The Challenges and Opportunities for Black Women Entrepreneurs in the Global Arena

The statistics on Black women-owned businesses in the United States are very impressive. A report from JP Morgan indicated that “the number of businesses owned by Black women grew 50% from 2014 to 2019, representing the highest growth rate of any female demographic. Black females accounted for 42% of all women who opened a new business during that time and represented 36% of all Black employers.”[1]

Drilling down to the financial figures provides an equally stunning perspective, with statistics showing that between 2019 and 2023 Black/African American women-owned businesses “have grown to 2,079,000 firms, representing 14.8 percent of all women-owned and 52.1 percent of all Black-owned businesses” in the USA, employing “528,000 people, representing 4.3 percent of all women-owned business employees” and generating “$98.3 billion in revenue, representing 3.6 percent of women-owned businesses’ revenue.”[2]

For Black women entrepreneurs, the most daunting challenge is rooted in the unavailability of financial resources to start, maintain, and sustain the business long-term. The tributaries that contribute to the overall challenge of financial resources are many. First, myriad studies show that Black women in the mainstream labor market experience a wage gap, earning less on the dollar than their male counterparts while doing similar work. This translates into Black women having less savings or accumulated funds than their counterparts to start their businesses. Due to discriminatory practices, risk aversion on their part, and the type of businesses they gravitate toward, Black women business owners are less likely to secure initial or expansion loans or lines of credit from financial institutions.

Another challenge Black women business owners face is their social capital, also called network structures. Network structures can be looked at from two perspectives. There are primary links in network structures that involve people and organizations you know. Then there are secondary links in network structures, which are individuals or organizations connected to your primary network structures and thus connected to you albeit through an indirect link. Black women business owners have been shown to have weaker primary links. They are less likely to have a strong connection to financial institutions than their male or Caucasian counterparts who are favored.

In addition to social capital and financial capital deficiencies, Black women business owners also struggle with human capital issues. Human capital encompasses the skills, knowledge, education, and experience that someone has. This takes many forms. One form is that Black women often occupy fewer managerial positions in the mainstream labor market, so they amass fewer of the skills needed to operate a business. This comes from the “glass ceiling” effect they experience from working in organizations where they are stymied in lower-level positions and often do not advance to management and upper management positions. In addition, Black women business owners are less likely than their male counterparts to obtain the formal education necessary to acquire the knowledge and human capital skills essential to operating their businesses. Black women business owners are also less likely to gain entrepreneurial experience related to operating a business before they in fact engage in or own their businesses.

The big three challenges above are not the only ones encountered by Black women business owners. They also experience a challenge in identifying, pursuing, and engaging with appropriate and extensive market opportunities. Part of this can be attributed to lacking the intricate knowledge of how to identify and access these market sources. Still another part of it has to do with having the resources to maximize the marketing potential of their businesses. Another challenge is having employees that they can rely on consistently. Their businesses often hire part-time or temporary employees, who are less likely to be stable and consistent. Another challenge facing Black women business owners is not being taken seriously. A Black woman-owned business is often regarded as lesser, as a hobby or a supplement instead of the main source of family income. This supercilious perception is detrimental to Black women business owners.

Opportunities are aligned in five key areas. Surprisingly, the COVID crisis was one key moment that offered Black women business owners wider and deeper opportunities to pursue, sustain, and expand their businesses. During COVID, Black women business owners were forced to engage in alternative methods of entrepreneurship. First, they began to see that markets for their products and services existed beyond their physical business location. These opportunities led them to seek ways to provide their services by electronic means and via systems such as Zoom, and to ship their products, including restaurant deliveries, to distant locations, often internationally. Black women business owners also engaged in the diversification of their businesses, engaging in additional endeavors that were either related or unrelated to their original initiatives.

Another great opportunity lies in the type of mentorship and network structures that can be built by Black women entrepreneurs to create a more robust social capital for themselves and their businesses. A key is having a “layered” network structure that includes mentorship. This network structure should include a diverse group of men and women as well as various institutions (including financial institutions) in order to build both marketing knowledge and personal knowledge. We often think of mentorship as coming from a more experienced entity or business owner to the Black woman business owner. However, mentorship should also go in the other direction, from the Black woman business owner to a less experienced business owner who may offer a positive contribution to the relationship through expertise in technology or marketing, for example. In a related vein, Black women business owners can engage in learning communities, conferences, seminars, and workshops related to their businesses and to their personal development as business owners. Black women business owners should engage in building an intentional support network, which allows them to maximize their networking through links that provide some measure of help with their businesses.

Grants, scholarships, loans, and other financial aid are available to Black women business owners for various endeavors, not just directly related to the business, but also to the business owners’ personal development. Funds available to support workshops or seminars are also a way for business owners to advance their businesses and discover potential market sources.

We have seen that Black women entrepreneurs have made monumental strides in a world where they are unfairly diminished. What remains elusive is what can move them to billionaire status. This requires several factors, but begins quite simply with access to financial resources. The record has shown that when they are provided with much-needed financing, Black women entrepreneurs can achieve a meteoric rise. Another major factor is ownership, but not in the way we often think. The key is Black women’s ownership of their ideas.

Andrea E. Smith-Hunter is a professor of management at Siena College. She is the author of Women Entrepreneurs across Racial Lines: Issues of Human Capital, Financial Capital and Network Structures (Edward Elgar Publishing, 2006) and Women Entrepreneurs in the Global Marketplace (Edward Elgar Publishing, 2013).

[1] Elana Dure, “Black Women are the Fastest Growing Group of Entrepreneurs. But the Job isn’t Easy.” J. P. Morgan, October 12, 2021. https://www.jpmorgan.com/insights/business/business-planning/black-women-are-the-fastest-growing-group-of-entrepreneurs-but-the-job-isnt-easy.

[2] National Women’s Business Council 2023 Annual Report, p. 11.