Black Entrepreneurship Soars Across the US!
A seismic shift is unfolding in the world of American commerce – the rapid rise of Black entrepreneurship!
The Historic Surge
Black business ownership is growing at the fastest pace in 30 years, and the share of Black households owning a business has more than doubled, from 5% to 11% between 2019 and 2022. This has been a historic leap in Black business ownership according to the U.S. Small Business Administration [1]. This remarkable transformation is the culmination of decades of perseverance and innovation by Black entrepreneurs that is now materializing as a beacon of economic empowerment and diversity in business.
Between 2019 to 2020 Black-owned businesses grew by 6,351 firms or 4.72% outshining white-owned businesses which actually declined by 0.9% during the same period [2]. Even over the 5 year period from 2017-2020, this growth in Black entrepreneurship is even more significant. Black-owned businesses grew at a rate of 13.64% surpassing the overall business growth rate of 0.53% by a staggering 26 times. [3] So not only is there an upward trajectory on the growth of Black businesses it is a meteoric surge.
Economic Impact Increases Government Support
The surge signifies a profound societal change where Black entrepreneurs are breaking barriers and setting new standards in a variety of industries. In 2021, the gross revenue of Black-owned firms soared by 43% from an estimated $127.9 billion in 2017 to $183.3 billion. During that time they provided income for approximately 1.4 million workers, with an annual payroll estimated at $53.6 billion[4]. Those numbers will continue to climb disproportionately to the rate of business growth.
The federal government is recognizing this shift and contributing to its momentum. In 2022, Black-owned businesses received $9.5 billion in federal contracts, an increase of $490 million from the previous year[5]. Additionally, the SBA’s loan portfolio allocated to minority-owned businesses has seen a significant rise since 2020, with the value of SBA-backed loans to Black-owned businesses more than doubling, reaching nearly $1.5 billion[6]. These increases in the value of loans are allowing more Black-led businesses to successfully secure more and larger contracts from the increasing government contract pool.
Black Women Entrepreneurs Lead the Charge
The majority, 53%, of Black-led businesses were owned by men, while 39% had women owners. Black business owners are also predominantly middle-aged, with half aged between 35 to 54 years, and a majority possessing a college degree, a critical foundation for building successful businesses[7].
Despite these successes, Black business owners often encounter significant obstacles. Access to capital remains a major hurdle, with studies showing that Black entrepreneurs are less likely to receive business loans compared to their white counterparts. This financial gap can stifle growth and make scalability a challenge.
Despite Black business ownership being predominantly male, it is Black women who are truly propelling this entrepreneurial revolution. The growth of Black-women-owned businesses outpaced the overall growth of both Black-owned businesses and women-owned businesses. A substantial 37.9% of these Black women business owners have an advanced degree, which is more than 10 percentage points above the national average. Overall from 2019 to 2023, according to a Wells Fargo study, women-owned businesses grew a staggering 94% greater than the men-owned businesses[8]. “America’s great diversity continues to propel entrepreneurship with Black, Latino, and women founders starting up at higher rates than ever,” SBA Administrator Isabel Casillas Guzman said.[9] This trend amongst Black women underscores the crucial role of gender diversity in the evolving business landscape.
Achieving Parity Requires Equity Investments
However, despite the general robust growth in Black-owned businesses, economic disparities persist. In 2020, Black Americans represented 14.2% of the US population. Yet Black-owned firms were only 2.4% of all employer-firm owners and accounted for just 1% of gross revenue from all U.S. firms classifiable by race and ethnicity of their owners[10]. The path to parity in both business ownership and business revenues for Black Americans is long. If Black business ownership continues to grow, at even its current rate, it will still take 256 years to reach parity[11].
Accelerating the Black-owned business growth rate to reduce that time frame to reach parity is crucial for closing the racial wealth gap. Achieving this will require more than government and other debt financing to fund growth, which on their own are insufficient. To fuel Black-led businesses to the next level will require equity investment, something that has traditionally eluded Black business owners. Increasing the amount of targeted equity investment is the catalyst needed to propel the growth of Black-owned businesses beyond their next significant milestones.
The Rise of Black Entrepreneurship: Harnessing the Opportunities
Conclusion Black-owned businesses are booming, particularly those led by Black women. The data reveals a community making significant strides in business ownership. The upward growth trajectory is a beacon of progress in the American economy and heralds great opportunity. There is no denying that the future of American business is becoming increasingly diverse, with Black entrepreneurs playing a pivotal role in shaping this new era. While the journey towards proportional representation in the business world is arduous, the current trends confirm that an evolution has taken hold. For the savvy, this evolution in Black-owned businesses present significant opportunities for equity investment capital to ride the emerging boom toward parity.
Footnotes:
[1] U.S. Small Business Administration, “Black Business Ownership Growth” 2023. [2] Brookings Institution, “Who is driving Black business growth? Insights from the latest data on Black-owned businesses,” 2023. [3] Ibid. [4] Pew Research Center, “A Look at Black-Owned Business in the US,” February 16, 2024. [5] Black Enterprise, “SBA, White House Aim To Eclipse Record In Federal Contracting Run With Black Businesses, Launching A Revamped Program To Assist,” February 3, 2024. [6] U.S. Small Business Administration, “Total Number and Dollar Amount of SBA-backed Loans to Black-Owned Small Businesses See 2.5x Increase Under Biden-Harris Administration,” October 2023. [7] Pew Research Center , supra note 4. [8] Diversitycomm.net, “New Report Finds Growth of Women Business Owners Outpaces the Market”, January 2024. [9] The St. Louis American, “Black Business Ownership Numbers Boom”, February 2024 [10] Pew Research Center , supra note 4. [11] Brookings Institution, supra note 2.