Throughout this week, Carolina Small Business Development Fund and our Innovation & Entrepreneurship Center have hosted a series of events for the first Black Entrepreneurship Week in Raleigh. The week has featured inspiring talks, panel discussions, workshops, and even a fireside chat hosted by Citrix—all highlighting, celebrating and encouraging entrepreneurship among African-Americans in the Triangle area.
Across the US, there are 2.58 billion black-owned businesses, which generate $150 billion in annual revenue and employ 3.56 million people. Entrepreneurship not only helps business owners and their employees gain income, it also has broader impacts. As inequality widens in the US, entrepreneurship provides a pathway to build critical assets to bridge the economic divide. Particularly for African-Americans, whose wealth was concentrated in housing and consequently lost much of their wealth in the wake of the Great Recession, business ownership is way to rebuild wealth. The effects of entrepreneurship ripple through the community, helping to create jobs, spur innovation, and generate community wealth.
A recent report by AEO, The Tapestry of Black Business Ownership in America: Untapped Opportunities for Success, shows that black business owners tend to be wealthier than their peers who are not business owners. The median net worth of for black business owners is 12 times higher than that of non-business owners, even factoring for those who began with more wealth.
However, from starting a business—turning an idea into a successful venture—to expanding an existing business, African-Americans unfortunately face significant barriers. AEO reports that while there is a high interest in entrepreneurship among African-Americans—startup rates are higher for African-Americans compared to whites—the failure rate is also high. As the report states, “This juxtaposition of motivation and action with high failure rates and lower ownership levels suggest a serious disconnect between desire and outcome.”
The consequences of this mismatch between entrepreneurial spirit and lack of successful outcomes—driven by a lack of access to both capital and resources—is that black-owned businesses lag behind in key business performance metrics. Black owned businesses generate lower revenues than their white counterparts. Although they account for 4.2 percent of firms in North Carolina, black owned firms only make up 1.3 percent of the business revenues generate in the state. Even in areas with a higher concentration of African-American population and businesses, revenues still only reach a maximum of 3.2 percent.
But the potential for African-American owned businesses is significant. AEO’s report shows that if these businesses could perform on par with other businesses, they would create nearly 600,000 new jobs. Additionally, black-owned businesses tend to hire black employees form the local area, meaning that the additional jobs created could reduce the black unemployment rate to roughly 5 percent. To get there, 15 percent of black-owned nonemployer firms would have to hire one person, while black-owned employer firms would have to hire two more employees.
These statistics illustrate why efforts like Black Entrepreneurship Week are so critical. There is no simple solution to this challenge, and no “silver bullet” answer. Bringing together funders, educators, mentors, and inspiring examples of success can create an ecosystem of support to propel local African-American entrepreneurs to take the next step in their business journey.
If you are in the Triangle area, there is still time to participate in Black Entrepreneurship Week. Go to www.iecnc.com/bew-2017 for more details, and spread the word using the hashtag #BEWNC!