Less than 20 percent of U.S. businesses are owned by minorities
(This post originally appeared on The Washington Post)
Minorities, particularly black-owned firms, have grown their share of business ownership in the past few years. But they have a lot of catching up to do.
According to this report in the Wall Street Journal, citing new data released by the Census Bureau, white-owned firms accounted for 81 percent of businesses that could be classified by race or ethnicity or gender, while 9.7 percent were owned by Asians and 5.8 percent by Hispanics. And even though African-Americans make up more than 12 percent of the U.S. population, black-owned firms made up just 2.1 percent of all businesses. Unfortunately, average revenues at black-owned firms also trailed their white, Asian and Hispanic counterparts.
So what does this mean for African American entrepreneurs?
It should first be noted that the Census Bureau’s Annual Survey of Entrepreneurs doesn’t cover all entrepreneurs and small businesses. It mainly focuses on the roughly 290,000 firms in the U.S. with paid employees and leaves out the millions of solo and non-employer companies in the U.S.
Also, the article quotes Thomas Boston, a professor and himself a business owner, who says that blacks as a group start out with less wealth, and were hit particularly hard by the financial crisis because a larger share of their wealth was in home equity. In addition, he noted that many black-owned firms have focused on doing business with the public sector, leaving them vulnerable to cutbacks in government spending and affirmative action programs.
Cultural factors may also be playing a role. Malcolm Crawford, founder of a minority business association in Chicago blamed culture factors. “Entrepreneurship is just not pushed in our community,” he told the Journal.
That said, there is good news for African-Americans entrepreneurs. According to the Census Data report half of the firms started by black people were launched in just the past five years. That’s significant. Cheaper and better technology has been a driver of this growth. And education is a big part. More and more African-Americans are attending university , majoring in business topics and that number continues to increase. I’m betting that this trend will continue and the ownership percentages will favorably change.