The Growth of Black-Owned Businesses: Entrepreneurship by Necessity

Commentary by:

Marc H. Morial
President and CEO
National Urban League

"I had to make my own living and my own opportunity! But I made it! Don't sit down and wait for the opportunities to come. Get up and make them!" Madam C.J. Walker, trailblazing African American businesswoman.

There is a silver lining in the dark cloud of the great recession. A new Census Bureau report reveals that from 2002 to 2007 the number of Black-owned businesses in the United States increased by 60.5 percent to 1.9 million – more than triple the national rate. According to Census Bureau Deputy Director, Thomas Mesenbourg, “Black-owned businesses continued to be one of the fastest growing segments of our economy, showing rapid growth in both the number of businesses and total sales during this time period.”

The reasons for this are many, beginning with the long history of African American entrepreneurship in response to poverty, high unemployment and discrimination. Consider the case of Madam C.J. Walker, the daughter of slaves who, in the early 1900s, turned her dream of financial independence into a hair care and cosmetics business that revolutionized the beauty products industry, created good paying jobs, and made her a wealthy woman and philanthropist.

Like Madam C.J. Walker, many African Americans may have turned to entrepreneurship in the years covered by the Census Bureau study because of high unemployment in our communities. The fact is, Black unemployment never got back down to where it was before the recession in 2001. So in effect, what we are seeing is a bit of entrepreneurship by necessity. There’s also an economic independent streak, particularly among emerging generations in the Black community. Building a business gives great satisfaction and cushions them from the shock of losing jobs because of economic down cycles.

New York State leads the country with more than 204,000 Black-owned businesses, followed by Georgia and Florida respectively. From 2002 to 2007, nearly 4 in 10 of these businesses operated in the health care and social assistance; and repair, maintenance, personal and laundry services sectors. The retail trade and health care and social assistance sectors accounted for 27.4 percent of Black-owned business revenue.

The survey also found that in addition to an increase in the number of Black-owned businesses, annual sales increased by 55% to $137.5 billion.

I recently called on federal, state and local governments to develop a “hyper-focus” on black- and minority-owned businesses. Every city, county, and state needs to have a plan that focuses on small and minority business. There is a spirit of entrepreneurship out there that needs to be nurtured and energized.

While the Census Bureau report is generally good news, we know that Black businesses still make up only 7 percent of all companies and they tend to be smaller and have lower gross receipts than other businesses. Black-owned businesses are also often hampered in their revenue growth by a lack of capital, connections and contracts.

What I hope this report says loudly and clearly to the investment community is that you are missing an emerging market in the United States. If minority businesses are growing at a faster clip than overall businesses, imagine what the growth rate would be if those barriers were eliminated or lowered. We need the investor community to look at this report and recognize that they are missing an incredible opportunity.