According to Fortune Magazine, African American women entrepreneurs are leading the charge as the fastest-growing group of entrepreneurs in the U.S. Since 1997, African American women-owned businesses have grown 322 percent.
How Many African American Women Businesses Are There?
The 2016 State of Women-Owned Businesses Report commissioned by American Express OPEN states that there are:
- an estimated 1.9 million African American women-owned firms,
- employing 376,500 workers, and
- generating $51.4 billion in revenues.
Between 2007 and 2016, the number of African American women-owned firms increased by 112%—far surpassing the overall 45% increase among all women-owned firms during the same time period. The report further reveals that African American women-owned firms constitute a 61% majority of all African American-owned firms.
5 Factors Contributing To The Phenomenal Growth
There are 5 main factors contributing to the explosion of African American Women businesses over the past 10 years.
- The number of women entrepreneurs has grown substantially with increased access to business capital. Sources include microenterprises, venture-capital-funded firms, and crowd funding.
- Many women are training to become investors thanks to networks of angel investors like Pipeline Angels, Topstone Angels, and Goldenseal Angels.
- Training centers, such as the Build Institute in Detroit provide the necessary tools for African American women to become business owners. In an eight-week course, women learn the entrepreneurial basics, participate in networking events, and find mentors. Since 2012 the Build Institute has graduated nearly 600 students, of which 70% are women.
- African American women experience many corporate inequities. Disparities in pay, limitations to advancement, unfair promotions and restrictive policies on family care cause them to seek out business ownership.
- Economic uncertainty further fuels the increase in entrepreneurship.
Risking It All To Be The Boss
As 72% of African-American women are the head of household, many have entered into the entrepreneurial pool out of necessity. Capitalizing on talents, skills, and interests to diversify income has historically been their path to increased financial security.
Often without resources, African American women are rolling up their sleeves, kicking off their heels and assuming the risk of building businesses from scratch. With the zeal to succeed and a goal to create wealth, viable companies are established and jobs are created in the process.
Since 2007 African American-owned businesses were responsible for an additional 71,503 jobs. Serving as role models for aspiring entrepreneurs, these women are providing opportunities and improving the lives of others.
The fire within African American women to become entrepreneurs is often diminished by the lack of finances, mentors or access to influential networks. According to Forbes, developing cross-cultural, cross-economic, cross-gender relationships within a white-male dominated world is necessary to progress.
The increase in the number of business for African American women is a good start. However, revenue disparity remains, according to the National Women’s Business Council.
Many of the industries of African American women-owned businesses do not exceed $48,000 in annual revenue. The largest share is in personal care services, such as hair and nail salons. Many businesses are day care services for children and home health care agencies. Only a small percentage of these businesses actually have employees or have significant growth potential. Start-up numbers in the higher-revenue professional, scientific, and technical services sectors remain low.
A national report released by Digital Undivided reveals that startup funding raised by African American women averages about $36,000 compared to $1 million in startup capital raised by white males. Without societal change, funding challenges will continue to stifle competition in minority-owned businesses.
About These African American Women Entrepreneurs
Despite the difficulties along the entrepreneurial road, African American women are thriving. The three states accounting for the largest share of African American women-owned businesses are Georgia, Illinois, and Maryland.
While financial independence remains primary, the next reason for entrepreneurship for this group is the desire to pursue one’s passion and live without limits, i.e. to be “the boss”. For many women, becoming a successful entrepreneur is their destiny; the point where one’s passion becomes profitable.