;https://www.sba.gov/sites/default/files/advocacy/Minority-Owned-Businesses-in-the-US.pdf&q; target=&q;_blank&q;&g;&l;span&g;two million minority-owned businesses&l;/span&g;&l;/a&g;&l;span&g; were created, while a net one million non-minority-owned businesses closed. In 2012, minority-owned businesses contributed&l;/span&g; &l;span&g;$1.38 trillion in revenue&l;/span&g;&l;span&g; to the U.S. economy, according to the most recent Survey of Business Owners (SBO) from the U.S. Census Bureau. Minority-owned businesses contribute this significant amount of revenue despite being generally smaller than non-minority businesses.&l;/span&g;

&l;span&g;For these reasons and more, we cannot fail minority-owned small businesses. Accounting firm leaders need to take an honest look at the racial diversity within their ranks and ensure they&a;rsquo;re more reflective of society as a whole. In doing so, we can get one step closer to stamping out inequality. &l;/span&g;

&l;/p&g;&l;div style=&q;padding: 20px 0pt;margin: 20px 0pt;border-bottom: 1px solid #DDDDDD;border-top: 1px solid #DDDDDD&q;&g;&l;a href=&q;http://www.forbesfinancecouncil.com/qualify/?source=forbes-text&q; target=&q;_blank&q;&g;Forbes Finance Council&l;/a&g; is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. &l;em&g;&l;a href=&q;http://www.forbesfinancecouncil.com/qualify/?source=forbes-text&q; target=&q;_blank&q;&g;Do I qualify?&l;/a&g;&l;/em&g;&l;/div&g;