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I’m betting on business—especially Black women entrepreneurs—as the best tool to address economic challenges in the Black community.
A recent report by the Brookings Institute documented an explosion of Black business formation in Indianapolis. According to the Brookings analysis, nationally Black-owned business formation surged from 2017 to 2020, increasing 13.6%. Business formation for all other businesses was a paltry 0.53% over the same period.
A deeper dive into the Brookings data reveals that, during this time, the number of Black women who owned an employer business—or a business with at least one employee other than the owner—increased 37%.
What is more remarkable about these statistics is that a study conducted by the Stanford Institute for Economic Policy Research released in May 2020 found a 41% decline in active business owners due to COVID-19. A National Bureau of Economic Research found that Black businesses experienced larger negative impacts on income of 12%-14% compared with white business owners.
During economic downturns, it isn’t uncommon to see shifts in business formation as workers who are downsized choose to start a business rather than join another firm.
A great irony is that—as corporate has America made pledges to advance diversity, equity and inclusion—multiple media reports have connected the drop in Black female labor-force participation and the surge in Black women business ownership as evidence of Black women being fed up. They’re fed up with microaggressions and being passed over for promotions and are just exhausted by double and triple standards for performance—in a corporate workplace not designed with them in mind.
This moment is full of possibility, but I think at least the following should happen to build on the current momentum for the economic reality of racial business parity in the region:
◗ DEI efforts should focus on supporting Black women in management positions. While this might increase retention of Black women, it might also support Black women’s entry into entrepreneurship.
◗ Black solo entrepreneurs must hire another employee and pay good wages. Around 97% of all Black businesses are solo proprietors, while all other businesses are around 80% solo proprietors. Employees grow a business.
◗ Black businesses need to consider joint ventures with Black and non-Black businesses to both gain experience on larger projects and to cultivate new competencies through close observation of other firms. This common practice in larger firms should be practiced by smaller firms.
◗ Tapping Black executives who might have an entrepreneurial sense to lead ventures that can be spun off is something that has happened in other industries, like the automotive industry in Detroit. Larger firms might consider the strategic benefits of growing a supply chain by investing in employee ventures—people who understand your business.
◗ The city should consider a small-business set-aside program as part of its procurement strategy to help small and micro businesses gain access to appropriate contracts.
◗ Philanthropy should continue to invest in both business education and capital for lending.
These are some ideas—which have pros and cons. There are certainly many other ways to leverage this moment. I’ve covered the economic disparities in this column numerous times. And while I don’t think Black capitalism is the panacea to addressing challenges faced by Black Indianapolis, increasing Black business formation and Black businesses hiring people seem to be good bets in moving Black Indianapolis and the larger city forward.
Black women are leading. Follow them.•
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Wolley is president and CEO of Black Onyx Management Inc. Send comments to ibjedit@ibj.com.
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As a small business entrepreneur for past 25 years, I always root for those individuals who risk time, effort and capital to start a small business. I hope they all are able to succeed. But as we have seen recently even large mega corporations can faulter when the focus shifts away from profitability and on social issues that in and of themselves produce no monetary value. Sorry, probably not a popular belief.