Olabisi Omoniyi-Alake

Policy Research Assistant Intern, Fall 2024

Research Blog Post: The State of Black Women-Owned Businesses 

Introduction

Several studies have found that the intersectionality of racism and sexism, coined misogynoir by Alice Walker, has negatively impacted the business outcomes of Black women through the cultivation of negative and discriminatory stereotypes. Black women face disproportionately high experiences in business management and workplace culture despite being a driving economic force.  In turn, many Black women are leaving the corporate workplace environment to become entrepreneurs. Despite Black women making up approximately 7.8% of the U.S. population, this demographic generates $98.3 billion annually through business revenue.  However, Black female entrepreneurship comes with its forms of discrimination. The potential impact of further investing in Black women-owned businesses can further contribute billions of dollars to the national economy and diversify the entrepreneurial sphere.

Current Landscape

Black women-owned businesses have contributed significant revenue and economic growth to the U.S. economy.  Black women-owned businesses employ 528,000 Americans despite representing only 14.8% of all women-owned businesses and 52.1% of all Black-owned businesses. Furthermore, the COVID-19 pandemic had been expected to slow or even halt the growth of businesses, but Black women-owned businesses have grown significantly since 2020. Black women have been outpacing growth in both revenue and employment since 2019 in comparison to all women-owned and Black male-owned businesses. Many Black female entrepreneurs started businesses around 2020 and 2021, with 17% starting or in the process of starting a business, compared to 10% of white women and 15% of white men. Additionally, compared to the 11.2% average revenue increase in all women-owned businesses, Black women-owned businesses grew to 32.7%. Small Black female-owned businesses also grew substantially to 2.1 million between 2019-2023. 

Business Discrimination

Despite the surge in Black female entrepreneurship, Black women-owned businesses face a disproportionate amount of barriers. Only 3% of existing Black female-owned businesses reach a maturity of five years. Furthermore, the average revenue for a Black female-owned business is significantly less than for women as a whole. Women-owned businesses have an average revenue of $142,000, while Black women-owned businesses have an average of $24,000. This may be attributed to the lack of capital and funding Black women face due to the racial economic gap in the United States. Black business owners are three times more likely to be rejected for funding compared to their white counterparts, while only 2% of venture capitalist funding goes to women-owned businesses. Faced with both the risks that come from being both Black-owned and female-owned, Black women have significant barriers in starting and maintaining businesses. 

Potential Impact

If there were significant investments that went towards Black female-owned businesses, it would not only improve the diversity in the entrepreneurship field but grow the U.S. economy. If Black female-owned businesses achieved the average revenue of white women-owned businesses, it would add $361.2 billion in revenue to the U.S. economy. Furthermore, if Black women-owned businesses closed the gap to achieve the average revenue of male-owned businesses, it would add $1.5 trillion in revenue to the national economy. There are several ways in which organizations and government entities can invest and support Black women-owned businesses. Some organizations have been founded by Black female business owners to create a community with Black women who have recently started entrepreneurship. These organizations provide crucial access to mentorship and networking opportunities. Others, like Wells Fargo and JPMorgan Chase, provide funding for Black female-owned businesses through grants and diversity programs. State governments have also had a hand in improving inclusion efforts through minority and women-owned business inclusion programs to ensure contracting opportunities.

Conclusion

Black women-owned businesses have made a significant impact on the social and economic fabric of the United States. Despite Black female entrepreneurs facing substantial barriers, they contribute almost $100 billion in revenue to the national economy annually and employ hundreds of thousands of workers. The pandemic has only spurred the growth of Black female-owned businesses while emphasizing the discriminatory practices in the business space. Black female businesses face significant barriers in accessing funding, accruing capital, and sustaining business long-term. However, if there is collective investment in Black women-owned businesses, Black women will be able to close the economic gap and thrive as entrepreneurs. Black female entrepreneurs are already trying to close the racial gaps in business ownership by launching campaigns, events, and organizations to invest in their community. Diversity, equity, and inclusion are needed in the entrepreneurship sector to grow the U.S. economy, and Black women must be included in these initiatives.

Sources

1. “The State of Black Women in Corporate America.” Lean In,   leanin.org/research/state-of-black-women-in-corporate-america.

2. The Urban Institute. “Exit Plan: How Racialized and Gendered Organizations Lead Black Women to Entrepreneurship | Urban Institute.” Www.urban.org, 1 Dec. 2023, www.urban.org/research/publication/exit-plan-how-racialized-and-gendered-organizations-lead-black-women.

3. Best, Eric, et al. “Supporting the Wave of New Black Women Entrepreneurs.” Wells Fargo Stories, Wells Fargo, 23 Aug. 2024, stories.wf.com/supporting-the-wave-of-new-black-women-entrepreneurs/.

4. Duré, Elana. “Black Women Are the Fastest Growing Group of Entrepreneurs. But the Job Isn’t Easy.” Www.chase.com, 2023, www.chase.com/personal/investments/learning-and-insights/article/black-women-are-the-fastest-growing-group-of-entrepreneurs-but-the-job-isnt.

5. “New Report Finds Growth of Women Business Owners Outpaces the Market.” Wf.com, 2020, newsroom.wf.com/English/news-releases/news-release-details/2024/New-Report-Finds-Growth-of-Women-Business-Owners-Outpaces-the-Market/, https://doi.org/109113716/en/1992679/4/PR-Image-810x455.