Black Entrepreneurs – 2022 Trends
Introduction by Mel Albin: Managing Partner Shop Black Enterprise®
Let me begin with Black/Minority Women, left out of the Guidant analysis. Women of color account for 47% or 5,824,300 of all women-owned businesses, employ 2,230,600 people, and generate $386.6 billion in revenues.
Yet, the average revenue for a women-of-color owned business is $66,400, compared to the average revenue of $212,300 for a non-minority owned business.
Women Owned Business in the United States
- More than 11.6 million firms are owned by women, employing nearly 9 million people, and generating $1.7 trillion in sales as of 2017.
- Women-owned firms (51% or more) account for 39% of all privately held firms and contribute 8% of employment and 4.2% of revenues.
- Businesses Owned by Women of Color
- 5.4 million firms are majority-owned by women of color in the U.S.
These firms employ 2.1 million people and generate $361 billion in revenues annually.
- Million Dollar Businesses
- One in five firms with revenue of $1 million or more is woman-owned.
4.2% of all women-owned firms have revenues of 1 million or more.
These disparities have to change! This is a serious problem and, in part, is a result of disparities of generational wealth between Women of Color and Caucasian Women. Shop Black Enterprise’s mission is to correct this disparity by building small businesses belonging to Women of Color so they are no longer small. This will transfer into building generational wealth and the communities in which these business prosper.
The NRCC report: Women-Owned Small Businesses In D.C Metro Region: Challenges & Resilience In A Time Of Pandemic
Key Take Aways
- Disparities in the accessibility of capital and federal aid may have impacted minority women-owned small businesses far greater than other businesses due to the historical exclusion in banking and lack of banking relationships
- More public and private sector spending should be directed toward supporting minority women-owned businesses in order to produce greater family and community wealth.
- 77% of 274 surveyed businesses reported that they had unmet funding needs of $5,000 or more.
- 41% percent of survey respondents received federal relief from the SBA, yet 42% had not sought any financial assistance from any source.
- Only 16% of the businesses had adequate capital available and did not need further aid or investment.
- The respondents who were affected by COVID-19 stated they needed to grow their revenue and sought to do so by accessing affordable capital, diversifying their revenue streams, enhancing their online presence and conducting more digital outreach.
Who are Black Small Business Owners in America?
The largest subset of People of Color (POC) small business owners in America, Black entrepreneurs are an essential part of our small business economy.
With women making up 46 percent of Black entrepreneurs, this group shows one of the highest percentages of female small business owners in any segment – 53 percent higher than white small business owners. The plurality (33 percent) of surveyed Black small business owners had Bachelor’s degrees. The next most common level of education was Master’s degrees, at 26 percent.
Black small business owners skew younger than their white peers. Twenty-seven percent of Black entrepreneurs are boomers, compared to 46 percent, 49 percent are Gen X compared to 43 percent, 21 percent are Millennials compared to 11 percent, and three percent are Gen Z, compared to less than one percent of white small business owners.
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.
Cash is the most popular small business funding option for Black small businesses; 43 percent of Black entrepreneurs used cash alone or combined cash with another financing method to start their small business. The majority (59 percent) of surveyed Black-owned small businesses required $50,000 or less to start up. The vast majority of Black entrepreneurs started their own new independent business as opposed to starting or buying a franchise location or buying an existing small business, at 77 percent.
With only 54 percent of surveyed Black-owned small businesses being profitable in 2020, it comes as little to no surprise that the biggest struggle among this segment over the last 12 months has been a lack of capital or cash flow, at 38 percent of the share of responses
COVID-19, Politics, and the Black Small Business Community
The COVID pandemic has affected Black small business even more than many others, due to Black businesses being concentrated in hard-hit service industries, as well as the struggles Black businesses have with equitably receiving funding and financial aid.
The Small Business Trends survey saw these challenges reflected in the difference between survival expectations between the average of small business owners and Black small business owners: 17 percent fewer Black business owners expect their businesses won’t survive the pandemic than the average of small business owners. Most surveyed white small business owners (81 percent) expect their business to survive COVID, compared to only 67 percent of Black small business owners.
About 24 percent of surveyed Black-owned small businesses lost revenue due to the COVID-19 pandemic in 2020. Twelve percent closed temporarily. With their businesses hit harder than white businesses, it’s illustrated that Black small business owners are more concerned about COVID – when asked how important COVID-19 was to them as a current topic, 82 percent of Black small business owners said it was “very important” on a five-point scale from “not important at all” to “very important. Only 57 percent of white small business owners said COVID-19 was “very important” to them.
A higher percent of Black small business owners also called economic relief “very important” to them as opposed to their white peers: 73 percent to 43 percent. Fifty-three percent of surveyed Black respondents did not receive financial aid via the Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL).* Thirty percent more surveyed white business owners received PPP or EIDL aid than Black small business owners.
*Note: The Small Business Trends survey was performed before the new stimulus act was passed into law and active as of January 01, 2021.
On a five-point scale of “strongly disliked” to “strongly liked” the US government’s response to the COVID pandemic, 41 percent of Black small business owners answered they “strongly disliked” the response. Only 28 percent of white small business owners responded with “strongly disliked.” On average, Black small business owners are neutral about their level of confidence in small business given the political climate though they lean neutral to positive about the future of small business, post-COVID.
Tellingly, a powerful 41 percent of surveyed Black small business owners said they didn’t belong to or feel represented by any US political party, while only 25 percent of white small business owners had the same response. Forty percent of Black small business owners said they belonged to or felt represented by the Democratic party, while 13 percent answered Republican.
The Future of Black-owned Small Business
Despite these hardships, the majority of Black small business owners (55 percent) want to grow their business, as opposed to sustaining it, selling it, or opening a new location. Sixty-one percent of respondents said they have plans to expand or remodel their business in 2021, while 51 percent plan to invest in digital marketing, and 46 percent plan to hire more staff. It’s clear that COVID and political challenges haven’t diminished these entrepreneurs’ determination for growth and success.
While the disparity between Black- and white-owned small businesses is clear, part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act includes significant funds to help “minority-owned” businesses in specific. Additionally, President Biden’s economic “Build Back Better” plan includes making business aid more equitable across minority populations. With more governmental assistance and a resilient, determined attitude for future success, Black-owned small businesses will sustain through 2021 and hopefully, begin to rebuild at the same time.