June is Blackity Black with so many different things happening – It’s Black Music Appreciation Month! Juneteenth! Pride! BBQs! Father’s Day! Here at Money Matters, we’re especially excited that June is also a celebration of Black businesses! For this edition of Money Matters, we will do a deep dive into Black, women-owned businesses to let you know how Black women are making a difference and impacting the entrepreneurship world.
According to Forbes, of all the new businesses that women are creating in the Unites States, 42% are Black women owned. Furthermore, on average the Black women-owned companies grew 67% from 2007 to 2012, compared to 27% of all women. These numbers highlight the creativity and entrepreneurial spirit of Black women.
In a recent poll by Guidant Financial, business owners expressed a number of reasons to start their own business. Many were “ready to be my own boss” (34%), followed others who had a “desire to pursue my own passion” (29%). The remaining respondents shared a “dissatisfaction with corporate America” (13%), or simply “the opportunity presented itself” (10%).
This data does not pull out the experiences of Black women specifically, but couple with the findings from McKinsey & Company’s The State of Black Women in Corporate America 2020 report, it would not be a surprise if many Black women fall into the “dissatisfaction with corporate America” or “ready to be my own boss” category. This study found that Black women don’t feel supported by managers, don’t get opportunities to manage project, and are far more likely to face day-to-day discrimination at rates much higher than their white, Latinx, and Asian-American counterparts. With toxic environments like these, no wonder Black women are flocking to start their own businesses!
Despite the growing number of Black women starting their own businesses, there is still a deep inequity in access to financial resources that limits these businesses’ ability to grow into maturity. One of the main challenges that Black women experience while running a business is the lack of capital and cash flow. Few of their businesses are approved for financing, and when Black women’s businesses are approved, that approval happens with higher interest rates.
As a result, most Black women start their businesses using their own funds (44%) or get help from friends or family (15%). This is particularly troubling because a 2019 report by CNN found that Black women earn on average a revenue of $24,000 per firm by running a business, which is less than 17% of what all women-owned businesses earn ($142,900). While the number of new businesses Black women start that will rightly take a minute to turn a profit contribute to this gap by pulling down the averages of more well-established businesses, most of this disparity is a result of barriers to financial resources and lack of infrastructure to connect with and support Black women entrepreneurs.
Despite the challenges, Black women who own their own business have found it to be a rewarding experience. Most Black business owners, 35% of them Black women, shared that they were happy or very happy that they chose to run their own business. At Money Matters we are happy that Black women are continuing to follow their entrepreneurial spirit. We encourage you all to support Black, women-owned businesses whenever you can.
I look forward to meeting you back here next month with new economic topics to be discussed. If you have questions for me about economics, send an email to firstname.lastname@example.org and I’ll answer it!