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Blacks outpace whites in business startups, but see less success Print E-mail

While blacks are starting businesses at a greater rate than whites, their enterprises are less likely to survive and thrive. "When it comes to entrepreneurship, African-Americans try twice as hard only to achieve half the success of whites.

While blacks are starting businesses at a greater rate than whites, their enterprises are less likely to survive and thrive.

That is why author Bill Boudreaux believes it's absolutely critical to help minorities become successful so they can provide jobs and economic stability to their communities.

"When it comes to entrepreneurship, African-Americans try twice as hard only to achieve half the success of whites. There is something within the process that causes them (blacks) to fall out at greater rates," says Boudreaux, author of "The Complete Startup Guide for the Black Entrepreneur."

African-American men and women are 50% more likely to attempt a business start-up than their white counterparts, but many of those new, black-owned businesses never get off the ground, according to a recent study by the Ewing Marion Kauffman Foundation.

And those that do start don't grow nearly as quickly or as big as white-owned companies.

Based in Kansas City, Mo., the Kauffman Foundation is dedicated to promoting entrepreneurship nationwide.

The study found that 1.7 million firms nationwide will still be in existence four years after they are launched, and of that number, only 3,200 will have grown to 100 employees or more. Of those 3,200, only 1% will be African-American-owned, it also found.

As a percentage of the minority population, African-Americans lag significantly behind Hispanics, Asians and Native Americans in terms of business ownership, says Boudreaux, citing census data.

"Walk through most cities and towns in the United States and just look around. It's hard not to see the lack of small, black-owned businesses." Boudreaux writes. "Sure, there is a sprinkling here and there, but they are few and far between - even in 2004."

Marc Levine, associate professor and director of the Center for Economic Development at University of Wisconsin-Milwaukee, agreed.

"One of the advantages that has been manifested in start-ups by Latinos and Asians is in the economic structure of their communities," Levine says. "Banks are somewhat looser with credit because there's a moral community that supports repayment of loans. That in large measure doesn't exist in the African-American community."

As other ethnic groups have done, African-Americans must do more to support each other, Boudreaux says.

"It's just smart," he says.

For example, Boudreaux notes that Hispanics represent 40.6% of the minority population and about an equal percentage of minority businesses, according to 2000 census data. Blacks represent 39% of the minority population, but their rate of business ownership is much lower, at 27.1% of all minority-owned businesses. Asians, a lower percentage of the minority population than blacks, at 12.3%, own businesses at a much greater rate than blacks, 30%.

"In the 50th anniversary of Brown versus the Board of Education, as we look at the progress that blacks have made in this country since desegregation, black businesses have to ask the same questions that educators are asking: 'Are we gaining or are we losing ground?'

"From all indications, it seems that black entrepreneurs are losing ground. The big question is why," Boudreaux said.

Like many businesses, black-owned businesses fail for any number of reasons, the top among them being poor planning and having too little capital. But Boudreaux contends that black business owners face roadblocks that others don't, which is why he saw the need for a book that speaks to their issues.

Boudreaux says black-owned businesses face stigmas whether it's from uncooperative banks or from suppliers who charge higher prices. What's more, black-owned firms are thought to have inferior products and services than other small businesses, he says.

"These kinds of preconceived notions about black-owned businesses tend to minimize the amount of success that these companies can achieve," he says.

Boudreaux and UWM's Levine agree that education is the best way to solve the failure problem among black-owned businesses.

"This book is about helping small black entrepreneurs who are trying to make a go of it. If one sector of our economy suffers because of lack of parity, it drives down our whole economy," he says.


 

 
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