The Tapestry of Black Business Ownership America: In Untapped Opportunities For Success

Monday, March 20, 2017
Association for Enterprise Opportunity (AEO)

"The Association for Enterprise Opportunity (AEO), a nonprofit organization dedicated to empowering microbusinesses, today announced the release of its new report “The Tapestry of Black Business Ownership in America: Untapped Opportunities for Success.” Funded by the W.K. Kellogg Foundation, the report set out to assess the economic strength and potential of Black-owned businesses, identify challenges and opportunities across a mosaic of segments, and launch a national discussion on how investors and policymakers can increase the effectiveness of programs designed to support Black entrepreneurship, keeping in mind that rich diversity.

“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,” said 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.”

The three barriers described in the report are a Wealth Gap, fewer assets and less disposable income to invest in business; a Credit Gap, decreased access to formal credit and high denial rates; and a Trust Gap, institutional bias that Blacks have experienced, inhibiting them from actions such as applying to financial institutions for more capital, joining networks, creating valuable partnerships, and more. This environment of scarcity translates into fewer establishments reaching maturity, and for those that do survive, limited potential to grow and hire. In fact, most businesses say the current financing environment hampers their ability to hire new employees.

The report’s authors calculated that if Black-owned firms were able to reach employment parity with all privately-held U.S. firms, 600,000 new jobs could be created and $55 billion would be added to the U.S. economy. Since many Black-owned businesses are small businesses that serve and hire from their communities, reaching employment parity could also have the effect of reducing unemployment in the Black community down to 5 percent. In addition, a larger portion of money spent at Main Street businesses stays circulating in the local region versus money spent at big box stores,  creating economic empowerment in areas that likely need it the most."

"The findings in this report emanate from a multifaceted research effort that included original data analyses commissioned by AEO from Professors William A. Darity, Jr. — on wealth creation via self-employment using the Panel Study of Income Dynamics — and Robert Fairlie — on business characteristics among immigrant and native-born Black business owners, using the American Community Survey."

Read the full report here