The University of Texas at Austin
  • Texas Black-Owned Enterprises Must Meet the Challenges for Growth

    By John Sibley Butler, Herb Kelleher Chair in Entrepreneurship and the J. Marion West Chair for Constructive Capitalism; Matt Kerwick, research scientist at the Bureau of Business Research, IC2 Institute.
    Published: July 9
    Texas

    Following the economic difficulties of 2001-2009, Texas has provided a fertile atmosphere for business prosperity and overall economic growth. As researchers who are close to the entrepreneurial process and have owned businesses ourselves, we understand that developing entrepreneurial firms, and the perceptions of their owners, may not be in synch with the larger economic picture. The priorities of entrepreneurs are often more fundamental, the urgency is often greater, and the observable opportunities differ based on the lens through which a business owner sees the world. We wondered how the black business community views the Texas business landscape overall today. To find out, we surveyed Texas black-owned businesses, including many in the Dallas-Fort Worth area, and asked owners about themselves, their businesses and their perceptions of other firms in their industries. What became clear is that black owners perceive significant hurdles in growing their businesses and achieving the profitability levels of their industry peers.

    Among the survey responses, we observed many of the same issues entrepreneurial businesses generally face, as well as a number of challenges to growth previously identified in the research literature on minority-owned small businesses and the overall research literature on all firms. Our survey, sponsored by The University of Texas at Austin, in cooperation with the Texas Association of African American Chambers of Commerce, polled 914 black-owned businesses across Texas about a variety of business-related issues.

    We found that most Texas black-owned businesses in our survey are similar to the businesses we ourselves have owned: firms that provide a professional service and are owned by an individual with at least a bachelor’s degree and who started that business himself or herself. Furthermore, the vast majority of these black-owned businesses have no paid employees other than the owner. The median age of the firms among our respondents is 10 years, a healthy number that points to significant longevity in business. Overwhelmingly, these business owners assess themselves as proficient at a range of professional skills, including analysis and problem solving, written and oral communications, team building and management, the ability to motivate, and the ability to develop relationships.

    And yet, despite confidence in their skills as business people and relatively high levels of educational attainment, black owners of businesses in our survey still perceive significant barriers. More specifically, a majority of the business owners responding to the survey agreed that black-owned businesses, in general, have less access than other firms to government decision makers for the purposes of procurement opportunities and that black-owned businesses are unfairly excluded from participating in both government and private-sector contracting opportunities. In addition, when we asked them an open-ended question about their top three training needs and to rank these training needs in order of importance, survey respondents identified accounting/finance topics more often than any other response (16 percent), followed by technology (10 percent) and management/leadership training (10 percent). Similarly, when we asked survey respondents to list the top three major challenges facing their businesses, the most frequently mentioned topic was funding/cash flow/finance (26 percent). Fully half of the survey respondents had never applied for a business loan.

    To overcome these challenges and address these training needs, and to ensure that entrepreneurial opportunities are shared across the board as the Texas recovery strengthens, policymakers and business leaders should focus on improving access to financial capital and financial training for black entrepreneurs. In addition, because research on black business has shown that firms that start with employees are more likely to grow faster and survive longer than those that are sole proprietorships, more should be done to encourage black entrepreneurs planning new businesses to start with a level of capitalization and scope that allows them to start their businesses with employees, if they chose to do so.

    John Sibley Butler is the Herb Kelleher Chair in Entrepreneurship and the J. Marion West Chair for Constructive Capitalism in the McCombs School of Business at The University of Texas at Austin, where he holds joint appointments in the Departments of Management and Sociology. He is on the Board of Glofish, where he was the first investor. Matt Kerwick is a research scientist at the Bureau of Business Research, IC2 Institute, The University of Texas at Austin. He is also founder and president of Visionary Research Inc., a research and strategy consultancy.

    A version of this op-ed appeared in the Dallas Morning News.


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