In honor of Black History Month, Intuit QuickBooks commissioned a survey of 1,000 Black-owned businesses to highlight their small business struggles and successes.
The survey results emphasize persisting economic and social inequalities. Yet, despite facing these challenges, Black business owners remain optimistic about their future, future generations, and the potential for successful Black businesses to strengthen Black communities.
In addition to the pressures of running a business, Black business owners must navigate racism and biases that threaten their success.
Dealing With Racism
More than three in four Black business owners (79%) say they have experienced racism from a customer—with 48% saying they’ve experienced racism in customer interactions at least once in the past year.
Higher Expectations for Black-Owned Businesses
Biased perceptions can affect how consumers evaluate the performance and quality of Black-run enterprises. A majority of Black business owners (86%) say Black businesses are judged more critically than non-Black businesses.
Advertising As “Black-Owned” and Non-Black Customers
In the wake of George Floyd’s murder and the COVID-19 pandemic, a racial reckoning ignited that called attention to the reality of Black individuals across America—including Black business owners.
The push to identify and support Black businesses outside of Black communities advanced, but more than two in five (46%) Black business owners who advertise their businesses as “Black-owned” think it is a deterrent to non-Black customers.
Fighting Against Stereotypes
Inequities in how Black businesses are judged create added pressure for Black business owners. Almost all survey respondents (94%) report that they are motivated to succeed by a desire to disprove racial stereotypes.
The Impact of Stereotypes on Behavior in Business Interactions
Black business owners feel the impact of racial disparities in everyday business dealings. More than eight in ten (82%) Black business owners say they behave differently in customer and vendor interactions to avoid negative racial stereotypes—with only 6% reporting they are unaffected.
Black small businesses continue to struggle with financial disparities that hinder their startup and success.
More than half (57%) of Black respondents indicate that they were denied a bank loan at least once when they started their businesses. For non-Black respondents, this number drops to 37%.
A third (34%) of Black business respondents report being denied a bank loan more than once—twice the amount (18%) of non-Black respondents.
Business Motivations Are Driven by Financial Need
Among Black respondents, the prevailing motivation for starting a business is financial need. More than two in five (47%) Black business owners report beginning in business to create additional and more lucrative income streams—the foremost influence for Black business owners.
This is a stark contrast to non-Black business owners, for whom wanting to be their own boss was the top motivator (67%) when venturing into business.
Pursuing a brilliant business idea was a close second (45%) in the motivations behind entrepreneurship for Black business owners, demonstrating a need for the innovation of Black businesses to be supported and well-resourced.
Higher Startup Costs for Black-Owned Businesses
At startup, survey data indicates a greater financial burden for Black business owners than non-Black business owners. On average, it cost Black respondents approximately $21,000 to start their businesses—$6,000 more than the average amount (roughly $16,000) needed for their non-Black peers.
Biggest Financial Challenges at Startup
Overall, Black business owners report that the three biggest financial challenges they face when starting out are not understanding available loan and grant options (36%), taking longer than expected to save enough money (36%), and selling personal assets to raise money (36%).
Coming Out of Pocket for Expenses
Almost eight in ten (79%) Black business owners say they’ve had to pay expenses or employees with personal funds at least once in the last two years. Among non-Black business owners, this number dips to 65%. This suggests that Black-owned businesses are experiencing greater cash flow problems than non-Black-owned businesses.
A Profitable Outlook
Despite the financial challenges facing Black business owners, 84% say being a business owner has improved their financial security—with a third (31%) of respondents reporting that owning a business has “significantly improved” their finances. Here, we see how entrepreneurship can be a gateway of opportunity and financial prosperity for Black business owners.
A Profitable 2022
A significant majority (85%) of Black respondents were able to pay themselves in 2022.
Of those who were able to pay themselves in 2022, eight out of ten (81%) were able to pay themselves more than the previous year.
A Profitable Future
Coming out of a profitable 2022, a significant majority (79%) also predict a profitable 2023—with a third (34%) being “very optimistic” about 2023’s financial forecast.
Success in Community
Black-owned businesses look to and invest in their communities to advance the progress of entrepreneurship and the Black community as a whole.
Three in four (75%) Black business owners agree that successful Black businesses are critical for a thriving Black community.
The Importance of a Network
When experiencing difficulties in their businesses, more Black business owners (53%) choose a family member or friend who is also a business owner as the preferred resource to help them troubleshoot challenges.
Giving Back to the Black Community
Survey results also show that a majority of Black business owners feel a strong connection between their business and their community with 94% reporting they feel a need for their business to give back to the Black community.
Volunteering Personal Time
On a personal level, Black business owners are pillars in their communities. A majority (88%) report having dedicated their personal time to volunteering in their local community at least once in the past year—with nearly a quarter (23%) saying they volunteer every week.
Building a Legacy
Black business owners see their success and lessons learned as part of a legacy to pass on for the prosperity of future generations.
Three out of four (75%) Black business owners think the next generation will experience fewer hardships than they have.
Mentorship Can Push Black Businesses Forward
A considerable majority (96%) view mentorship of younger Black business owners as important for the advancement of successful Black businesses as a whole.
A Legacy of Success
Similarly, 95% of Black business owners view their business’s success as important to the success of future generations of Black entrepreneurs.
Closing the Divide
Evidence shows that the Black-white wealth gap could take over 200 years to close. Seven in ten (73%) Black respondents are optimistic that the divide will significantly decrease in the next 100 years.
Considering the support needed to help Black-owned businesses succeed, Black business owners agree that more mentorship from other Black business owners and easier access to financing are the resources needed the most.
This report is a part of QuickBooks’ larger Black History Month efforts, including a fireside chat with Issa Rae and Nate Burleson on Feb. 1 about what it takes to walk the entrepreneur’s path — the courage it takes to hit the summit of success and the distinct challenges Black-owned small businesses encounter on the way.
The complete survey data is available here.
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