Black-Owned Businesses

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The number of Black-owned businesses increased by 60.5 percent to 1.9 million from 2002 to 2007, more than triple the national rate of 18.0 percent, the latest U.S. Census Bureau?s ?2007 Survey of Business Owners? shows. Over the same period, total receipts generated by Black-owned businesses increased 55.1 percent to $137.5 billion and employment at these firms grew 22 percent from 754,000 to 921,000 workers, a significantly higher rate than that of nonminority-owned firms between 2002 and 2007.

Taken at face value, these numbers are impressive. They tell a different story upon closer examination. For example, Blacks account for some 13 percent of the U.S. population, with a buying power projected to top $1.1 trillion by 2012,
but Black-owned businesses accounted for just 7.1 percent of the country?s nonfarm businesses, employed a mere 0.8 percent of all workers and generated a meager 0.5 percent of all receipts in the 2002 to 2007 period.

And while the 14,500 Black-owned firms with annual revenue of $1 million or more grew their average gross receipts by 19 percent, from $4.6 million in 2002 to $5.4 million in 2007, the average gross receipts generated by Black firms as a whole fell 3 percent, from $74,000 per firm in 2002 to $72,000 per firm in 2007. Furthermore, a whopping 87 percent of Black businesses earned less than $50,000 a year in receipts in the time period.

True, average gross receipts for all minority-owned firms are well below those for nonminority-owned firms, at $179,000 and $490,000, respectively, in 2007. But at $72,000 in gross average receipts in 2007, Black-owned firms, on average, are also much smaller than minority-owned firms as a whole.

That?s not good enough, minority business advocates say.

?We are encouraged by the overall growth of the minority business community, including African American-owned businesses, but we still have a lot of work to do,? says David A. Hinson, national director of the U.S. Department of Commerce?s Minority Business Development Agency. ?Creating new businesses and new jobs on a path to entrepreneurial parity in size, scope and capacity is our primary goal.?

Marc H. Morial, president and CEO of the National Urban League, adds: ?This report highlights a lot of the positives in terms of the increase in growth of current businesses and new businesses started, but it also shows the painfully sobering news that the average Black-owned business is still significantly smaller than mainstream ones. It is important to understand when you average out the growth receipts of these firms with nonminority-owned firms, there is a huge gap. There is a 7-to-1 differential ratio in terms of average size.? To change this unsettling picture, Black businesses need more capital, be it in the form of grants or small-business loans; a network of business connections; and contracts, Morial says.

Still, there?s no denying the overall upward growth trend among Black-owned firms. In other signs of this, the average employment per firm for Black businesses with employees increased from 8 employees in 2002 to 9 employees in 2007, and the average payroll per employee increased by 12 percent, from $23,000 in payroll per employee in 2002 to $26,000 in payroll per employee in 2007.

Among states, New York had the largest number of Black firms at 204,032 (10.6 percent of all Black-owned firms), with receipts of $12.8 billion (9.3 percent of all Black-owned firm receipts). Georgia and Florida were next with 183,874 (9.6 percent) and 181,437 (9.4 percent) Black-owned firms respectively, with receipts of $8.9 billion (6.5 percent) and 10.6 billion (7.7 percent) respectively. Among cities, New York City had the largest number of Black-owned businesses in 2007 with 154,929 businesses. Chicago came a distant second with 58,631 businesses.