by J. Coyden Palmer
(NNPA)—Black entrepreneurs will have plenty of company if they launch their operations in Chicago or Cook County, according to a recently released U.S. Census Bureau study on Black-owned businesses. Among counties, the report, which tracks the nation’s Black-owned businesses showed of the 1.9 million non-farm Black-owned businesses in the nation, Cook County had the most at 83,733, of which 58,631 are in Chicago. Among cities, New York had the most Black-owned businesses, with 154,929.
The study, called the Survey of Business Owners (SBO) includes businesses surveyed between 2002 and 2007. It also showed there was a 60.5 percent increase in Black businesses during that period. Consideration is given to those businesses, which have at least 50 percent of the ownership or equity held by a Black person or group. The SBO includes a sample of more than 2.3 million non-farm businesses filing 2007 tax forms as individual proprietorships, partnerships, or any type of corporation, and with receipts of at least $1,000.
However, the data also showed a wide disparity in the number of employees Black-owned firms employ compared to Whites. Of the 1.9 million Black-owned businesses 106,824 had paid employees. That was a bump up of 13 percent during the reporting period. Additionally, the average number of paid employees increased from eight to nine, with Black businesses employing 921,032 workers nationwide. Marc H. Morial, president and CEO of the National Urban League, said the new data shows promise, but also highlights several concerns. Morial said the increases in Black-owned businesses came out of necessity as many people found themselves unemployed when the economy dipped. He also said Black businesses need more capital, business connections, and contracts. According to the survey, 87 percent of Black businesses earned less than $50,000 a year in receipts. Morial said starting a business requires capital like grants or small business loans, but in order for the business to grow, one must have the network of contacts, which lead to new business.
“Many Black-owned firms remain very small businesses,” Morial said. “It is important to understand when you average out the growth receipts of these firms with non-minority owned firms, there is a huge gap. There is a 7:1 differential ratio in terms of average size. This report highlights a lot of the positives in terms of the increase in growth of current businesses and new businesses started, but it also shows the painfully, sobering news that the average Black-owned business is still significantly smaller than mainstream ones.” Morial added, “I believe like many others that one way to create jobs in this country is by focusing on small businesses. But that focus needs to include a hyper-focus on the nation’s minority and African American-owned businesses. If we do so, we will create the jobs and economic growth, but also make a better quality of life for the business owners and the communities they serve.”
Althea Taylor, director of Taylor Made Industries, a South Side business consulting firm was critical of the report because of the time lapse in the data. She said the economy and business community has changed drastically since 2007. While many aspects of the report are still relevant, she said the numbers themselves have probably changed. “While its good there are more Black businesses, the report doesn’t discuss why there is an increase,” Taylor began. “Many people started their own business out of necessity. Many were laid off from their companies after 15 years and can’t find work so they’ve had to go into business for themselves. Usually when this is the case they don’t have a lot of startup capital so people are using their retirement savings, taking out second mortgages on their home, selling valuable items or doing whatever they can. They are basically taking huge financial risks because they are out of viable options. And that is why many of these Black-owned firms can’t hire employees or return profits; they don’t have any money.” She also disagrees with the Obama administration’s view that the economy is getting better because the national unemployment rate is decreasing. She believes that number is skewed because unemployment benefits run out after 99 weeks and a person is automatically taken off the list, but they are still unemployed.
“I have a client right now who has an invention based off solar power, but he can’t get his business going because he had to spend all of his capital on patents and developing the product,” Taylor said.
Dave Thomas, executive director of the Minority Business Development Council in Chicago, said he is currently working with a client who was able to get business loans from some wealthy investors instead of a bank because bank financing was not an option for him. He said the client’s company has grown 60 percent in its first year.
“The harsh reality is that most banks are not interested in loaning money to people who actually need it,” Thomas said. “Black business owners in particular really need to look within the community to find investment opportunities.” Thomas said historically Black businesses have always had some trouble getting off the ground. Part of that he believes comes from a bad philosophy. He pointed out that many Hispanic, Middle East and Arab-owned businesses start based on a family concept when a group of relatives pool all of their financial resources together to start a business. All of the members work within the business cutting down the cost of hiring employees. “Black businesses are often started up through personal relationships, non-traditional financing or angel financing,” said Shelia Hill Mason, president and CEO of Chicago Minority Supplier Development Council Inc. “Oftentimes small, Black-owned businesses are employing themselves. Many of them are lifestyle businesses.
“Businesses like barbershops (B to C—business to consumer) generally may employ other people as they lease space to several other barbers and I think that is a good thing,” Morgan said. “But quite frankly if we’re going to be more sustainable we have to have more businesses that are B to B (business to business). Many of our B to B businesses are looking for corporations, governments to sell their wares to, not just to people in the community.”