“… experience is the best thing, and I’m thinking you’ve just got to go for it. Just like you said, no turning back. You’ve just got to go for it.” - Black woman business owner, Omaha, Nebraska
The previous quote best encapsulates the broad perspectives of the 34 black women business owners who participated in five focus groups in late 2017 conducted by the Federal Reserve Bank of Kansas City. The Bank determined it was important to gain insight into this group of business owners for two reasons. First, recent growth in the rate of business ownership by black women has been faster than any other group in the nation. From 2002-12, the number of businesses owned by black women increased 179 percent compared with 52 percent for all women-owned businesses and 20 percent for all businesses. The second is the important contribution small business plays in the growth of national and local economies. Businesses owned by black women tend to be significantly smaller on average than other business ownership identified by race and gender. However, research shows that these microbusinesses provide valuable contributions to local economies. Research also shows that an increase in entrepreneurial activity is associated with faster local economic growth, provides a potential pathway to developing economically challenged communities, and provides local jobs and improves the tax base.
The high growth rate of businesses owned by black women provides policymakers and economic developers a unique opportunity to develop policy and programming to accelerate and expand the economic impact of these businesses in their local economies. However, for policies and programs to be effective, policymakers and economic developers need a greater understanding of this group of business owners. The objective of this report is to increase this understanding.
"I'm encouraged by the growing number of black women starting small businesses in our area. This trend continues the legacy of black women, who've always found creative ways to take care of their families. It bodes well for our community because they're making positive contributions...as role models, as business leaders, as empire builders, as game changers, as policy influencers and as decision makers. Black women who own small businesses are making a difference in their lives and our community." - Lee Gash-Maxey, Colorado Black Chamber of Commerce
Businesses owned by black women, on average, are significantly smaller than businesses owned by all men and by women of different races and ethnicities. These owners are likely to start their firms between the ages of 35 and 54, and are more likely to have a bachelor’s degree or higher than black women who don’t own a business. Businesses owned by black women represent 59 percent of all black-owned businesses, making black women the only women business owners with a higher share of business ownership than their male counterparts.
Many black women who own businesses have difficulty accessing credit and face capital constraints, according to the Federal Reserve System’s 2016 Small Business Credit Survey. The survey indicates these women are more likely than their nonminority peers to identify that access to credit and financing for operations were a financial challenge. They also reported being less likely to receive some or all of the financing they requested, and are significantly more likely to not apply for financing because they already are discouraged borrowers.
Two dominant entrepreneurial characteristics expressed by many black women business owners who participated in the 2017 focus groups were determination and self-learning. They said their determination manifested itself in a willingness to overcome multiple obstacles to start and run a successful business. Self-learning was a key characteristic that allowed many to start and grow a company in an environment with limited access to formal business knowledge and training. Faith and religious belief were also important characteristics of many of these owners, who said they used both as a source of motivation and a tool to support resiliency during difficult times.
Black women who own businesses tend to be highly motivated by a passion for their industry and opportunities in the marketplace. Serving their community also was expressed as a strong motivation for starting and running a business. A catalyst for making the leap into entrepreneurship often was poor treatment and the perception of being undervalued in the workplace.
Black women business owners reported that while family and friends were their primary form of support, mentors and general social networks also provided support and valuable business insight. However, many also expressed frustrations that because family members often did not understand business, they withheld support until the business demonstrated some success. Another concern they expressed was a perceived lack of adequate support from the black community and existing small business organizations. The greatest challenges many of these owners reported were a lack of their own general business knowledge at startup, being able to access sufficient financing and resources, identifying their target market and fear.
Based on insights from the focus groups and using an entrepreneurship ecosystem approach, several recommendations were developed to provide communities insight into how they can support this group of entrepreneurs. Some suggestions: expanded research on black women who own businesses; improved diversity, inclusion and retention in local workplaces; creation of better access and more diverse funding sources accessible to black women business owners; and the development of local, culturally relevant business education and training programs for black women.
Section I uses public data sources to develop a profile and provides other insights into black women business owners and ownership. Section II shares insights into the motivations, challenges and support networks of black women owners who participated in the 2017 focus groups. Section III discusses the validity of the findings. Section IV contains recommendations on how to improve the startup rate, strength and growth of businesses owned by black women. Section V concludes.