The State of Black Entrepreneurship, 2005

Bruce P. Corrie, PhD

Concordia University-St. Paul, MN

Recent national reports document interesting trends in African American entrepreneurship.

1. The Global Entrepreneurship Monitor, 2003 found that Black Entrepreneurship is the highest among all groups in the USA. Total entrepreneurial activity for Blacks was 16.5 % compared to 10.8 % for Whites. Blacks had the highest rates for both opportunity based as well as necessity based entrepreneurship. Black entrepreneurs tend to be in age group 25-34 years.
2. According to another report, The Panel Study of Entrepreneurial Dynamics, a longitudinal study of 64,622 U.S. households:

• Black men and Black women are about 50 percent more likely to engage in start-up activities than Whites.
• Education significantly predicts nascent entrepreneurship for blacks: approximately 26 of every 100 black men with graduate education experience efforts to start a new business comparing to 10 of every 100 white men.
• Blacks in urban areas show a greater tendency to start businesses.
• Black women in the middle age groups, 25-54, have a much higher rate of entrepreneurship than other groups.
• Black men and women with higher income levels are more likely to start a business. They had the highest nascent entrepreneurship rates than all groups in the income range $76 K and up.
• Blacks working in full time jobs had the highest nascent entrepreneurship rates than blacks working part time or not working.

3. According to recent studies by Small Business Administration, Office of Advocacy, during the period 1997-2001:

• The number of Black owned firms increased from 308,260 in 1982 to 780,770 in 1997.
• Total receipts of Black owned firms in 1997 was $71 billion dollars
• Black share of business ownership increased from 2.56 percent in 1982 to 4.2% in 1997. Black-owned firms made up 15 % of minority employer firms.
• Black-owned business survival rate increased with the size of the business, reaching 75 % with receipts between $500,000 and 999,999. Survival rates were the lowest in the $10-25,000 range for receipts.
• Black-owned business expansion rates were the highest in the less than $5000 range for receipts.
• The contraction rates were the lowest in the firms with low receipts.
• The receipt range of $10,000 to $50,000 appears to be a critical stage for the survival and expansion of Black-owned businesses.
• The sectors with the highest survival rates for Black-owned businesses were Finance, Insurance and Real Estate, Agriculture, Forestry and Fishing, Services, Wholesale and Manufacturing.
• Top sectors for Black owned firms were Services (53%), Retail (10 %), Transportation (8%) and Construction (7%).
• During the period 1990-2000 Blacks received 4.15 % of SBA 7 (a) loans and 1.59 % of the 504 loans.
• During the period 1997-2001, in Minnesota Black-owned businesses were the only minority group showing net gain in jobs created.
• During the period 1997-2001, in Minnesota Black-owned businesses had a survival rate of 71 % compared to the state average of 74 %.
• During the period 1997-2001, in Minnesota Black-owned businesses had an expansion rate of 33 % equal to the state average.
• During the period 1997-2001, in Minnesota Black-owned businesses had a contraction rate of 14 % lower than the state average of 23 %.
• States with the highest survival rates for Black-owned businesses were Wyoming (93.5%), Utah, D.C., North Dakota and Rhode Island (72 %).

4. According to the 2002 Economic Census:

• Blacks firms make up 1.6 % of all employer firms in the country
• 31 % of Black employer business owners have some college education
• 25 % of Black employer business owners had a post-graduate degree, the second largest group in the country after Asians.

5. A survey of clients of top non profits in Minnesota revealed that Blacks make up the largest percentage of their clients: MEDA (46 %), NDC (40 %), WomenVenture (21%). For the clients using the state’s Urban Initiative Funds, 46 % were Black.

Bruce P. Corrie, PhD Emerging Markets Series

651 641 8226 corrie@csp.edu