Memo to business: ignore the recession

Cynthia E. Griffin | 4/3/2013, 5 p.m.

The statistics speak for themselves. According to a 2007 Survey of Business Ownership conducted by the U.S. Census Bureau, African American businesses grew at more than triple the rate of national business growth in the United States from 2002-2007.

That year, the Census counted 1.9 million Black firms, which represented a 60.5 percent increase from 2002. Additionally, the report found that Black-owned firms increased their hiring by 20.6 percent, employing more than 900,000 people. These companies also posted total receipts of $137.5 billion.

At the same time, the average salary of an employee at a Black-owned firm, which according to an article in the Atlanta Black Star hired two of every three Black workers, was $33,000 compared to the average salary of $21,239 for African Americans.

And then came the Great Recession. This economic downturn in 2007-2009 ferociously pounded the Black business sector, not to mention individual consumers.

There is no better indicator of just how devastating this period was to America's Black economy than the declared insolvency of Chicago's ShoreBank in August 2010. At the time of its closing, ShoreBank was the oldest and largest community development bank in the nation.

Other dire economic indicators include the decline in Black firms. According to Automotive News, by mid 2011, there were only 261 Black-owned auto dealerships in the nation, half as many as three years previously.

And, according to the Gazelle Index, between 2007 and 2010 the performance of small businesses owned by African Americans was below that of all U.S. small firms. During that time, Black business revenue grew by 26.5 percent and employment grew by 6.3 percent. This is compared to a 39 percent growth of revenue among all small businesses and an 11 percent increase of employment on average.

The Gazelle Index provides timely information that helps improve the performance of minority and small businesses.

A survey by the Kauffman Firm found that in 2004-2008 the Black businesses that declined most during the Great Recession were retailers, while technology firms retained the highest five-year survival rate among Black firms.

To put the situation into context, most of the highly prosperous Black-owned companies are concentrated in certain states--New York, Georgia and Florida--and cities like New York, Chicago, Houston and Detroit.

And even franchising, which has always been an important entree point for minority entrepreneurs, has seen involvement by people of color dip precipitously.

That is because minorities are less likely to be able to obtain start-up funding, and because franchisers who previously had programs in place to recruit minorities have in some cases scrapped them in favor of staying afloat themselves, and not loosing franchisees, says Robert Bond, cofounder of the National Minority Franchising Initiative, which was established in 2000 to increase the number of minorities in franchising.

One published report also noted that franchisers have also shifted away from recruiting minorities toward wooing veterans.

A report by the National Urban League, called "State of the Urban Business 2011: Metro Areas That Lead the Way," noted the top metropolitan areas for Black businesses--Washington-Arlington-Alexandria; D.C.-Va.-Md.-W.V.; Los Angeles-Long Beach-Santa Ana, Calif.; Chicago-Joliet-Naperville, Ill.; Detroit-Warrner-Livonia, Mich.; Atlanta-Sandy Springs-Marietta, Ga.; Charolotte-Gastonia-Rock Hill, N.C.-S.C.; St. Louis, Mo.; Dallas-Fort Worth-Arlington, Texas; Cleveland-Elyria-Mentor, Ohio; New York-Northern New Jersey, Long Island, N.Y.-N.J.-Pa.; Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md. and some key common characteristics: they had cities with strong diversity supplier policies; and provided easy access to business-to-business and government contracts.