The Unique Challenges of Being Black and Starting a Business in 2024

If you are part of the Black community and have a passion for entrepreneurship there are a few things you should know before starting your business venture in 2024. According to a recent survey conducted by the Pew Research Center Survey in September of 2023 more than one-in-five Black adults in the U.S. say owning a business is essential to financial success. Despite this opinion, we still see that only about 3% of U.S. businesses were identified as Black or African-American-owned in 2021. Compared to our share of the U.S. population which is more than double – 8%.

The African American community faces unique and significant challenges when creating businesses including economic, sociocultural, and institutional barriers. So here are three vital resources you can utilize to assist in making informed decisions as a business owner knowing you may face unprecedented challenges.

McKinsey & Company’s Building a Supportive Ecosystem for Black-owned US Businesses

McKinsey & Company is a global management consulting firm that provides strategy and management consulting services to leading global brands including the likes of Microsoft, Coca-Cola, Best Buy, and more.

In 2020 they released a 24-page guide on building supportive ecosystems for Black-owned US businesses covering a range of strategic opportunities the Black community can take advantage of to mitigate or negate the effects of structural obstacles to business building for Black business owners. This strategy claims to be able to add $290 billion in business equity for the Black community.

Within the guide, they map several barriers throughout the entrepreneurial pathway from business ideation and starting up, to sustaining, scaling, and exiting. If you want to fully and thoroughly understand the unique barriers faced at each stage of the business and how they impact growth for businesses created by the Black community compared to other races in the United States, then start here: Building a Supportive Ecosystem for Black-owned US Businesses.

The second resource we recommend you review is the Brookings Black-owned Businesses in U.S. Cities: The Challenges, Solutions, and Opportunities for Prosperity. (Emphasis on opportunities for prosperity.)

Brookings Black-owned Businesses in U.S. Cities

The Brookings Institution is an American think tank that conducts research and education primarily on the topic of social sciences. Their Black-owned Business in U.S. Cities guide was released in February of 2022 and houses a 22-page report on the importance of investing in Black-owned businesses to create economic growth for the future. One of the most important tools within the guide is an interactive chart that goes into depth by metropolitan area and shows you the difference between the existing number of businesses held by the Black community, on average 3% of employer businesses, compared to what would happen if the Black community accounted for a percentage of businesses equivalent to the percent of the Black population in the area.

This guide contains a wealth of information including the metro areas with the highest representation and highest number of Black employer businesses, how aid and other government grants and loans are disbursed to various businesses broken down by race, as well as federal and metropolitan policy solutions that can and may be implemented to expand opportunities for Black business owners.

If you take anything away from the Brookings black-owned business guide it should be the information they provide on empowering Black people as public fund managers, and the vast information shared on grant resources such as the AssistHER grant program and Urban Wealth funds, that are exclusively dedicated to funding our under-sourced and often unbanked communities.

If you want a deeper breakdown on the importance of location, legal policies, and capital investment in Black-owned businesses then start here: The Brookings Black-owned Businesses in U.S. Cities.

The third and final resource we will discuss is the Aspen Institute’s racial gap in business ownership explained in four charts. Which breaks down a deeper historical context of business ownership and wealth in the U.S.

Aspen Institute: The Racial Gap in Business Ownership Explained in Four Charts

The Aspen Institute is an organization created with the mission to gather diverse and nonpartisan thought leaders, creatives, and the like to address some of the world’s most complex problems. They provide a plethora of resources for business owners, one of which is their “Racial Gap in Business Ownership Explained” think piece.

Though briefer in delivery than McKinsey & Company or Brookings, the Aspen Institute touches on some very important points to be made regarding the economic status of the African American community compared to their counterparts. The figure 1 graph provided breaks down the total level of business and financial assets by race in America. The Aspen Institute goes on to explain that one of the reasons we notice such a staggering gap in wealth equality within the United States is that the African American community is less likely to own business and diversified financial assets i.e., net worth. The majority of Hispanic and Black Americans have levels of net worth valued at one-tenth of the average White or Asian American.

Figures 2 and 3 go on to break down the level of business ownership by race in the United States, as well as business profitability. Typically, Black business owners suffer higher losses, are more likely to break even on business costs, and are less likely to have business profits.

Their last and most important chart, figure 4, breaks down the percentage change in the number of firms by industry. How many Black-owned businesses are being added to the American economy based on industry? The Aspen Institute mentions that you will notice that historically the African American population has often been sequestered from entering many industries, the hardest for us to gain access to being industries such as construction, retail trade, finance and insurance, enterprise management, and more.

The Aspen Institute goes on to conclude that addressing such disparities for our community will allow us to create successful entrepreneurs and ultimately add to the total net worth and economic growth of our community. The Racial Gap in Business Ownership Explained in Four Charts.

So Here is The Conclusion

The story of our people is often told as one of resilience and growth. Despite facing such exhausting systemic barriers, we have proven our capability and determination to shine. According to the Pew Research Center in 2021 alone, we saw 161,031 U.S. firms with majority Black or African American ownership, a 29% increase compared to 2017. In that same amount of time, Black-owned firms’ gross revenue increased by 43%, this is an estimated 183.3 billion dollars that the African American community was able to create in revenue, despite the often-scary statistics that we face.

As a business owner, it will often be left to you to make the crucial decisions that could either make or break your business, but with more information and research under your belt we hope that you will be allowed to make a more informed decision. One that will not only lead to your vital success but create future opportunities for our community to work within Black-owned businesses and impact the lives of our people. To create new education and awareness surrounding entrepreneurship and financial success for us.

We see you Black entrepreneurs, and we are relying on you, so start your business!

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