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Austin TX Business Law Blog

Friday, March 18, 2016

Women-Owned and Minority-Owned Businesses Still Trailing those Owned by White Men

Why are businesses owned by women and minorities trailing in earnings and in size?

Women and minorities may have come a long way as business owners, but it is clear that they still have a long way to go. According to the Pew Research Center's analysis of Census data, while minority women are the fastest-growing group of entrepreneurs in the nation, the businesses they own bring in far less revenue than firms with non-minority or male owners. Minority owners don't fare much better. The land of opportunity still seems to be on unevenly weighted in favor of white males.

The Statistics

When the research was completed in 2012, women owned 36.2 percent of U.S. businesses, but earned only 11.3 percent of the nation's business income. Part of this may be attributed to the types of businesses women go into (or are permitted to enter), but the discrepancy in revenue continues even when the focus is on female-dominated industries, such as healthcare and social assistance. As evidence, in 2012, women owned 64.5 percent of the two industries mentioned, but still received only 19.9 percent of those industries' total revenue of $703.5 billion, or approximately $140 billion.

The category of minority-owned businesses is defined as companies owned by anyone who is not white. This includes businesses owned by blacks, Asians, and Hispanics (who may be of any race). Such businesses, at the time of the study, made up 28.6 percent of businesses in the country. Nonetheless, these firms made up only 10.4 percent of the nation's revenue. Perhaps proving that the playing field is uneven, companies owned by women and minorities are centered on particular industries. In 2012, when the study took place, almost 20 percent of healthcare and social assistance firms were owned by blacks, while almost 19 percent of accommodation and food services were owned by Asians.

Differences in Business Size

For reasons not fully explained, the businesses owned by females and minorities tend to be smaller than those owned by white males. This is demonstrated by the fact that, in companies with employees, those owned by women averaged 8.5 employees in 2012 as opposed to the average of 13.5 employees in companies owned by men. Firms owned by minorities fared almost the same, with an average of 8.4 employees compared to an average of 12.6 employees in non-minority-owned companies.

Lack of Investors behind Size Differential

According to a fact sheet distributed by the White House, only 3 percent of venture capital backed women's start-up companies and only 1 percent invested in companies owned by African-Americans.  The Department of Commerce also reports that women are more likely to start businesses without outside investors and both women and minority owners create startups with less capital than their white male counterparts. Oddly, these discrepancies continue even though the statistics show that investors in diverse companies see greater returns on their investments than those who businesses owned by white men.

If you are contemplating starting a business, or have already started one, whether you are a woman,  member of a minority, or a white male, you would be well-advised to consult with an experienced and talented business attorney.


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