{"id":7080,"date":"2018-09-23T17:52:36","date_gmt":"2018-09-23T21:52:36","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=7080"},"modified":"2018-09-23T17:52:36","modified_gmt":"2018-09-23T21:52:36","slug":"why-black-women-entrepreneurs-are-on-the-rise","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=7080","title":{"rendered":"Why Black Women Entrepreneurs Are On The Rise"},"content":{"rendered":"\n\n\n
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\"\"<\/a>Dell Gines, the author of an intriguing new\u00a0report<\/a>\u00a0from the Federal Reserve Bank of Kansas City,\u00a0Black Women Business StartUps,<\/em>\u00a0loves this quote attributed to Reid Hoffman, co-founder of LinkedIn: \u201cAn entrepreneur is someone who will jump off a cliff and assemble an airplane on the way down.\u201d But for black women entrepreneurs, Gines quickly adds, \u201cthey do it with only a toothpick and a napkin.\u201d What he means is that black women entrepreneurs typically lack the resources and capital to launch, yet take-off they do \u2014 in droves.<\/p>\n

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Dell Gines<\/figcaption><\/figure>\n

According to\u00a0The 2018 State of Women-Owned Business Report<\/em><\/a>commissioned by American Express, while the number of women-owned businesses grew an impressive 58 percent from 2007 to 2018, the number of firms owned by black women grew by a stunning 164 percent, nearly three times that rate. There are 2.4 million African American women-owned businesses in 2018, most owned by women 35 to 54. Black women are the only racial or ethnic group with more business ownership than their male peers, according to the Federal Reserve.<\/p>\n

Read on Forbes<\/a><\/strong><\/p>\n

Black Women Entrepreneurs: The Revenue Lag<\/h3>\n

But not everything about black women entrepreneurs is so rosy.<\/p>\n

American Express found that the gap is widening between the average revenue for businesses owned by women of color and those owned by non-minority women. For women of color, average revenue dropped from $84,000 in 2007 to $66,400 in 2018, while for non-minority businesses, revenue rose from $181,000 to $212,300. And the gap between African American women-owned businesses\u2019 average revenue and all women-owned businesses, Amex found, is the greatest.<\/p>\n

What\u2019s more, a catalyst for making the leap into entrepreneurship, the Federal Reserve Bank of Kansas City report said, \u201coften was poor treatment and the perception of being undervalued in the workplace.\u201d The Amex report echoed this, noting that \u201chigher unemployment rates, long-term unemployment and a much greater gender and racial pay gap have led women of color to start businesses at a higher rate out of necessity and the need to survive.\u201d<\/p>\n

\u201cIt\u2019s pretty evident that one of the primary reasons for black women to start businesses is frustrations on the job,\u201d Gines told me. \u201cThey feel they can\u2019t get anywhere. We have been to seven cities doing the outreach and talked to a lot of black women. There\u2019s a feeling of being passed over for promotions, a sense of workplace fatigue, of being asked to train people to be their boss.\u201d<\/p><\/blockquote>\n

What\u2019s also evident, according to Gines: \u201cThe businesses tend to stay very small, and you don\u2019t see a lot of scalability.\u201d<\/p>\n

On average, annual sales at businesses owned by black women are two times smaller than the next-lowest demographic group, Hispanic women, and close to five times smaller than for all women-owned businesses, according to the Federal Reserve. The average annual sales for businesses owned by black women was $27,752 in 2012 (the most recent figures available), compared to $143,731 for all women and $170,587 for white women.<\/p>\n

Gines said those figures are unlikely to have shifted dramatically since 2012. \u201cThe gap persists at about the same level,\u201d he said.<\/p>\n

\"\"<\/a>Credit: The Federal Reserve Bank of Kansas City<\/span><\/div>\n

Why So Many of the Businesses Are Micro<\/h3>\n

One reason so many of the businesses are micro is that many black women have difficulty accessing credit and face capital constraints, according to the Federal Reserve. That makes it hard to get the necessary funding to grow. And when black women try to borrow with lower income and lower wealth, \u201cthese factors make going for a loan that much more difficult,\u201d Gines said.<\/p>\n

As a result, black women entrepreneurs tend to tap personal savings, and, all too frequently, retirement accounts, according to BC Clark, director of business development at the\u00a0Nebraska Enterprise Fund,<\/a>\u00a0a nonprofit based in Omaha that works with many black women business owners.<\/p>\n

\u201cWe definitely do not want them to do that because it took years to build and they might not get that money back,\u201d Clark told me. That\u2019s why the Nebraska Enterprise Fund puts on workshops to teach things like borrowing basics, how to write a business plan, creating a mission statement and managing risk.<\/p>\n

Starting As Side Businesses<\/h3>\n

For many black women business owners, the tiny size of their firms is intentional, regardless of the dearth of capital available from lenders. That\u2019s partly because they\u2019re often launched as side businesses out of financial necessity. Most black women entrepreneurs work part-time in their businesses, less than 39 hours a week, according to the Federal Reserve report.<\/p>\n

\u201cMany black women founders may be single parents and need to have this dual income to support the household needs,\u201d said Gines.<\/p>\n

Using a startup as a second income stream initially can lead to positive results over the long haul. \u201cIt can mitigate the risk,\u201d Gines said. \u201cBecause the women are taking care of their families, they need to have a level of confidence before they can make that jump completely. Woman who are responsible for the household tend to keep the size of businesses artificially low because they\u2019re risk averse, need health insurance from a primary employer and want to make sure everything is absolutely appropriate before taking the jump.\u201d<\/p>\n

A Lack of Resources and Mentors<\/h3>\n

Another factor that slows growth: a lack of educational resources and mentors to help black women entrepreneurs ramp up their business knowledge.<\/p>\n

While there are\u00a0SCORE programs\u00a0<\/a>(retired business professionals offering free advice to startup founders) in every major city, many black women cite a lack of mentors who understand their businesses and business models or feel they can\u2019t connect culturally with the ones they meet, Gines said.<\/p>\n

Two dominant entrepreneurial characteristics expressed by many black women business owners who participated in the 2017 focus groups conducted by the Federal Reserve of Kansas City were determination and self-learning. \u201cSelf-learning was a key characteristic that allowed many to start and grow a company in an environment with limited access to formal business knowledge and training,\u201d according to Gines.<\/p>\n

Frequently, black women \u201cdon\u2019t know who to go to, where to go and what organizations are out there that can support them,\u201d Gines said. This is one reason, he added, that \u201cyou see a lot of clustering in very few industries with a low barrier to entry \u2014 service businesses such as hair salons, catering, child day care centers and consulting.\u201d<\/p>\n

The Optimistic Outlook<\/h3>\n

But Gines anticipates promising change coming.<\/p>\n

\u201cYou are going to see a rise in black women doing business in professional services with the rapid increase in\u00a0education levels<\/a>\u00a0for black women and their increased participation in the labor market, in fields such as accounting and engineering,\u201d he said.<\/p>\n

Where to Get Advice<\/h3>\n

Both Gines and Clark advise black women entrepreneurs to look for know-how through a local chamber of commerce, the Small Business Association\u2019s\u00a0Women Business Centers<\/a>\u00a0and women\u2019s business owner associations. Also, they say, take courses on entrepreneurship at a local community college.<\/p>\n

It might make sense, too, to get\u00a0certified<\/a>\u00a0as minority-owned and as a women\u2019s business on the federal, state and city level, Clark said.<\/p>\n

One parting thought: Faith and religious belief have also been important characteristics of many of the black women business owners who spoke with Gines. \u201cThey used their faith as both as a source of motivation and a tool to support resiliency during difficult times,\u201d he said.<\/p>\n

Amen to that.<\/p>\n

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Part of the\u00a0AMERICA\u2019S ENTREPRENEURS SPECIAL REPORT<\/a><\/p>\n

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By\u00a0Kerry Hannon\u00a0<\/a><\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n<\/div>\n

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Entrepreneurship and Personal Finance Expert<\/span><\/a><\/span><\/p>\n

Kerry Hannon has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among other publications. She is the author of a dozen books including\u00a0Money Confidence: Really Smart Financial Moves for Newly Single Women<\/em><\/a>,\u00a0\u00a0Great Jobs for Everyone 50+: Finding Work That Keeps You Happy<\/em>\u00a0and Healthy…and Pays the Bills<\/em><\/a>,\u00a0Getting the Job You Want After 50<\/a>,<\/em>\u00a0Love Your Job: The New Rules for Career Happiness\u00a0<\/a><\/em>and\u00a0What’s Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond<\/em><\/a>. Her website is\u00a0kerryhannon.com<\/a>. Follow her on Twitter\u00a0@kerryhannon<\/a>.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
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