The number of businesses owned by black women increased significantly faster than other businesses from 2002-12, making them the fastest-growing group of business owners in the nation during this period. These businesses tend to be smaller on average than businesses owned by both males and females of all major race, ethnic and gender groups. These businesses are heavily clustered in three of the 14 North American Industry Classification System (NAICS) industries. Despite their small average size, the contribution of businesses owned by black women to national and state economies is increasing. Black women business owners report that they face greater capital challenges and constraints, making them less likely to apply for financing.
Dawn Rattan, EverFit
Black women who own businesses mostly were between the ages of 35 and 54, have a company that has been open less than three years, have a bachelor’s or master’s degree and are a first-time business owner. They were more likely to work part time in their business, use their business as a secondary source of income, and capitalize their business with family savings or with sweat equity. They also were most likely to have a business in the other services or health care and social assistance industries.
Growth in the number of black women who own businesses significantly outpaced all women-owned firms from 2002-12 in total firms, firms with employees, sales growth and employee growth (Chart 1). The number of black women who owned businesses grew from 8 percent of all women-owned firms in 2002 to 15 percent of all women-owned firms in 2012 (Chart 2). Black women are the only group of women that own more businesses than their population percentage. During this same period, black women doubled both their number of firms with employees and total number of employees.
Average Business Size
Sales at businesses owned by black women tend to be significantly less than sales at businesses owned by women overall. On average, annual sales at businesses owned by black women are two times smaller than the next-lowest demographic group, Hispanic women, and close to five times smaller than for all women-owned businesses (Chart 3).
Ownership Shift Among Men and Women
Black women were the first among all women to achieve more than 50 percent of the total business ownership within their race or ethnic group. In 2012, black women owned 59 percent of all black-owned businesses, up from 46 percent in 2002 (Chart 4).
Sales receipts at businesses owned by black women doubled during 2002-12, from $20 billion to $42 billion (Chart 5). In 2012, businesses owned by black women accounted for 6 percent of all U.S. businesses, but produced only 0.1 percent of the sales receipts. This increases to 0.4 percent of the national sales receipts for all nonpublic companies and 3 percent of all women-owned business receipts. The number of employees at businesses owned by black women nearly doubled from 2002 to 2012, growing from 176,000 to 317,000 (Chart 6).
Businesses owned by black women are heavily concentrated in three industry clusters: other services; health care and social assistance; and administrative and support and waste management and remediation services. Combined, these three industries represent 68 percent of businesses owned by black women (Chart 7). In contrast, 46 percent of businesses owned by women overall were clustered in these industries. Although businesses owned by black women are overrepresented in those three industry clusters, they are underrepresented by 5 percent and 7 percent, respectively, in retail trade and professional, scientific and technical services relative to all women who own businesses. These two industries represent the fourth- and fifth--largest industries in which black women own businesses.
Chart 1: Growth Rates Black Women to All Women Firms, 2002-12
Chart 2: Percentage of Black Women Owned Businesses to All Women Owned Businesses by Category, 2002-12
Chart 3: Average Women Owned Business Sales by Race and Ethnicity, 2012
Chart 4: Women Owned Firms as a Percentage of Firms Within Race or Ethnicity, 2002-12
Chart 5: Black Women Business Sales Receipts, 2002-2012
Chart 6: Black Women Business Employees, 2002-2012
Chart 7: Firm Distribution by Industry Black Women and All Women, 2012
Lisa Kirk, Lisa Sunshine
Shanell Reffell, Nella Yoga
It can be a challenge to determine which states have the best environments for supporting business startups and growth. Many publications use different methodologies and often show varied outcomes. This report, instead, will use three indicators of business ownership by black women to show which states lead the nation in various business categories. The indicators are business density, total business growth rate and the growth rate of businesses with employees. Business density, calculated as the number of businesses per 1,000 members of a population, is an important measurement that research shows contributes to state economic growth. In a 2004 Small Business Administration (SBA) research report, Ying Lowrey demonstrated that business density contributed positively to economic well-being and gross domestic product (GDP) growth at the state level (Chart 8).
From 2002 to 2012, when excluding states with small black populations, businesses owned by black women grew the fastest in Nevada with a rate of 372 percent (Chart 9).
Missouri had the fastest-growing number of black-women-owned employer businesses at 112 percent (Chart 10). The growth rate of employer-owned businesses may be a more suitable measure of the strength of the business environment based on what is needed to grow or maintain companies with employees. If a state is producing faster growth in employer-owned businesses, which require more inputs and managerial skill, then it could be said it has a stronger entrepreneurship ecosystem.
As previously mentioned, there is little research on businesses owned by black women. One recommendation for future research is to analyze the various factors that drive state-level performance and growth of these businesses.
Chart 8: Top Five States for Business Density of Black Women Owned Firms, 2012
Chart 9: Top Five States for Total Growth Rate of Black Women Owned Firms, 2002-12
Chart 10: Top Five States for Growth Rate of Black Women Owned Employer Firms, 2002-12
Dewanna O’Guinn, Lee Andrew Hall & Gardens
Businesses owned by black women that have employees were more likely to have financial challenges due to credit access and operational needs. In addition, they were less likely to apply for business funds because they were discouraged borrowers, and less likely to receive the funding requested. Alicia Robb, in a report commissioned by the SBA in 2013, said “ … undercapitalized businesses had lower sales, profits, and employment, and were more likely to fail … .” This makes the lack of access to credit a challenge to the performance of businesses owned by black women. In 2017, the Federal Reserve System compiled from its 2016 Small Business Credit Survey findings that are specific to businesses with employees owned by black women. The following charts share some of the key findings from the 2016 survey (Chart 11).
Black women owners were more likely to express having financial challenges. The greatest challenges were in funds for expansion and operating expenses. In response to these challenges, black women owners were more likely to make a late payment, use personal funds, negotiate payments with their lender or let their debt go into collection (Chart 12).
Black women owners were much more likely to rely on personal funds to finance business needs compared to their nonminority women peers (Chart 13).
Black women owners were much more likely to report not applying for credit because they were discouraged about credit opportunities (Chart 14). They also were significantly less likely to report they did not apply because they had sufficient financing.
Their discouragement may be a result of experiences when they have requested financing. Black women owners were much more likely to report they received none of the financing they requested (Chart 15).
Black women owners were more likely to apply for financing at credit unions, online lenders and community development financial institutions (CDFI) than nonminority women owners (Chart 16).
“According to NWBC research, as one of the fastest-growing segments of entrepreneurs, black women business ownership has seen a sharp rise–nearly 67 percent since 2007, adding over 71,000 jobs to the economy. However, there are persistent challenges in terms of receipts, investment, representation and growth. It is important to cultivate sustainable solutions to create and improve on funding opportunities, networks and entrepreneurial supports for black women business owners so they can reach their full economic potential.” Shannon Trudge, National Women’s Business Council
Chart 11: Greatest Business Financial Challenges, 2016
Chart 12: Response to Business Financial Challenges, 2016
Chart 13: Sources of Business Financing, 2016
Chart 14: Reasons for Not Applying for Business Credit, 2016
Chart 15: Amount of Business Financing Received Based on Amount Requested, 2016
Chart 16: Business Loan Application Location, 2016
Adrienne Haynes, SEED Law
Businesses owned by black women have experienced unprecedented growth over the past two decades. This growth has established them as the only racial or ethnic group in which women own more than 50 percent of all businesses within the group. This expansion has led this group to be overrepresented by race and gender when compared to their population percentage in the United States. Businesses owned by black women tend to be newer, smaller and more clustered in fewer industries than their male and female business-owner peers. Black women tend to start businesses with no capital, or use personal or family savings. Employer firms owned by black women tend to have worse outcomes in the credit market than women overall. Their greatest financial challenges have been access to credit for growth and operations. They also were more likely to be discouraged borrowers, and, therefore, not apply for financing. When they did apply, they were less likely to receive funding or received less than they requested.