African-American-owned firms increase
By Jim Hopkins, USA TODAYThu Aug 18, 7:46 AM ET
Cherie Ransom struggled to find work after Bethlehem Steel went bust in 2001, zapping her accounting job near Buffalo during the recession.
Ransom moved home to Virginia, but full-time permanent jobs were elusive, and some employers said she was overqualified. Ransom started a bookkeeping service from her Virginia Beach home, focusing on small-business customers.
Now, Ransom, 35, says she has enough work to consider hiring her first employee. "I was so busy last year, it was crazy," she says.
Her business is one of about 375,000 started by African-Americans from 1997 to 2002, new Census data show. That was surprising growth, given that African-Americans trailed Asians and Hispanics five years before, the last time the Census tracked the numbers.
The 45% jump in black-owned firms, to 1.2 million, was the highest growth rate among the largest minority groups, the Census says.
Virtually all that growth among black-owned companies was in mom-and-pop firms, often started at home. Annual revenue averaged $21,000. Few had paid employees.
Other minority groups also owed big gains primarily to growth in tiny start-ups. There are "clearly challenges ahead" in creating a sizable number of big minority-owned companies with multimillion-dollar revenues, says Betsy Zeidman, an expert on new markets at the Milken Institute, a think tank in Santa Monica, Calif.
Economists will spend years debating why black business ownership grew so much. The figures might be revised as the Census analyzes them further. Yet, clues emerge in government labor statistics and in interviews with new black entrepreneurs:
•Job losses. Compared with other groups, a bigger share of African-Americans lost jobs from 2001 to 2002 after the recession. That forced some laid-off workers to start companies.
Black employment fell 0.9%, vs. a 0.4% loss for whites, a USA TODAY analysis of Bureau of Labor Statistics data show. Asian-American employment rose 0.6%. Employment among Hispanics, who can be of any race, jumped 2.5% as their population swelled.
Ransom, hunting work in Virginia Beach, got a list of newly opened small companies from a chamber of commerce. She blanketed them with flyers advertising her skills and asking if they had a bookkeeper. A trickle of phone calls led to a handful of clients. Ransom supplemented her income with a part-time temporary accounting job. She now has four clients and several others she handles on an occasional basis. That's enough to support herself and spur a possible move to commercial office space. Adding an employee would land her in the more select group of African-American businesses, the nearly 95,000 with paid workers.
•Lower start-up costs. Technology boomed as the Internet took off and PCs and cell phones got more powerful and less expensive.
Lenders targeted more niche markets, including minority business owners. EBay and other Web sites made it a snap to buy second-hand goods cheap.
Near Cleveland, Ted Jordan spent $6,000 buying PCs and other gear for his two companies, a corporate computer trainer and a kids' computer camp. "Computers come so cheap," he says.
Jordan, 45, and his wife, Greer, 40, had dreamed of self-employment. The chance came in 1998 when his last employer, Sun Microsystems, wanted him to take a job he didn't like. "I said, 'Maybe this is the time.' "
North of Chicago, Robert Smith, 31, started a public-relations firm in 1998 from his kitchen table to advise companies chasing minority customers, especially African-Americans and Hispanics.
He first used computers at the public library, opening free e-mail accounts. Next, he bought used PCs for $450, then added a cell phone and a $700 photocopier.
He started Robert Smith & Associates in Rockton, Ill., when he couldn't find a job in his field, paralegal work. He began a child-support collection agency in 1996. While promoting that, he discovered he had a gift for publicity. "I was bitten by the bug," he says.
Smith expects at least $500,000 in revenue this year.
Pipeline to big business
The rise in African-American entrepreneurship comes as big companies and government agencies beef up supplier networks with more minority-owned companies.
In the auto industry, for example, "There is no American car made that does not have parts made by African-American-owned businesses," says Earl Graves Sr., founder of Black Enterprise magazine and a DaimlerChrysler board member. He says incoming Chrysler CEO Thomas LaSorda "is a proponent of doing business with African-Americans in particular and minorities in general."
As more corporate customers do business with minority start-ups, Zeidman says, the firms and their owners prosper. "They become more a part of the mainstream. It's creating opportunity," she says.