Growth of Minority Women-Owned Firms Outpaces All Others

The number of minority women-owned businesses grew twice as fast as the number of businesses created by male minority entrepreneurs and non-minority men and women, according to a new study released this morning by the Minority Business Development Agency.





Source: Minority Business Development Agency

The MBDA, a branch of the Commerce Department, released its findings after spending months drilling into data from the U.S. Census Bureau's 2002 Survey of Business Owners and the 1997 Survey of Minority-Owned Business Enterprises.

Between 1997 and 2002, the growth in the number of minority female-owned firms was 57 percent, compared to 31 percent for minority male-owned firms. The firms that the agency reviewed were at least 51 percent owned by a minority woman.

One of the more surprising findings was that Native Hawaiian and other Pacific Islander women-owned businesses grew the most of any group -- at a rate of 84 percent. They were followed by African-American women, whose businesses grew at a rate of 75 percent, while Hispanic women-owned businesses grew 60 percent and Asian women-owned businesses grew at a rate of 40 percent.


Source: Minority Business Development Agency

The findings are particularly interesting because many studies of minority groups I've read tend to lump Pacific Islanders into an "other" catch-all category. The Census is currently conducting a new business owner study that will cover all ethnicities, but that data will not be available until 2010.

Ivonne Cunarro, MBDA's chief knowledge officer who worked closely with the data released today, said she was surprised by the incredible growth of minority women-owned firms. "We knew that they were growing faster than non-minority owned firms, but we were surprised that they were growing at twice the rate of male-owned firms."

She attributed the firms' rapid growth in part to programs at the development agency and the Small Business Administration.

The data Cunarro reviewed also revealed that businesses owned by minority females are employing more workers than other firms. The employment rate for minority women-owned firms went up 16 percent while non-minority female businesses stayed about the same.

"That shows us that these women are employing a large segment of the population, and we've found that minorities tend to hire other minority employees," Cunarro said.

She also said that as an entire group, minority women tend to open more franchises than their start-up peers, and they also are among the top minorities to export.

Minority women-owned businesses span many industries, but most were concentrated in health care and social services; dry cleaning and personal care services; retail; administrative, support and waste management and remediation services; and professional, scientific and technical services.

Despite their recent rapid expansion, minority women-owned businesses still lag behind minority male-owned firms in gross receipts, Cunarro noted. Of all minority groups studied in this report, only Asian male entrepreneurs have reached parity with their non-minority counterparts based on population in terms of number of businesses, gross receipts and employees.

She said the findings are heartening for minorities, but there is more work to be done.

"Women choose to open a business because of lifestyle considerations like more flexibility and greater ability to be with family," said Cunarro. "Others want to start and lead a big corporation and some women may reach the glass ceiling and find that they can do better if they start their own business."

She added that she was surprised to see so many minority women-owned businesses beginning in traditionally male dominated fields like scientific services, construction and information technology.

However, minority-owned firms possess a disproportionately small share of the country's wealth, which is an obvious roadblock to starting a business. Many entrepreneurs start things off by tapping into their own savings accounts, but according to a 2001 Consumer Confidence survey, only 47 percent of non-white families had personal savings compared with 63 percent of white families.

Cunarro told the Small Business Blog that the MBDA found in a previous study that minority-owned firms are tapping into their own personal savings, but are also using credit cards as a second source of capital to start a business.

"That's a bit of a concern because non-minority firms are using bank loans as a second source of capital and bank loans traditionally have lower interest rates than credit cards," she said, adding that it's important that minority entrepreneurs are aware of programs like those at MBDA that help pair them with venture capital.

"Finding better ways to access capital, increase financial literacy and using technology to expand business opportunities are the keys to entrepreneurial success," said Ronald Langston, the agency's national director.

By Sharon McLoone |  October 14, 2008; 7:00 AM ET Data Points
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Comments

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Great article. I am a minority woman and three years ago I started my own marketing business for the "glass ceiling" reason and my starting capital came from my savings. Lessons learned there about using savings but opportunities have been boundless in the three years. I love being my own boss, having time for family, and building something to be proud of.

Posted by: Ann Albergotti | October 14, 2008 10:39 AM

I will say that we did try to get a traditional bank loan and got the $10 K SBA loan from Bank of America. So you do tap into your savings, credit cards and home equity. Now that the business has been around for almost three years, I will say that I vote with how I spend money with small independent business owners. It takes a lot of courage and risk, but I will never regret it. You continue to have faith in the face of no evidence and Providence provides.

Posted by: Hyun Martin | October 14, 2008 3:19 PM

I, like Ann and Hyun, am also a minority woman business owner (I'm Filipina-American and my company does web design). For some of our clients, who are also Asian-American and African-American, and Latina women, I've found that the biggest barrier to entry is knowledge and access to resources.

Once we are able to start sharing our knowledge and accessing tools and support, we can make even more of a difference, and more of us can reach the million-dollar mark and beyond.

I blog about this at www.asuccessfulwoman.com

Posted by: Monica Flores | October 14, 2008 5:04 PM

Savings is the way to go, avoiding debt is a major priority. Banks in general don't deal with Black Men effectively. I felt like I was begging and being forced to jump through red tape during the loan process. I got my business up and running by diligently working and saving. Now I have to Build my Store into a profitable Venture. I am sure Black Men would start Businesses if they had the Money that others are given without even being a citizen. Many of us can't even get a job in our own city because of immigrants being put ahead of us in line. Please forgive me for believing Americans should be first in line for jobs in America. After all its our country we have a stake in it's destiny that can not be denied.

Posted by: gpitts7 | October 14, 2008 6:35 PM

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