For African American History Month, we wanted to assess the data trends for Black- owned business both nationally and in the Atlanta 29-county MSA area. Atlanta has always been a national (and Southern regional) node for Black population in-migration, and our analysis finds that our area has also had relatively strong recent growth in Black-owned businesses.
The Census Bureau has published Annual Business Surveys (ABS) for 2017 and for 2018 –and these provide the latest business data aggregated into ownership by race at the subnational level. While these data from past years don’t reflect pandemic impacts, they do give a very good snapshot of the state of Black- owned business in a pre-COVID 19 world, as compared to the sum total of businesses in that same “era”.
Nationally for 2017, as seen below, Black- owned businesses are 2.1% of the total, related profits are a 0.3% share, employment in them 3.3% of the job base, and annual payroll is 0.5% of the total. In 2017, though, for the Atlanta metro, Black- owned businesses are much better represented than they are in the nation on the whole. They comprise 6.1% of the all businesses, a 0.8% share of total profits, 2.4% of jobs, and 1.2% of total payroll for the area.
|Number of employer firms: 2017||Sales, value of shipments, or revenue of employer firms ($1,000): 2017||Number of employees: 2017||Annual payroll ($1,000): 2017|
|Black Owned in Metro Atlanta||6,795||$6,710,835||62,227||$1,726,209|
|All Ownership in Metro Atlanta||110,107||$814,178,225||2,492,242||$137,895,121|
|Black Owned Nationally||124,004||127,850,815||1,208,270||$36,105,467|
|All Ownership Nationally||5,744,643||36,579,575,617||127,738,274||$6,534,271,084|
We found similar trends in some draft analyses of the 2018 ABS data, which were released only late last month. The number of black-owned businesses in the Atlanta MSA had increased to 7,406, representing a one-year surge since 2017 of over 600 businesses (9% growth). Local additions to the Black-owned business inventory far outstripped overall business formation (a 2.5% increase) in the metro economy. And Atlanta stood out nationally with this level of growth, as Black-owned businesses across the country barely increased, only to 124,550 in 2018 from 124,004 in 2007. The Black-owned share of all businesses in Atlanta rose from 6.1% in 2017 to 6.6% in 2018; this compared to a static share (for Black-owned businesses) of 2.1% nationally in both years.
For 2018, we also looked at the employment size of Black-owned firms compared to firm size across all ownership–and Black-owned businesses again stand out. Small businesses (those employing fifty or fewer persons) make up 98% of Black-owned businesses, and provide over three-fourths of the jobs in Black-owned businesses. Across all other businesses, 75% of the jobs come from larger firms (those employing fifty or more workers), though (still) nine in ten of these other businesses employ fifty or fewer persons.
So, Black-owned businesses have seen strong growth in the recent past. But we must keep in mind that the pandemic has hit not only this population, but these owners, and these businesses, particularly hard. An NBER report of June 2020 found that a full 41 percent of Black-owned businesses had failed since pandemic onset. A Federal Reserve survey conducted in September and October of 2020 found that 77 percent of Black-owned small businesses reported that their financial condition was fair/poor (compared to 57% of all others). A primary concern was credit availability. Only 13% of Black-owned small firms received all the financing they sought. A study by JPMorgan Chase Research Institute assessed trends in the 2013-2019 period for 150,000 small businesses across Florida, Georgia, and Louisiana, and found the following:
- Black and Hispanic- owned small businesses are well represented among firms that grow organically (12.9%/27.5%), but not that prevalent among firms with external financing (5.8%/21.3%)
- Overall, Black and Hispanic businesses have lower revenues, smaller profit margins, and less cash liquidity than do businesses owned by other race/ ethnic groups.
- Firms with Black owners under the age of 35 are the most likely to exit in the first three years, but Black and Hispanic owned businesses with comparable revenues & cash reserves are just as likely to survive as businesses owned by others.