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Texas needs the growth of black-owned businesses

Great things can be said about small businesses: They’re the lifeblood of job creation in America; the backbone of our economy; the pillar to American innovation.

And in Texas, black businesses owners are doing all of those things well.

A new survey from the Bureau of Business Research at the University of Texas at Austin revealed that the number of black-owned businesses in Texas is growing, despite barriers to growth and profitability.

Black-owned businesses accounted for 7 percent of all businesses in Texas in 2007, up from 5 percent in 2002, according to the most recent U.S. Census Bureau figures. That’s 154,283 firms out of 2.1 million, up from 88,768 firms in 2002, according to the UT report.

Two years ago, the university released its first installment of minority business surveys by focusing on Hispanic-owned businesses. The state’s Hispanic-owned businesses grew at an even faster pace. But both groups felt they were unfairly excluded from participating in government contracting opportunities more often. Education is where the two groups showed striking differences: 22 percent of Hispanic business owners had some college, 23 percent had bachelor’s degrees and 18 percent held graduate degrees.

In contrast, educational attainment black-owned businesses was “quite high” among the respondents to the study: 67 percent had bachelor’s degrees and 33 had graduate degrees, while 91 percent had some college. Most African-American businesses are in the service sector including accommodations and food service, retail and wholesale. Almost 30 percent of the firms can be categorized as professions, scientific or technical service, which include fields like accounting, law, architecture and health services.

The growth of black-owned businesses is happening all over the state, even in Central Texas, despite an exodus of African-Americans from the city of Austin.

“Between 2002 and 2007, there was a 35 percent growth (of black-owned businesses), in a time where there was a decline in the black population in the region” said Natalie Madeira Cofield, president and CEO of the Greater Austin Black Chamber of Commerce.

“There is this desire to inherently connect those two numbers to make a connection”, Cofield said. “The numbers don’t communicate that.”

That said, the outlook could be better. On a national level, white-to-black entrepreneurship rates has remained constant at a 3-to-1 ratio for more than 100 years.

In 2007, the average business in Texas had $1.2 million in sales, whereas the average black-owned business only had $60,000 in sales.

That disparity hasn’t stopped the black entrepreneur.

The growth rate among black-owned businesses exceeded the growth rate among all Texas businesses between 2002 and 2007. The total number of black businesses grew 74 percent between 2002 and 2007, while all Texas businesses grew only 25 percent during that same period. The study, also showed that while there is growth in black businesses, the firms remain small in comparison with other Texas businesses. More than 95 percent of Texas black-owned businesses are solo practitioners, with no employees other than the owner, according to the study.

Though not large in scope, small businesses shouldn’t be discredited because in today’s market, size isn’t everything. In 2012, Instagram, with 13 employees and a handful of investors, was acquired by Facebook in 2012, for $1 billion in cash and stock.

Capital was key in that example, something that isn’t so easy to come by for most minority business owners.

Low levels of financial assets and lending discrimination continue to limit or discourage new businesses among blacks.

The UT study found that despite their confidence in their work, and high levels of educational attainment, black business owners see “significant barriers” to growing their firms and achieving profitability seen by their peers. That’s especially true of business owners with no employees, the study found.

Black-owned and other minority businesses should have the same access to financial capital as their peers. Government leaders and policy makers should be alert to the unintentional creation of new barriers and work to break down old ones. There is also power in our individual consumption habits as well, giving close consideration to local businesses and extending the hand of business expertise to new entrepreneurs of all ethnic backgrounds.

The report produced three ultimate goals for policy makers and local business leaders: to focus policy on increasing black access to financial capital; encouraging black entrepreneurs to start their businesses as teams with employees rather than sole proprietorships; and to target black-owned businesses in the construction and service sectors for growth training.

All great places to start.

The health of minority businesses is a barometer of the health of the greater community. Their success means a better future for us all.

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