Black Entrepreneurs Start More Businesses, But Fail At Higher Rate

Blacks are starting businesses at greater rates, but they are also failing at greater rates, according to a recent study by the Ewing Marion Kauffman Foundation.

While black men and women are 50% more likely to attempt a business start-up than their white counterparts, the numbers show many of those new black businesses never get off the ground. And for those that do actually start, they are not growing as quickly or as big as white-owned companies.

For example, 1.7 million firms will still be in existence four years after they were started. Of those, only 3,200 will have grown to 100 or more employees.

Of those 3,200, only 1% will be African-American owned.

"So when you piece together the various data, you can see the story that unfolds, which is a story about a tremendous gap between a minority's dream of entrepreneurship and the reality of making it happen," says Wendy Guillies, spokesman for Ewing Marion Kauffman Foundation.

"African-Americans are very entrepreneurial oriented, yet they are failing at very high rates," says Bill Boudreaux, author of The Complete Startup Guide for the Black Entrepreneur. "Something in the process is causing that."

Black business owners and analysts say a lack of proper planning, poor capital structure and stigmas are partly to blame.

Hattie Nelson, director of operations at Nelson, Inc., a local general contracting firm founded in 1972, says young African-American entrepreneurs need to be focused and have a plan.

"If they're not willing to commit everything, don't do it," she says. "And they need to have a clear, realistic plan."

Nelson's firm is redeveloping the building that takes up 92-96 South Main. They plan to turn the building into a mixed-used development with retail on the ground floor and condominiums