The number of black-owned businesses in Texas is growing, but the firms remain small in comparison to other Texas businesses, and their owners perceive significant barriers to growth and profitability, according to a new report from the Bureau of Business Research at The University of Texas at Austin.
Based on census data and a survey of black business owners, the report shows the number of black-owned businesses in Texas is growing faster than the state average for all businesses. The state saw a 74 percent jump in the number of black-owned businesses between 2002 and 2007, compared with a 25 percent rise in the number of Texas businesses overall during the same period.
But the vast majority (95 percent) of black-owned businesses in Texas have no paid employees other than the owner. In sales and number of employees, black-owned businesses lagged behind state averages. In 2007, the average black-owned business had 10 employees and $60,000 in sales, while the average Texas business had 23 employees and $1.2 million in sales.
In their survey responses, a majority of black business owners indicated they felt they had the education and skills needed to succeed. They saw room for improvement in the areas of political access and contracting opportunities.
A majority of those surveyed (76 percent) said they perceive black-owned businesses to have less access than other firms to government decision makers who influence procurement opportunities. A majority of survey respondents also believed that black-owned businesses were unfairly excluded from taking part in contracting opportunities with government (63 percent) and the private sector (70 percent).
“The survey showed a strong need among black business owners for more financial training and increased access to working capital,” said report co-author Bruce Kellison of the Bureau of Business Research. “Many of our survey respondents have businesses in the service sector, a growing segment of the state and national economy. But their firms have difficulty scaling and remain smaller than the average Texas business. As a state, we must work together to address their needs for financial training, better access to capital, and increased contracting opportunities, all of which appear to be constraining this growing and vital part of our economy.”
“We are grateful to the Texas Association of African American Chambers of Commerce for collaborating with us on this important survey,” said university President Bill Powers. “A better understanding of the obstacles faced by black business owners will help the association, and all of us across the state, formulate strategies to create a healthier economy for all Texans.”
The Bureau of Business Research, part of the IC2 Institute at The University of Texas at Austin, surveyed 914 black-owned businesses across the state. Additional survey findings dealt with:
- Access to capital: More than 50 percent of the respondents had never applied for a business loan and almost 20 percent had applied but never received one, while 28 percent had received business loans.
- Perceptions of profitability: In general, respondents believed their businesses were less profitable than their peers in the same industry, a perception that was especially strong among nonemployer firms.
- Training needs: Accounting and finance were seen as the top training needs.
In 2012, the Bureau of Business Research published a similar report on the state of Hispanic-owned businesses in Texas.