Art by Daiana Feuer

Women's Business

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Minority Women Entrepreneurs: Strong Growth, Short Shrift

Why the move toward female entrepreneurship needs to be inclusive.

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The strong growth of businesses owned by women of color is news worth celebrating. But the road from startup to success may have a disproportionate share of obstacles for these enterprising women.

Back in 1997, minority women helmed one in six female-owned firms. Today, with 2.7 million businesses, they own one in three. Women of color are also creating new businesses at five times the rate of white women. The flip side is that while the number of minority women–owned firms may be rising, those businesses are typically small, with less than half the average number of employees and revenues compared with firms owned by white women.

Some minority women may be turning to entrepreneurship as a form of self-employment when other opportunities are lacking. The jobless rate was 11.5 percent for African-American women in August, 8.7 percent for Hispanic women, and 5.9 percent for white women, according to the Bureau of Labor Statistics.

Many of these ladies may be abandoning the corporate workforce, where the pay gap is even larger for women of color. African-American women make 64 cents for every dollar earned by a white man, and Hispanic women earn just 53 cents. For women in general, business ownership can offer an alternate career path with more opportunities and work-life flexibility.

But it wouldn’t be fair to discount the strong entrepreneurial spirit that drives many minority women to want to create their own successes. Women of color have a long history of entrepreneurship, says Natalie Madeira Cofield, President and CEO of the Capital City African American Chamber of Commerce and founder of Walker’s Legacy, a women-in-business lecture series. Madame C.J. Walker, the first self-made female millionaire in U.S. history, was African American. “Before, there was Mary Kay, before there was Estée Lauder, there was Madame C.J. Walker running a global business enterprise,” Cofield says.

But obstacles for businesswomen of color abound. The small scale of minority women–owned businesses may reflect a concerning lack of access to the financial resources and investments needed for growth. As a whole, they rely more heavily on financial institutions for loans than on other sources, reports the Kauffman Foundation. Yet they typically face higher borrowing costs, receive smaller loans, and face rejection more often.

As a result, “they have rapid speeds but they go very short distances,” Cofield explains. “We’re not seeing the longevity and the scalability of these companies.” In addition to scant financial resources, many minority women also lack social capital, or the connections and support structure for networking. “Not everything in business is money,” Cofield says. That’s why it’s critical for the women’s entrepreneurial environment to be inclusive. “A lot of them are going out on a limb, on their own. The more we look at our sisters as sisters,” she says, “the more we’re really advancing the overall agenda.”

We all lose when women of color are unable to maximize their business investments. In 2007 for example, if minority-held businesses had parity, they would have made an additional $2.4 trillion in receipts and employed three times as many people. That’s an economic loss of revenues and jobs that hurts us all.

To level the playing field, Cofield advocates networking with women’s and business groups, and increasing angel investments for businesses owned by women of color. Most importantly, she advises entrepreneurs to dig deep and stay strong: “You’ve got to fuel and fan your own success.”


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