Black Business Stability

Survival is a more urgent issue for black businesses than for other minority-owned companies, according to a Small Business Administration study. Dynamics of Minority-Owned Employer Establishments, 1997—2001 finds that black companies have the lowest survival rates of any ethnic businesses.

Survival rates varied according to industry. In 1997, more than half of black-owned businesses were in the service industry, and 63% of these survived, versus 72% for all service companies. The worst black survival rate was 40% for non-classifiable establishments, the second-largest category of black companies. One in eight black businesses didn’t fit any industrial classification. The study’s author, SBA Office of Advocacy senior economist Ying Lowrey, says this sector’s low survival rate probably reflects its composition of startups lacking strong direction, specialized skills, or financial resources.

Black finance, insurance, and real estate companies survived best. With a 71% survival rate, these black establishments matched the staying power of Hispanic businesses and surpassed U.S. companies overall in the same category. Lowrey credits this industry’s excellent survival rate to its high regulatory and professional requirements. Finance, insurance, and real estate companies accounted for one in 20 black businesses.

Black businesses that do survive tend to be stable — neither expanding nor shrinking in terms of employee numbers. “When you are in a small business, especially if you don’t have the money to pump in, you just don’t have the strength to expand,” Lowrey says. “Black small businesses seem to hang in there pretty well, because their contraction is not as bad as, say, the rate of white businesses.”