As Black Entrepreneurship Grew, the Value Gap With White-Owned Businesses Widened


African-Americans were more likely to open a new business in the years during and after the recession than white entrepreneurs. But the white-owned businesses were generally much more successful, according to a new report from the Corporation for Enterprise Development.

 

While the racial gap in business ownership narrowed between 2007 and 2012, the gap in the value of those businesses widened considerably, the group said in its annual Assets and Opportunity Scorecard, released today.

 

Business ownership rates among American-Americans increased to 16% in 2012, from 13% in 2007, an increase of almost two million new businesses. During the same time, the number of white-owned businesses declined by more than one million firms.

 

The vast majority of those businesses—both white- and minority-owned—had no paid employees. That suggests that black workers were more likely to turn to self-employment when times were tough, but white business owners found better jobs elsewhere, said Kasey Wiedrich, CFED’s director of applied research.

 

At the same time, the value of the average white-owned business—measured in sales, receipts or revenue—went up much faster, and is now three times the value of the average minority-owned business. Businesses owned by African-Americans were worth an average $224,530 in 2012, compared with $656,364 for the average white-owned business.

 

And the difference was even starker for women. In 2012, their businesses were worth $239,500 on average, versus $726,000 for men. While minority-owned businesses performed better on average in some states than white-owned businesses, the same was not true for women.

 

“Nowhere do women-owned businesses do better than men,” Ms. Wiedrich said. “I think it probably speaks to access to capital.”

 

While CFED’s scorecard has always included small-business data, this is the first time the data has been broken down by race. The report also draws on the latest Census Bureau survey of business owners, released in August, which comes out every five years. It offers an updated look at what happened to those businesses during and after the recession.

 

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25 Jan 2016


By Kate Davidson
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