September 1, 2011
Earlier this year, much was made–by everyone from the Obama administration to minority business advocates across the country–of the amazing growth in the number of businesses owned by African Americans. Indeed, the numbers are impressive: Black-owned businesses grew faster by numbers (60.5%, to 1.9 million) and revenues (69%), and employed people at a higher rate (22%) than non-minority-owned businesses between 2002 and 2007, the most recent years for which U.S. Census figures are available.
However, black-owned businesses still make up only 7% of U.S. businesses, although African Americans constitute 12% of the population. Of the 1.9 million businesses owned by African Americans, in 2007 only 106,824 had paid employees. Average receipts for black-owned employer companies came to $925,427; for the remaining 1.8 million black-owned non-employer businesses, receipts came to $21,263–not enough to keep a family of four above the poverty line. And let’s not forget that these figures precede the Great Recession. With the resulting credit crunch, lack of access to financing, and decline in consumer spending, there’s little reason to believe that those numbers haven’t worsened over the past four years. Now, put those figures alongside these: While national unemployment stands at about 9.2%, black unemployment is 16.2%. It’s 17% for black men.
If it sounds as if I’m trying to provoke a sense of urgency, I am. It’s not enough to just create self-employed black entrepreneurs; we must build more black-owned employer businesses that create jobs.
Now, the government has a role to play in this, as well as the large multinational corporations that have shifted much of their job creation power to foreign markets, where, not coincidentally, they are achieving much of their revenue growth. Initiatives such as the Urban Entrepreneurship Summit held by the White House and the Startup America Partnership in Newark, New Jersey, in June, should be supported, expanded, and applauded. But before we look to others for solutions, we need to check our own mirrors and challenge ourselves to set our sights higher.
Only a few generations ago, when intrepid black entrepreneurs such as John H. Johnson, Madam C.J. Walker, Arthur G. Gaston, and others built business empires in the early to mid-20th century, they did not have access to higher education, senior management experience in corporate America, or training in the financial markets of Wall Street. They were locked out of doing business with city, county, state, and federal governments. They had no hope of landing a contract with the large corporations of their day. They were almost totally limited to selling to black consumers at a time when the income level of that market, hardly a generation removed from slavery, was paltry compared with African American income levels today. And while they were largely barred from competing for the business of white consumers, white-owned industry could compete in and even dominate the black consumer market with impunity. There was no Minority Business Development Agency, no minority vending programs, or diversity initiatives. Instead, there was Jim Crow, and lynching and race riots were constant threats to black entrepreneurs and business communities (such as “Black Wall Streetâ€ in Tulsa, Oklahoma) that were deemed too successful. Yet Johnson, Walker, Gaston, and countless other black entrepreneurs built businesses that created jobs, and even helped to create other employer businesses.
Can we do no less in 2011? No matter what challenges we face today as entrepreneurs and aspiring business owners, we cannot. We must focus more attention on building scalable, black-owned businesses in industries that are most likely to create jobs for people who are disproportionately unemployed, such as African Americans, particularly in urban areas. Self-employment is not enough.