According to the latest LendingTree study (analysis of 2021 data from the 2022 U.S. Census Bureau Annual Business Survey), Black-owned businesses make up 2.7% of all U.S. companies. This percentage marks a 12.5% increase from the 2.4% recorded in 2020 and 2019.
Despite a slight decrease in the Black population from 12.8% in 2019 and 12.6% in 2020 to 12.2% in 2021, there has been a rise in the proportion of Black-owned businesses. One potential explanation for this surge in Black-owned businesses amidst a population decline could be the economic pressures experienced during the pandemic.
This indicates a growing trend of Black individuals turning to entrepreneurship. Motivations for entering this field ranged from having additional funds to seeking a fresh outlook, with numerous businesses starting of necessity during 2020 and 2021.
A worrisome reality is that despite representing only 60.9% of the American population, white-owned ventures comprised 82.0% of all businesses in 2021. Whereas, despite the uptick in Black-owned businesses, the disparity between their representation at 2.7% and the Black population at 12.2% remains pronounced.
According to Matt Schulz, LendingTree’s chief credit analyst, “In 2020 and 2021, a lot of people decided to take the plunge into starting a small business.”
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“Given the fact the Black community was hit particularly hard, both physically and financially, by the pandemic, there’s no question many of these businesses were started out of necessity,” he added.
According to the LendingTree study, Whites own 4,835,023 businesses, comprising 80.0% of the total. Asians have 642,950 businesses, representing 10.9%, while Blacks/African Americans own 161,031, accounting for 2.7%. American Indians and Alaska Natives have 48,582 businesses, making up 0.8%, and Native Hawaiians and other Pacific Islanders are behind with 8,324 businesses representing 0.1%.
City Spread
The LendingTree study reveals that Atlanta, Georgia remains a focal point for Black-owned businesses, securing the top position for the second consecutive year among the 50 metros analyzed. The capital of Georgia boasts the highest proportion of Black-owned companies at 8.8%, a rise from 7.4% in 2020. Additionally, Atlanta holds the second-highest quantity of companies owned by Blacks, totaling 10,689.
Despite Atlanta’s leading position in the rate of Black-owned businesses among the studied metros, it represents only a fraction of its Black population, which stands at 34.2%, ranking fifth highest among the 50 metros. Moreover, according to BusinessIsBlack, a local Atlanta organization supporting Black entrepreneurs, the value of Black-owned businesses in the city is notably lower than that of Whites, with the majority lacking paid employees.
However, the University of Georgia Small Business Development Center’s Multicultural Business Division, alongside the Atlanta Black Chambers and the Atlanta Business League, are a few organizations spearheading programs and initiatives aimed at nurturing and assisting Black business owners in the region.
Washington, D.C., retains its position as the metro with the second-highest rate of Black-owned businesses, standing at 7.6%, a position it held in 2020 as well. Despite a slight decline in the local Black population from 25.1% in 2020 to 24.5% in 2021, the percentage of businesses owned by Blacks in Washington increased from 7.0% in 2020.
Memphis, Tenn., and Augusta, Ga., tied with a 6.7% rate of Black-owned businesses. Memphis, with the second-highest Black population in the study at 47.3%, climbed from fifth place in the 2020 study. On the other hand, Augusta has a Black population of 35.0%. The rise of these two metros pushed Virginia Beach, Va., down from third place in 2020 to fifth in 2021.
Virginia Beach, VA., and Jackson, MS., are tied for fifth place with a 6.1% rate of Black-owned businesses. In Virginia Beach, the Black population stands at 29.4%, with only 1,681 out of 27,444 businesses being Black-owned. Meanwhile, in Jackson, MS., the Black population is significantly higher at 49.8%, yet there are only 677 Black-owned businesses out of 11,140 total in the metro area.
On the opposite end of the table, Portland, Oregon, ranked lowest again, retaining its position from the previous study. In 2021, only 1.1% of the metro’s businesses were Black-owned. With a Black population percentage of 3.0%, Blacks own just 599 out of the 55,034 total businesses in the metro area.
Gender Spread
Examining the gender dynamics provides deeper insights into the advancement of Blacks in the business sphere. According to a 2021 report by Harvard Business Review, 17% of Black women in the U.S. are involved in running or initiating new businesses. However, these ventures are often sole proprietorships, as highlighted by Brookings. Additionally, only 3% of Black-women-owned businesses manage to survive beyond the initial five years, mostly due to obstacles in accessing capital and other inherent challenges.
The Lendingtree study showed that In the United States, 39.1% of Black-owned businesses are led by women, showcasing a narrower gender gap compared to the overall business landscape. While men make up 61.0% of all business owners regardless of race, women account for 21.6%. Among Black-owned businesses, although a majority (53.4%) are headed by men, women hold a significant share, leading 39.1% of such enterprises.
Women – In the United States, there are 1,275,523 women-owned businesses across all races. However, Black women own just 62,952 businesses, constituting 21.6% of all businesses and 39.1% of Black-owned ventures.
Men – There are 3,595,656 businesses owned by men across all races. However, Blacks own just 85,920, amounting to 61.0% of all businesses and 53.4% of Black-owned ventures.
Industry Analysis
The three primary industries where Black individuals own businesses are:
1. Health care and social assistance industry
2. Professional, scientific, and technical services
3. Administrative and support and waste management and remediation services
According to the study, nearly 3 in 10 Black-owned businesses, or 28.0%, operate within the health care and social assistance industry. This sector encompasses various roles in healthcare, social services, and childcare. In contrast, the healthcare and social assistance industry accounts for 11.4% of all firms, irrespective of ownership.
The professional, scientific, and technical services industry, while a distant second, comprises 13.9% of Black-owned firms in both 2021 and 2020. This sector encompasses various professions such as legal services, accounting, design, and research.
Out of the 363,624 businesses in the Administrative and support and waste management and remediation services sector, regardless of race, Black-owned businesses amount to 12,470, representing 6.2% of all businesses and 7.7% of Black-owned companies.