Whether or not 2023 brings a recession to the US economy, Black-owned businesses will likely see greater challenges than their white counterparts. That’s the lesson of our recent experience with economic distress and crisis. If history is any indication, Black-owned businesses are the first to feel the pain of downturns, like those we saw in the immediate aftermath of lockdowns in the spring of 2020 when Black-owned businesses accounted for more than 40% of pandemic-induced business closures, and are often the last to feel the relief of recovery.
It doesn’t have to be this way, and if our society is to live up to its promises of economic equality and fulfill our full potential for growth, we can’t continue this way. Together, organizations and individuals from the private sector, government and civil society can make tools available that allow Black entrepreneurs and leaders to thrive and enjoy the same access to opportunity that others expect.
The well-being of Black-owned businesses is disproportionately precarious, and especially vulnerable to economic shocks. Research from the National Black Chamber of Commerce and Groupon in 2021 found that during the pandemic, roughly 3 out of 4 Black business owners said capital investment in their business lagged in comparison to their white counterparts. In the same study, Black business owners cited concerns in managing their business such as building a support network and hiring enough staff.
When those concerns are paired with recent research from the Federal Reserve showing that Black startup founders receive just a third of the venture capital that peer founders enjoy, it’s clear that the external resources vital to keeping businesses alive are not available to Black businesses in the same way as they are to others.
These disparities belie the fact that Black entrepreneurs are remarkably resilient and have the economic vibrancy to drive an enormous amount of growth if given the tools to succeed. We can see, for instance, evidence of the impact that an inability to hire adequate staff has on the average Black business in research by the Brookings Institution. Black businesses create an average of 10 jobs per firm, compared to 23 for non-Black businesses. That illustrates the gains possible if facilitators in the business and nonprofit communities invest in creating networks that connect Black employers with prospective employees – if Black businesses employed the average number of people, our economy would create approximately 1.6 million new jobs.
One such effort to deepen networks for Black business leaders began earlier this year. Our company launched an initiative entitled Equity = Possibility to provide solutions, research and insights for diverse businesses. The kick-off event for the initiative, the Black Leaders Symposium in Atlanta this March, brought together Black business owners with a variety of business leaders to discuss their challenges and how they can be addressed.
The setting for that event was a purposeful choice. Atlanta is known as a hub of Black-owned businesses in our country and has the highest concentration of Black businesses in America.
While that is a commendable distinction, the numbers paint a disappointing picture for Black entrepreneurship. In Atlanta, 7.4% of businesses are Black-owned as of 2020, in a metro area that is nearly 50% Black. That’s evidence that we have a lot of room for Black business growth in the city.
Several civic and private organizations are helping to close the gap
The Gathering Spot has built a community of Black entrepreneurs, creatives and executives ready to build opportunity through collaboration.
The Russell Innovation Center for Entrepreneurs is helping Black-owned business connect with the capital they need through its relationships with banks, venture capital funds, angel investors and community development financial institutions.
But if we are indeed going to reach equity and full economic opportunity, we need more organizations, not just those that are Black-led, to lead the way.
Recent research from Mercer points to one way in which large enterprises can help alleviate racial wealth disparities: closing the career gap. By intentionally emphasizing diversity in higher level (and higher paying) positions, organizations can increase Black employees’ “career equity,” and support wealth creation. Building a pipeline of Black talent remains a challenge for businesses, with only 10% saying their efforts to drive career progression for Black employees have been successful. This is a clear area where further investment can increase wealth and capital to encourage Black entrepreneurship in the long term.
The will in our Black communities to build businesses is immense. Consider the above statistic that 40% of closures in the early days of the pandemic were Black-owned businesses. Black entrepreneurs also bounced back fiercely – by August 2021, the number of Black-owned businesses had actually grown by 30% over the pre-pandemic figure.
According to Mercer’s latest research, 39% of US companies will provide Juneteenth as a paid holiday this year. Our company will as well.
That is exciting progress. But there is so much left to do for the Black community to reach its full economic potential. With the right support this Juneteenth and beyond, Black businesses can be the engine that powers a new generation of growth in our economy.
Partner and Atlanta Office Leader