Article by By David Baboolall, Kelemwork Cook, Nick Noel, Shelley Stewart, and Nina Yancy from McKinsley.com

Black business owners have been disproportionately affected by the pandemic-linked economic downturn, partly because they were more likely to already be in a precarious position, including more likely to be located in communities with business environments that are more likely to produce poor business outcomes. Indeed, about 58 percent of Black-owned businesses were at risk of financial distress before the pandemic, compared with about 27 percent of white-owned businesses. The pandemic contributed to tipping 41 percent of Black-owned US businesses into closure from February to April 2020. More than 50 percent of the owners of surviving Black businesses surveyed in May reported being very or extremely concerned about the viability of their businesses. This concern may be linked to having a more difficult time accessing credit since the COVID-19 crisis began; 36 percent of Black business owners responding to the survey said they had experienced this, compared with 29 percent of all respondents.

Black Americans have never had an equal ability to reap the benefits of business ownership. While about 15 percent of white Americans hold some business equity, only 5 percent of Black Americans do. Among those with business equity, the average Black American’s business equity is worth about 50 percent of the average American’s and a third of the average white American’s .

Black-owned businesses also tend to earn lower revenues in most industries and are overrepresented in low-growth, low-revenue industries such as food service and accommodations.

This gap in business activity contributes to an overall lower level of prosperity for Black families: the median white family’s wealth is more than ten times the wealth of the median Black family’s. This disparity is also a lost opportunity for the US economy as a whole. If existing Black-owned businesses reached the same average revenue as their white-owned industry counterparts (excluding publicly held companies), the result would be an additional $200 billion in recurring direct revenues, which could equal about $190 billion in additional GDP, or a roughly 1 percent increase in 2017 GDP. (For our analytical approach, see sidebar “Quantifying the impact of revenue parity.”)  read more

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