Black Businesses Grew at 3 Times the National Rate

A lack of capital and connections still hampers success for African-American entrepreneurs.

Posted:
 
bizowner

Between 2002 and 2007, the number of black-owned businesses in the United States increased by 61 percent to 1.9 million. It was a growth rate more than triple the 18 percent rate for all businesses. Black-owned firms also saw their receipts rise 55 percent to $137.5 billion during those years.

It is a great snapshot provided by the U.S. Census Bureau, but there are shadows. Every five years, the Survey of Business Owners takes the entrepreneurial pulse of black-owned businesses. The hitch is that the data were collected in 2007, before the Great Recession hit millions of U.S. businesses, workers and consumers, and doesn't reflect reality for many of those groups today.

Marc Morial, the president and CEO of the National Urban League, addressed that issue when speaking about the survey's release. He said that company building has been affected by the downturn, but that necessity has always driven black entrepreneurship. He added that the difficulty for most black would-be entrepreneurs is gaining access to capital and connections.

There are also disparities between black and nonblack businesses when it comes to average receipts and number of employees. The survey reports that only 12.7 percent of African-American companies have annual revenues of more than $50,000, and 68 percent have four or fewer employees.

Steady Growth for 20 Years

The results of the 2007 survey are no anomaly, however. Since 1987 the number of black-owned businesses and the total revenue they receive has been soaring. To paraphrase Esther Phillips, who sang about positive changes, what a difference 20 years makes. In 1987 there were 424,165 black-owned businesses that took in revenue of $19.8 billion, according to the Census Bureau. During the next 20 years, the number of black businesses grew 353 percent to 1,921,881, and their revenue soared 594 percent from $19.8 billion to $137.5 billion.

It was the only black billion-dollar company on that list. The next-largest company was Chicago's Johnson Publishing, with revenue of $202 million. The remaining top 10 were hair care companies, a soft drink bottler, a construction company, fabled Motown, a transportation firm and two computer-systems-integration companies. The smallest firm on that year's BE 100 list was a custodial company that brought in $3.1 million.

Currently, the largest U.S. black-owned firm is World Wide Technology. Its $3.2 billion in revenue should keep the Maryland Heights, Mo., technology-products and consulting-services giant atop the BE 100 when the magazine unveils the list this June. Ironically, the No. 22 company on last year's BE 100, with $200 million in revenue, was Johnson Publishing, publishers of Ebony and Jet.

In 2011 the sectors in which the 10 largest black-owned companies operate reflect changes in how African Americans do business. The firms are led or were founded by men and women with a deep knowledge of their industries, but also by those with an MBA, holders of other advanced degrees and corporate executives with an itch to run their own businesses.

Their ranks include an international oil business, two tier-one suppliers of automotive parts, two staffing-human resources companies, a national passenger-transportation company, a diverse conglomerate, a holding company owned by a serial entrepreneur, a food company run by a former NBA player and the nation's only black-owned casino company. His company reported revenue of $380 million in 2010.