Companies Owned by Black Men Declined, but Sales Increased

By Frederick H. Lowe

The number of black-male owned businesses with employees declined between 2007, the beginning of the Great Recession, and 2012, the end of it, according to a report by the Center for Global Policy Solutions in Washington D.C.

The study, titled “The Color of Entrepreneurship: Why the Racial Gap Among Firms Cost the U.S. Billions,” reported that the number of firms owned by African-American men with workers declined 2.3 percent from 2007 to 2012.

In 2007, there were 61,879 firms with employees owned by black men, and by 2012, the number had plunged to 60,439, the report stated.

“I wish I knew the answer as to why there was a decline for black men’s firms,” said Algernon Austin, the report’s author. “As I mentioned, there was a strong decline in black male construction firms. We know that the bursting of the housing bubble was devastating for construction firms generally. White men’s construction firms declined by 11.4 percent and black men’s firms declined by 23 percent. It is likely that black men’s firms generally were in a more precarious situation because of their low level of wealth. The shock of the Great Recession eliminated more of them than for white men.”

Austin is a senior research fellow at Global Policy Solutions, where he focuses on economic security.

Average annual sales for black-male owned firms, however, rose during the same period. Sales in 2007 were $1.2 million, and they increased 3.9% to $1.3 million in 2012.

Firms owned by black men had the second highest growth rate in average annual sales. “But this growth may have been the loss of weaker firms with lower sales rather than the real increase in firms with higher sales,” the report stated.

Firms owned by black men reported the lowest annual sales and companies owned by white men had the highest average annual sales of $2.8 million.

Black male owned firms with workers employed 552,611 men and women in 2007 and 563,338 in 2012, an increase in the number of employees by 10,727.

Data for the analysis was culled from the U.S. Census Bureau’s Survey of Business Owners, which is conducted every five years.