The Untapped Potential of Black-Owned Businesses

The latest research from the Association for Enterprise Opportunity (AEO), The Tapestry of Black Business Ownership in America: Untapped Opportunities for Success, assesses the economic fortitude and potential of Black-owned firms, identifies the opportunities and obstacles for these business owners and addresses the ways in which policies and investments can contribute to the success of Black entrepreneurs.

Three Obstacles to Black Entrepreneurship

Wealth Gap: black entrepreneurs have less assets and capital to invest in their businesses.

Credit Gap: facing serious difficulty accessing credit and high rejection rates, Black entrepreneurs struggle securing business capital.

Trust Gap: discrimination Black entrepreneurs face preventing them from securing loans, forging partnerships, securing mentors and more.

Of Black-owned businesses, 96 percent are non-employer firms and a mere 4 percent are employer firms. The study estimates that if Black-owned businesses could match the employment of all privately-held U.S. firms, $55 billion would enter the economy, 600,000 new jobs would be created, the unemployment rate in the Black community would drop to 5 percent and significant economic relief would be provided to low-income areas.

“There is a myth that Black people aren’t motivated to start their own firms, and are pushed into business ownership mostly due to unemployment,” stated AEO President and CEO Connie Evans. “Our findings show that in actuality, Black Americans have high entrepreneurial drive and the same motivations as other entrepreneurs, yet face three persistent barriers that operating together impede the establishment and growth of Black-owned firms. Understanding and addressing the unique interplay of these obstacles are crucial steps to unleashing the potential economic power of Black business ownership in America.”

In order to remove barriers and unleash the potential of Black entrepreneurship, AEO recommends that providers of services, donors, policymakers and investors consider the following list of concepts:

1. Addressing the low ownership rate
2. Growing the number of employer firms from four percent of Black-owned firms to 19 percent by helping 380,000 sole proprietors to hire one person
3. Expanding the number of employees at existing employer firms by two, from an average of 9 to 11, the current level for all U.S. firms
4. Fostering the movement of aspiring and existing Black entrepreneurs into higher-revenue sectors

To read the full report, please, click here.