The Struggle for Black Women Entrepreneurs Continues - Black Enterprise
Black Enterprise Magazine July/August 2018 Issue

Black women are excelling in sectors across the board—from designing LeBron James’ newest sneaker to running countries to winning championships—and, ultimately, changing the world.

Black women are also the fastest-growing group of entrepreneurs in the U.S., running about 2.4 million businesses around the country. That equates to 20% of all women-owned businesses and an estimated $386.6 billion in revenues. Some took a leap of faith into entrepreneurship to pursue their dreams, while others launched businesses in order to supplement their income or escape mistreatment at work. Yet, even after turning their passion projects and side hustles into companies, many African American women entrepreneurs are subjected to the same racial and gender-based biases that propelled them to leave traditional workplace settings in the first place.

Women Drive Black Business Ownership

According to the Census Bureau, black-owned businesses increased from 1.9 million to 2.6 million between 2007 and 2012. That boom can be attributed to black women, who make up 59% of black-owned businesses. The astounding rate at which black women are opening businesses was also quantified in a newly released study commissioned by American Express, titled The 2018 State of Women-Owned Business Report, which found that the number of firms owned by black women grew by a whopping 164% from 2007 to 2018. That’s more than three times the rate of all women-owned businesses, which increased by 58% within that time period.

The new report also found that poor treatment coupled with feeling undervalued at work and the lack of pay equity are catalysts that led women of color to start businesses at a greater rate.

From 2007 to 2018, higher unemployment rates, long-term unemployment and a much greater gender and racial pay gap led women of color to start businesses at a higher rate out of necessity and the need to survive, rather than a desire to seize a market opportunity, reads the report.

The Challenges of Entrepreneurship

Black women are launching businesses at an impressive rate, but it seems they haven’t escaped the isms that have historically held them back in corporate America. As a result, the gap between the average revenue for businesses owned by women of color and those owned by white women is increasing. American Express found that women-owned businesses produced an average revenue of $143,100 a year, but African American-owned businesses generated only $24,700 per firm. Plus, “for women of color, average revenue dropped from $84,000 in 2007 to $66,400 in 2018, while for non-minority businesses, revenue rose from $181,000 to $212,300,” states the study. “And the gap between African American women-owned businesses’ average revenue and all women-owned businesses, Amex found, is the greatest.”

Getting access to capital is also a big challenge for an overwhelming majority of African American entrepreneurs, and particularly for black women founders. Back in 2016, ProjectDiane found that only a mere 0.2% of all venture capital funding was allocated toward startups founded by black women. Meanwhile, just 34 black women business owners received more than a million dollars in funding last year. As a result, a lack of capital often prevents black women from starting or scaling a business. Meanwhile, having a lower income and less wealth make it harder for them to get a small business loan.

Another problem black female founders face is a lack of educational resources and mentors for their businesses. Frequently, black women “don’t know who to go to, where to go and what organizations are out there that can support them,” Dell Gines, the author of the Black Women Business StartUps reporttold Forbes. This is one reason why “you see a lot of clustering in very few industries with a low barrier to entry–service businesses such as hair salons, catering, child daycare centers and consulting.”

Remaining Strong

In spite of the grim reality, black women entrepreneurs continue to strive and succeed despite the odds. “You are going to see a rise in black women doing business in professional services with the rapid increase in education levels for black women and their increased participation in the labor market, in fields such as accounting and engineering,” Gines predicts.

 


Editor’s Note: This article was updated on Sept. 27, 2018, to correct the percentage of African American women-owned businesses, which equates to 20% of all women-owned businesses. 

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Selena Hill

Selena Hill is the Digital Editor at Black Enterprise and an award-winning multi-media journalist.


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