Minority Women-Owned Businesses

The number of companies owned by women of color has skyrocketed over the past decade making them the nation’s fastest-growing segment of all privately held firms, recent studies show.

A report by the U.S. Department of Commerce’s Minority Business Development Agency concluded last month that minority women entrepreneurs are establishing businesses twice as fast as male minority business owners - and more than four times the rate of non-minority men and women.

The number of firms owned at least 51 percent by women of color increased 57 percent between 1997 and 2002 to nearly 1.5 million companies with $111 billion in gross receipts. By contrast, minority male-owned firms increased 31 percent, all women-owned businesses jumped 20 percent, and all male-owned firms increased by 16 percent.

The Center for Women’s Business Research in another recent study places the number of firms now owned at least 50 percent by women of color at 2.3 million, providing 1.7 million jobs and generating $235 billion in revenues.

“Women see entrepreneurship as the key to freedom – providing flexibility and wealth creation,” said Ronald N. Langston, MBDA’s national director. “Women are taking advantage of their talents and experience establishing businesses throughout our communities at astounding rates. Many choose entrepreneurship as a way to battle the glass ceiling that still, unfortunately exists in corporate America.”

Despite the rapid growth in numbers, minority business women have yet to reach parity based on population and they trail minority male-owned businesses in gross receipts and employees, the MBDA report concluded.

Some of the nation’s top academics in entrepreneurial studies said the growth in minority women-owned businesses is a phenomenon underscoring the strides in education, opportunity and access to capital made by women of color as they increasingly invest in their own ventures rather than fight limitations imposed by corporate America.  

Ella L.J. Edmondson Bell, an associate professor of business administration at Dartmouth’s Tuck School of Business, said the entrepreneurial world has become an “incubator” for women of color who are setting out to establish a new level of business for themselves and the country out of which she predicted a new wave of successful corporations and Fortune 500 companies.

“Out of these could come the next American Express.”

Dr. Bell said minority women still face a double set of obstacles in corporate America, while finding considerably more freedom and support as entrepreneurs.

“They feel more opportunity to start their own business, to be in control of their fate and not be subject to a management or corporation that might not be recognizing their full potential,” she said. “For minority women, the degrees of difficulty and the time (to move up in a corporation) encourage them to enter the entrepreneurial world a lot quicker.

“I know several women who left it after they got the experience, exposure and skill sets instead of waiting for the promotion that might never come. They invest in themselves. “

Dr. Bell said young minority women with educations at some of the best business schools in the country aren’t willing to take the slow promotional road that many of their parents and grandparents did.

“They are well prepared and they have resources around them,” she said.

Younger minority businesswomen increasingly can tap into the entrepreneurial experience of their families or extended communities with access to capital increasingly available through both formal and informal networks. The result is more talented businesswomen of color in the “pipeline,” which Dr. Bell predicted will continue to swell the ranks of minority women-owned businesses and ultimately crack more corporate glass ceilings.

Ashleigh Shelby Rosette, assistant professor at Duke University’s Fuqua School of Business, and an expert in minority women in leadership roles, said that while women of color have made real strides in leadership, business ownership and matriculating up the corporate ladder, the percentages remain relatively small.   

“That may explain why they’re pursuing entrepreneurial opportunities. Sometimes, because there’s a glass ceiling in regard to gender and race, there is a double dilemma for them that as a result can lead to frustrations, so they choose to pursue other avenues where they’re not dealing with those types of negative dilemmas and so they choose to be their own boss.”

Kathleen R. Allen, a professor in the Greif Entrepreneurship Center at the University of Southern California’s Marshall School of Business, said the increase in minority women-owned businesses is a continuation of both a population and entrepreneurial trend nationwide.

“It doesn’t surprise me, because even among non-minority groups, women tend to start businesses at higher rates than men. I think it’s partly the glass ceiling, I know it was for me. I didn’t want to fight that battle,” said Dr. Allen, who’s helped hundreds of companies get going since 1991 through her work at USC, in addition to starting four of her own firms.

Dr. Allen said as women have become 51 percent of the population, and the ranks of minority women have swelled, women increasingly have taken skills learned as the “seat of power” within the family into the work place.  There they have discovered freedom to express themselves, to choose their schedules, and to create their own working cultures with like-minded employees.

With fewer barriers to capital, better education among young entrepreneurs, and a discovery of second-career opportunities for older women, she said the acceleration in the number of women owned, and minority women-owned businesses, was inevitable.

“You see baby boomers getting older, and as women pass the age of 50 they seem to get a second wind, they’re ready to start taking off, whereas men have sort of the opposite happen to them. I see a lot of women in new careers, doing things they want to do. They’re freer now than they ever were, more successful, and with money.”

Dr. Allen said the Internet has given both minority and non-minority women more flexibility in crafting a business out of their homes, particularly if they’re simultaneously raising children. Those entrepreneurs have been creative too in finding capital or micro loans in nontraditional ways from family to the broader community.

While changing demographics have played a big part in the entrepreneurial trends, she said the emergence of minority women role models too have shifted how women of color view their possibilities.

“Women feel more empowered, they see more people like them in positions of power, on the front of Fortune. Today, a lot more women of color are rising through the ranks, a secretary of state and potentially again a woman in a position like that,” Dr. Allen said.

The MBDA study said women of color have expanded predominantly into the health care and social assistance fields. It found that to be the case for 35 percent of African-American business owners, 23 percent of Latina business owners, and 15 percent of Asian entrepreneurs .  Asian women entrepreneurs, however, were more likely to own firms offering “other services,” or 23 percent.

Twenty-two percent of the 78,292 businesses owned by American Indian or Alaskan Native women were in the health care and social assistance fields, as were 26 percent of the 10,582 businesses owned by Native Hawaiian and other Pacific Islander women entrepreneurs in 2002.

The Center for Women’s Business Research study estimated the number of firms now owned at least 50 percent by women of color increased 30 percent compared to nine percent for all other companies;  saw revenues climb by 35 percent compared to 15 percent for all other firms; and experienced employment growth of 22 percent versus two percent for other businesses  between 2002 and 2008.

Latinas with 747,108 firms and employing 430,000 workers have the largest number of businesses generating $62 billion as of 2008, according to the study. That was followed by African-American women entrepreneurs with 734,664 firms employing 281,055 people with revenues of over $32 billion.

Asian-American women – fastest growing in terms of numbers, employment and receipts -  own 627,837 businesses employing 898,240 people with $128 billion in revenue, according to the center.

“The face of women entrepreneurship is changing,” said Margaret A. Smith, the center’s chair. “Today, women of color represent 26 percent of all women business owners – up from 20 percent just a few years ago. These business owners are a vital driver of economic growth in every community and a vibrant source of suppliers and customers.”