Impoverished Neighborhoods Impact Small Business Creation

in Finance & Business/Opinion by

To own a business is one of the best ways to move up in class, but for the poor hoping to entrepreneurially move up, the price of real estate constricts mobility into higher income regions, increasing their chance of failure.

The Idea:

For the past 10 years, there has been a strip mall at the end of my $60,000 price per house neighborhood, where no matter what business moves in, it fails. This can be symptomatic of 1 of 2 things: a slew of terrible businesses and ideas, or a social issue.

I will take the latter stance.

Several weeks ago, my boss, a small business owner and I discussed the placement of business locations. One determining factor she uses when deciding where to place another coffee shop is the type of car that the people in the area are driving. When I questioned her rationale, she parried with:

Why would neighborhoods of people who drive beater cars spend $5.00 a day for a specialty coffee?

I understood her point.

A perfect simple truth–many businesses are destined to fail, solely based upon where homeowners are able to afford to live.

Solution?

This is an issue of Capitalism, and its cyclicality. In theory, a free market economy’s intent is to allow everybody an opportunity to own their own business. In reality, free markets allow some to have more opportunity and more freedom than others.

To solve this inequity requires a change in the structural fabric of either the prevailing economic system or in the design of cities themselves.

If it were possible to consolidate all of a city’s shopping outlets into a single location, then the free market playing field would be leveled. A small business could then compete with a larger business more easily.

Imagine if the mom and pop grocery store were to be next door to Walmart. How much easier would it then be to support the small, local business?

Though it is not clear cut, it is best to see the world as it is–and to remember a key real estate principle in the process: location, location, location. A small business located in the right place will make all the difference in the world towards its survival.

Which of the following photographed locations seems more likely to allow the business owner to have a sustainable income?

 

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