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National reports suggest Black business owners are less profitable than other groups

Recent reports from StatsCan and the Pew Research Center suggest that Black businesses tend to have smaller payrolls and underperform financially.

National reports suggest Black business owners are less profitable than other groups
While there are more Black entrepreneurs than in years past, many are struggling to convert their efforts into generational wealth. MIKELYA FOURNIER/UNSPLASH PHOTO

A new report from StatsCan suggests that Black-owned businesses tend to have smaller payrolls and underperform financially compared to companies owned by white, Asian and Latino groups.

The agency analyzed data from many sources up to 2018 and found that while Black-owned businesses have increased, more founders are struggling on average and yield lower profit margins.

Men's ownership of Black-owned businesses increased from 1.8 per cent in 2005 to 3.5 percent in 2018, while women's ownership increased from 1.3 per cent in 2005 to 2.2 per cent in 2018, according to the StatsCan report.

Still, access to capital is still a serious roadblock for nearly 67,000 Black business owners in Canada, which accounts for only 2.1 per cent of all businesses in the country.

According to a separate research report released in 2021 by the Canadian Black Chamber of Commerce and the Business Development Bank of Canada (BDC), Black business owners lacked the confidence to request funding due to past experiences or couldn't find suitable funding for their businesses.

When dealing with banks, several Black respondents said they experienced racial or gender discrimination, according to the Chamber report.

Moreover, a survey conducted in 2021 by the African Canadian Senate Group (ACSG) and senator Colin Deacon revealed that more than 75 per cent of Black entrepreneurs believe their race hinders their ability to succeed. The survey also showed that Black entrepreneurs encountered obstacles to getting funding, financing, capital, or sales; many reported having little faith in banks and access to support or advice.

The consequences are immense. Only 44 per cent of Black business owners could afford to pay themselves and many were more likely to be unincorporated. That’s due to an uneducated business base, more than half of which are immigrants leveraging their skills in new countries out of necessity, the StatsCan report reads.

More than half of Black immigrant business owners come mostly from five countries: Nigeria, Jamaica, Ethiopia, Haiti and Somalia, accounting for 51.7 per cent of the total base.

Most of the Black business owners surveyed generally reside in Ontario (50.6 per cent) or Quebec (23.3 per cent) and the rest elsewhere across the country.

Additionally, more than 70 per cent are men, while the other 29.6 per cent are women business owners, according to StatsCan.

Health care sector helping Black trim revenue gaps between racialized groups in the U.S.

A recent report from the Pew Research Center suggests that six-in-10 Black adults believe that supporting Black businesses is effective in moving Black people to equality.

Yet while Black-owned businesses in the U.S. have grown significantly in recent years, they still make up a small share of firms and revenue in the country, according to an analysis of Census Bureau data.

It shows that in 2020, there were an estimated 140,918 U.S. firms with majority Black ownership, up 14 per cent from 124,004 in 2017. Those firms brought in an estimated $141.1 billion in gross revenue in 2020, an 11 per cent increase since 2017, according to Annual Business Survey (ABS) figures.

That said, only three per cent of all U.S. firms were Black-owned in 2020 and accounted for just one per cent of gross revenue from all classifiable companies.

Likewise, white business owners in the U.S. accounted for a large majority (86 per cent) of firms whose ownership was classifiable by race and ethnicity in 2020, bringing in 93 per cent of the revenue.

Meanwhile, U.S. firms with Asian majority owners accounted for 11 per cent of all classifiable firms and six per cent of revenue in 2020. Those majority-owned by Latinos accounted for seven per cent of classifiable companies and three per cent of revenue.

A majority of Black businesses in the U.S. occupy the health care and social assistance sectors. In 2020, more than 38,000 of the nearly 141,000 U.S. companies with majority Black or African American ownership, or 28 per cent of the total, operated businesses in the space.

Professional, scientific and technical services were the second-most common sector, accounting for 14 per cent of Black-owned businesses in 2020. Pew Research data suggests that other common sectors included administrative, support, waste management, and remediation services (nine per cent) and construction (seven per cent).

Most companies were also owned by men, like in Canada. Approximately 63 per cent were majority-owned by men in 2020, while 22 per cent were owned by women and 15 per cent were run by men and women, according to a Pew Research Center report.