The State of Black Businesses in the U.S.

By: Eric Craig

As published in Data News Weekly

The month of February marks the beginning of Black History Month, a time where the nation recalls the triumphs, inventions and strides of African-Americans in United States history.

While the month is usually geared towards celebrating Black individuals in United States, it can also be used as a point in time to reflect on the current state of Black people. One area in particular is the growth of Black wealth in the nation, which can easily be measured by the amount of Black businesses in operation.

So how well are Black Businesses in the United States?

State of Black Businesses:

African-American businesses have grown at an exponential rate in the 21st Century. According to the United States Black Chambers, Inc., in 2012 there were 1.9 million Black businesses. In Fall of 2015, there were over 2.6 million. Black women tend to start more businesses on average, according to the data.

However, Black Businesses still face challenges in the new year.

"The challenges the Black businesses face, any business regardless of race for that matter, is location and access to capital," said Ron Busby, Sr., CEO and President of the United States Black Chambers, Inc.

When small Black Businesses obtain capital through loans, they either have a high interest rate or never receive as much as needed, Busby said.

While access to capital is one disadvantage of minority firms, information is among the many that can stagnate Black businesses.

"Challenges Black businesses face year to year is the same: It's access to information. Most small minority businesses are unaware of many opportunities," said Kelisha Garrett, the executive director of the New Orleans Regional Black Chambers of Commerce.

Garret works for the Consulting Group Gen-X, which focuses on business development by linking small minority firms to large corporations that are looking to fulfill contracted tasks.

"There has been a significant push from the smaller corporate entities for more inclusion with more minority businesses," Garret said.

Particularly in New Orleans, infrastructure and construction related services have been on a rise, especially for minority businesses. However, professional services, such as marketing, public relations and legal have not grown nearly as fast.

"We have capable minority businesses that provide those services, but they are not highly identified within the larger push that's coming from the public or private sector," Garrett said.

Stereotypes of Black Businesses:

While Black businesses have seen growth throughout the years, they sometimes struggle with the stigma of being less than, less organized, and less effective than their majority counterparts.

Both Busby and Garret say that myth is false, especially in the 21st Century.

"It's a perception that has continued to go around the country, that our product and services are inferior," Busby said.

"But that's in fact not true. Looking at the size and infrastructure of majority firms, they have the ability to invest back in the firm. Many Black firms don't have the resources to invest back."

Many big box stores, and majority-owned chains have been around longer than their minority counterparts. That additional time has allowed them to work out quirks that are common in any start up business, Busby said.

Majority owned counterparts have been in existence longer, and have more resources to act quicker than a 'mom and pop' store. That has led to minority businesses leading to a jaded response, because of the lack of an ability to move as quickly as its majority owned counterpart" Garrett said.

"Home Depot started with one store at a time, just as many Black Businesses start slowly. If all circumstances were equal things would be different.

Another concern is the higher cost of goods at Black establishments compared to their majority-owned counterparts.

"This lays into the fact that we pay more because we buy less. We cannot leverage our dollars. Larger corporations have purchase power in volumes, and we're purchasing in need," Garrett said.

When shopping, consider minority businesses had to pay a little more to receive the same item, Garrett added.

"As we continue to have pride in our community and our businesses that myth will decrease. But I don't think the fact and the myth is that Black people's services are inferior. That's true today, and it's true 40 years ago," Busby said.

Goals for African-American Businesses:

The United States Black Chambers, Inc., is spearheading the "Black Wealth 2020," which is an initiative to close the wealth gap between White and Black families by the year 2020. The USBC has partnered with over 22 other organizations geared towards building Black wealth.

The new initiative plans to increase the number of home owners by 2 million, increase the number of Black Businesses to 4 million, and to increase the general number of African-Americans banking at Black banks.

The USBC has developed an application for both iPhone and Android users to help users find Black businesses in their immediate neighborhood. According to the USBC, there are over 101,000 Black businesses in its application's directory.

Through the Black Wealth Initiative, the USBC also hopes to increase Black annualized revenue. In 2014, the annual revenue, on average, for Black Businesses was $86,000. In 2015, the annualized revenue was $75,000.

Reflection of Past African-Americans in Business:

Throughout history, several African-Americans have taken on the task of starting a business to build the wealth and social power of Blacks in the United States. Many bBack businesses today stand on the shoulders of these great men and women. Here are a short list of some of successful African American entrepreneurs.

• Annie Minerva Turnbo Malone was an inventor and philanthropist in the early 20th century. Born in 1869, Malone developed cosmetics for African-American women, including hair care and skin-safe hair perm. Malone also created to Poro college, a beauty college for African-American women.

• Madam C. J Walker was an entrepreneur and philanthropist in the early 20th century, and is currently regarded as the first female self-made millionaire in the United States. Walker worked for Malone, but soon ventured off to her own company that pioneered hair care for African-American women. Despite popular belief, Walker did not invent the hot comb, but her business did successfully pushed, supplied and refined the technology, making it more accessible for consumers.

• John Harold Johnson was known as an American publisher, and the owner of Ebony, Negro Digest and Jet Magazine. In his publications, Johnson supported publishing Black national news, entertainment and features, which had little to no national support at the beginning of his publication. Johnson was the first African-American ma to appear on the Forbes 400 list in the early 1980s.