More than one-in-five Black adults in the United States say owning a business is essential to financial success, according to a September 2023 Pew Research Center survey. While Black-owned businesses have grown significantly in the U.S. in recent years, they still make up a small share of overall firms and revenue, according to our analysis of federal data.
How we did this
Pew Research Center conducted this analysis to examine the characteristics of Black-owned businesses in the United States. The analysis relies primarily on data from the 2022Annual Business Survey(ABS), conducted by theU.S. Census Bureauand the National Science Foundation’sNational Center for Science and Engineering Statistics.
The survey – conducted annually since 2017 – includes all non-farm U.S. firms with paid employees and receipts of $1,000 or more in 2021. Firms are defined as businesses “consisting of one or more domestic establishments under its ownership or control.” Majority business ownership is characterized in the survey as having 51% or more of the stock or equity in the firm. The Census Bureau counts multiracial firm owners under all racial categories they identify with; Hispanic firm owners may be of any race.Read more about the ABS methodology.
In 2021, there were 161,031 U.S. firms with majority Black or African American ownership, up from 124,004 in 2017, according to the latest estimates from the Annual Business Survey(ABS), conducted by the U.S. Census Bureau and the National Science Foundation. Black-owned firms’ gross revenue soared by 43% during this timespan, from an estimated $127.9 billion in 2017 to $183.3 billion in 2021.
Despite this growth, majority Black-owned businesses made up only about 3% of all U.S. firms that were classifiable by the race and ethnicity of their owners in 2021. And they accounted for just 1% of gross revenue from all classifiable companies that year. By comparison, in 2021, roughly 14% of all Americans were Black.
As haslong been the case,White majority-owned businesses made up the greatest share of classifiable firms (85%) and their revenue (93%) in 2021. About one-in-ten classifiable firms (11%) were majority-owned by Asian Americans, and no more than 7% had majority ownership by someone from another racial and ethnic group.
A note on classifiable companies
The Annual Business Survey classifies businesses as “majority Black- or African American-owned” if a Black owner has at least 51% equity in the firm. The same standard holds for business owners of other racial and ethnic backgrounds. The U.S. Census Bureau counts multiracial firm owners under all racial categories they identify with; Hispanic firm owners may be of any race.
Not all U.S. businesses are classifiable by the race or ethnicity of their owners. In 2021, about 4% of all businesses in the U.S. werenotclassifiable by the race and ethnicity of their owners – though these firms accounted for 61% of total revenue. Ownership and revenue figures in this analysis are based on the roughly 5.7 million firms thatwereclassifiable by the race and ethnicity of their owners in 2021, most of which are smaller businesses.
How many workers do Black-owned businesses employ?
Black or African American majority-owned firms provided income for roughly 1.4 million workers in 2021. Their annual payrolls were estimated at $53.6 billion.
Still, most Black-owned firms tend to be smaller businesses. Two-thirds had fewer than 10 employees in 2021; 13% had 10 to 49 employees and just 3% had 50 or more. Another 16% reported having no employees. (The ABS determines employment size by the number of paid workers during the March 12 pay period.)
What’s the most common sector for Black-owned businesses?
By far, health care and social assistance. About 45,000 of the roughly 161,000 U.S. companies with majority Black or African American ownership, or 28% of the total, were part of this sector in 2021.
Looked at a different way, 7% ofallclassifiable U.S. businesses in the health care and social assistance sector were majority Black-owned that year.
Other common sectors that year included:
- Professional, scientific and technical services (comprising 14% of all Black-owned businesses)
- Administrative and support and waste management and remediation services (8%)
- Transportation and warehousing (8%)
- Retail trade (6%)
- Construction (6%)
Where are Black-owned businesses located?
Most Black or African American majority-owned businesses (87%) are located in urban areas. Just 5% are in rural areas – that is, places with fewer than 2,500 inhabitants, underthe Census Bureau’s definition.
Some of the most populous states also have the greatest number of Black majority-owned businesses. Florida had 18,502 such businesses in 2021, California had 15,014 and Georgia had 14,394.
Black majority-owned businesses made up the greatestshareof all classifiable firms in the District of Columbia (15%), Georgia and Maryland (8% each).
Who are Black business owners?
- They’re more likely to be men than women. Some 53% of Black-owned firms in 2021 had men as their majority owners, while 39% had women majority owners. Another 8% had equal male-female ownership. The gender gap is larger among classifiable U.S. firms overall: 63% were majority-owned by men in 2021, 22% were majority-owned by women and 14% had equal male-female ownership.
- They tend to be middle-aged. Roughly half (49%) of Black or African American business owners who reported their age group were ages 35 t0 54 in 2021. Another 28% were 55 to 64, and just 7% were younger than 35.
- A majority have a college degree. Among owners who reported their highest level of education completed, 27% had a bachelor’s degree and 34% had a graduate or professional degree in 2021.
What motivates Black entrepreneurs?
When asked to choose from a list of reasons why they opened their firm, about nine-in-ten Black or African American majority owners who responded said an important reason was the opportunity for greater income; a desire to be their own boss; or wanting the best avenue for their ideas, goods and services. Balancing work and family life (88%) and having flexible hours (85%) were also commonly cited.
For most Black or African American majority owners, their business is their primary source of income. Seven-in-ten of those who reported income information in 2021 said this was the case.
Note: This is an update of a post originally published on Feb. 21, 2023.
