When it comes to black entrepreneurs, there's good news and bad news. Black Americans are creating new businesses at a much faster pace than the economy as a whole. From 1977 to 1982, according to a Census Bureau study, the number of black-owned companies increased 47%, almost twice the growth in the total number of nonfarm businesses.
The bad news is that black-owned companies are tiny. In 1982, 89% of the 339,239 black companies had no paid employees, compared with about 40% of all businesses. And 63% had less than $10,000 in sales. Despite a 33% jump over the five-year period, the rate of black entrepreneurship remained low -- in 1982, there were 12 black-owned firms per 1,000 blacks, compared with 63 companies per 1,000 people in the total population.
"What this says is that we've got a very large number of firms that really aren't firms at all," says James H. Lowry, president of a Chicago consulting firm of the same name. "More blacks are looking at business as a way out, but the vast majority of these firms are owned by people who have jobs and are doing something on the side." The 231% rise in "nonstore retailing," which includes selling from home, supports this analysis, especially since these retailers averaged less than $5,000 in 1982 sales.
More full-fledged businesses may be on the way, however. Two decades have passed since a large number of companies opened their doors to black managers. Many people who entered those jobs then "have gotten to the point where they're not going to go any higher. They are at the prime entrepreneurial age, about 40," says Paul Pryde, chairman of Pryde, Roberts & Co., a Washington, D.C., economic consulting firm. While the Census doesn't note ages, there is one indication that black professionals are going out on their own -- a 41% jump in the number of black law firms.
Ten states saw the number of black companies grow faster than 60% over the five years surveyed. Mostly west of the Mississippi, they include such entrepreneurial hotbeds as Arizona, Colorado, and California. The list excludes states that had fewer than 250 black-owned businesses in 1977.