Tracking Minority-Owned Businesses Expansion, contraction, survival rates

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In its latest report on minority-owned businesses with employees, the U.S. Small Business Admini-stration’s Office of Advocacy (www.sba.gov/advo) says such businesses had lower survival rates, higher expansion rates and lower con- traction rates than their nonminority-owned counterparts between 1997 and 2001. Most U.S. businesses are small, with only 26 percent of nonminority-owned firms and 20 percent of minority-owned firms having paid employees in 1997. But nearly one-third of Asian-owned firms (32 percent) had paid employees at the time, while the ratios for other minority-owned businesses were between 11 percent and 18 percent. 

The report, “Dynamics of Minority-Owned Employer Establish- ments, 1997–2001,” was released in late February. Significantly, it covers employer establishments only, not firms, which are a better measure of business ownership. Neither does it contain information on establishments opened after 1997, simply those in existence in 1997. Here are the key findings:

-The share of businesses owned by minorities rose from 6.8 percent of all U.S. businesses in 1982 to 15.1 percent in 1997.

-American Indians/Alaska Natives were the fastest-growing business group. The number of businesses owned by this group grew tenfold between 1982 and 1997, followed by Hispanic-owned businesses, the number of which quadrupled during this period. The number of Black-owned businesses grew to 4.24 percent of all businesses in 1997 from 2.56 percent in 1982.

-The four-year survival rates of nonminority-owned businesses were 72.6 percent; Asian- and Pacific Islander-owned, 72.1 percent; Hispanic-owned, 68.6 percent; American Indian/Native Alaskan-owned, 67.0 percent; and Black-owned: 61.0 percent.

-During 1997-2001, the percentage of nonminority-owned establishments that expanded was 27.4; Hispanic-owned, 34.0 percent; Asian- and Pacific Islander-owned, 32.1 percent; American Indian/Alaska Native-owned, 27.8 percent; Black-owned, 25.7 percent.

-Hispanic- and Black-owned establishments had the lowest contraction rates (17.8 percent and 19.9 percent, respectively), while 21.1 percent of nonminority-owned businesses shrank, as did 22.4 percent of those owned by American Indian/Alaska Natives, and 22.9 percent of those owned by Asians and Pacific Islanders.

-Among the largest minority-owned businesses (more than $1 million in receipts), American Indian/Native Alaskan-owned businesses showed a 47.2 percent upsurge in employment due to business expansion, followed by Hispanic-owned businesses at 39.6 percent. For small minority-owned establishments, the highest percentage increase (531.9 percent) was seen in Black-owned businesses with less than $5,000 in annual receipts, followed by Asian-owned businesses in the $5,000-$9,999 category (434.5 percent).

-During 1997-2001, the survival rate of all U.S. businesses was highest in the manufacturing sector (74 percent), followed by services (72 percent), wholesale (71 percent) and agriculture (70 percent). Asian businesses were most resilient in the finance/insurance/real estate sector as well as in services; Hispanic businesses in manufacturing and retail; Black businesses in finance/ insurance/real estate, agriculture and services.

-In states with the highest survival rates for minority business groups for the period 1997-2001, Delaware had the highest rate for American Indian/Alaska Native-owned businesses (93.8 percent); Wyoming for Black-owned businesses (93.5 percent); South Carolina for Hispanic businesses (88.6 percent); and New Mexico for Asian and Pacific Islander-owned firms (84.6 percent).