The State of African-American Entrepreneurs


How are African-American entrepreneurs doing? There are nearly 2.6 million African-American owned businesses in the U.S., employing nearly 1 million Americans, according to the Commerce Department’s Minority Business Development Agency. The same study reports minority-owned firms overall experienced significantly higher growth than the average business between 2007-2012—a period including the Great Recession.

Here’s a closer look at the average African-American entrepreneur, according to a recent Guidant Financial survey of current and aspiring small business owners. (Read what the study revealed about Hispanic business owners.)

African-American small business owner profile

Gender

  • 62% male
  • 38% female

Age

  • 18-29: 6%
  • 40-49: 28%
  • 50-59: 25%
  • 30-39: 22%
  • 60-plus: 19%

Education

African-American entrepreneurs have varying degrees of educational attainment. About one-third (32%) have a high school diploma/GED. Some 26% have a bachelor’s degree, 21% have an associate’s degree, and 22% have a master’s degree or higher.

Motivation

Why are most African-American entrepreneurs motivated to launch businesses? These entrepreneurs are more likely than the average business owner to say they were dissatisfied with corporate America (22%). However, the vast majority (62%) wanted to “pursue their passion,” 53% were “ready to be my own boss,” and 30% say that opportunity presented itself. Just 12% say being laid off or outsourced motivated their startup.

Location

The most popular states for African-American small business owners are

  1. Texas
  2. Georgia
  3. California
  4. Florida
  5. North Carolina

Industry

The most common industries in which African-American small business owners start businesses are:

  • Business services—13%
  • Health/beauty/fitness—9%
  • Food/restaurant—9%
  • General retail—7%
  • Other—28%

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How are African-American entrepreneurs doing?

Despite the rapid growth of African-American-owned firms in general, there are still many challenges for these entrepreneurs. For example, just 57% of those Guidant surveyed say their business is profitable—lower than the average for all survey residents (68%).

African-American business owners are also less likely than the average business owner to have employees: 46% are solo entrepreneurs, 41% have two to five employees; 7% have between six and 10 employees; and 6% have 11 or more workers.

Particularly concerning, the average annual receipts for African-American businesses is just $58,119. That’s compared to an average of $173,552 for minority-owned firms in general and $552,079 for non-minority firms.

What’s behind these issues? One problem is financial. A whopping 80% of African-American entrepreneurs in the Guidant poll say lack of capital is their biggest business challenge. This is 10% higher than the average small business owner in the survey. The next biggest challenges, marketing/advertising (31%) and time management (23%), are mentioned far less often than capital.

If they did get additional capital, half of African-American entrepreneurs would use the money for expansion; 61% would use it for equipment, 54% would use it for marketing/advertising, 36% would use it for staff, and 30% would spend the windfall on technology.

The challenges African-American business owners face are reflected in their lower confidence in the political climate for small business. Their confidence level is seven out of 10, compared to eight out of 10 for business owners as a whole.

RELATED: Minority Business Loan Programs

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