Report Outlines Top Challenges for Black Entrepreneurs



  • Funding, cash flow, and other financial constraints were the top challenges identified in the survey
  • Black entrepreneurs say more training is needed in accounting and finance, technology, and management skills
  • 95 percent of Texas’ black-owned businesses have no employees besides the owner

Black entrepreneurship is a steadily growing force within Texas’ economy, but many African-American business owners in the state say they face persistent challenges in getting their young companies off the ground. One commonly cited barrier is a lack of access to important people and resources that are available to their competitors.

A recent report from the Bureau of Business Research — part of the IC2 Institute at The University of Texas at Austin — examined the factors that can help or hinder the success of black-owned businesses in Texas. Researchers surveyed the owners of 914 companies to get their input on topics ranging from financial issues (profitability, business longevity, access to capital) to self-assessments of their own business-related skills.

John S. Butler, director of the Herb Kelleher Center for Entrepreneurship at McCombs and a coauthor of the report, says the survey results reflect his own experiences as an entrepreneur. In an op-ed for The Dallas Morning News, he and IC2 Institute researcher Matt Kerwick wrote that the responses they analyzed revealed a common theme: “Black owners perceive significant hurdles in growing their businesses and achieving the profitability levels of their industry peers.”

“A majority 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.”

Survey-takers identified funding, cash flow, and other financial constraints as their top business challenges. Professional development emerged as another key issue in the report, with owners citing a need for additional training in areas including accounting and finance (16 percent), technology (10 percent), and management and leadership skills (10 percent).

Inadequate staffing could also be contributing to the problem. About 95 percent of Texas’ black-owned businesses have no employees besides the founder.

Based on these findings, the coauthors formulated some initial steps to help turn things around:

“To overcome these challenges, address these training needs and ensure that entrepreneurial opportunities are shared across the board, policymakers and business leaders should focus on improving access to financial capital and financial training for black entrepreneurs. …

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 choose to do so.”

Further coverage of the report:

“The number of black-owned businesses in Texas increased 74 percent from 2002 to 2007, while the total number of Texas businesses rose only 25 percent in that period. While the increase seems impressive, the report goes on to say that this is largely because more than 95 percent of black-owned businesses in Texas are owned by single proprietors with no employees.” — KUT

“More than half of all respondents said they had never applied for a loan, and 79 percent agreed that black business owners have less access to funding than average.” — The Alcalde

“Educational programs should target black business owners in the service and construction sectors. … These sectors appear to be strengths of the black business community already and dovetail nicely with the general diversification of the Texas economy.” — Bruce Kellison, associate director of the Bureau of Business Research (quoted by The Daily Texan)


Faculty in this Article

John Sibley Butler

Director of the Herb Kelleher Center for Entrepreneurship, Management Professor McCombs School of Business

John Sibley Butler is the director of the Herb Kelleher Center for Entrepreneurship and a professor in the management department at McCombs, with...

About The Author

Rob Heidrick

Writer, McCombs School of Business

Born and raised in Austin, writer Rob Heidrick has spent several years as a contributor and editor at local magazines and community newspapers. He...

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