7 Amazing Facts About Black-Owned Businesses
August is National Black Business Month in America, a time when individuals and businesses recognize Black-owned businesses across the country. The largest subset of People of Color (POC) small business owners in America, Black entrepreneurs are an essential part of our small business economy.
This month traces its history back to 2004 when Frederick E. Jordan, an engineering entrepreneur, teamed up with John William Templeton, president and executive editor of scholarly publishing company eAccess Corp to start the yearly event.
Jordan felt compelled to highlight and uplift Black business owners like himself after reflecting on the challenges he faced as a new business owner. When Jordan began his firm in San Francisco in 1969 he struggled to get financing. And though today he’s the successful owner of F.E. Jordan Associates Inc., a company that’s done work around the world, he realizes the cards are still stacked against young Black entrepreneurs.
Here are 7 amazing facts about black-owned businesses:
1. Being Their Own Boss was the Motivation
The majority (36 percent) of Black small business owners decided to go into business for themselves because they were ready to become their own boss. Twenty-four percent wanted to pursue their passion, 17 percent were inspired with a new business idea, and 17 percent were dissatisfied with corporate America. The plurality (42 percent) of Black entrepreneurs are very happy as small business owners.
2. There are nearly 3,000,000 Black-Owned Businesses
Black-owned businesses with no employees in the United States increased 19.2% between 2012 and 2017 totaling 2,951,000 Black firms. Businesses with no employees refer to non-employer firms (for example sole-proprietorships, partnerships with no paid employees).
3. Black Business is Big Business
Minority-owned businesses bring in $1.3 trillion in annual receipts.
4. The Ladies are Rocking It Out!
36.1% of all Black-owned businesses are owned by women—higher than any other racial group.
5. Black Business Means Jobs
Blacks or African Americans owned approximately 124,551 businesses with employees, with about 28.5% (35,547) of these businesses in the Health Care and Social Assistance sector, the highest percentage of any minority group.
6. COVID Pandemic – Adversity to Opportunity
In the immediate aftermath of the COVID-19 pandemic, upward of 41% of all Black-owned businesses in America closed their doors for good versus 20% of all active U.S. businesses. After the initial impact of COVID shutdowns was felt, thousands of Black entrepreneurs turned adversity into opportunity by starting businesses of their own. By the end of 2020, there were more new Black-owned businesses proportionate to the total population than at any time in the last quarter-century. On average 380 out of every 100,000 Black adults became new entrepreneurs during the 2020 pandemic, up from 240 in each of the prior two years.
7. Why are there so few Black-owned businesses?
It’s true that the numbers should be higher. African Americans make up more than 13% of the U.S. population, but only own 7% of the businesses there. The answer to this question will vary depending on whom you ask, but most agree that racism, discrimination, and predatory lending are all factors because many aspiring Black business owners have been unfairly turned down by banks when applying for small business loans. On average, big banks approve around 60% of loans applied for by white small-business owners, 50% by Latinx small-business owners, and 29% by Black small-business owners. Another factor is that there is a lack of economic and business resources in African American communities. This leads to a lack of education on how to properly start and manage a successful business.
Despite the dour news of the racial funding gap, however, there are encouraging signs for the growth of the Black business community. Fiffik Law Group regularly advises black-owned businesses. Our business attorneys help with all aspects of starting, funding, and growing black-owned businesses. Contact us for a consultation about your business.