The land of Dixie, where slavery and racial segregation limited opportunities for African Americans for centuries, is now where some of the best opportunities exist for black entrepreneurs, according to a study released Wednesday by the digital business publication FitSmallBusiness.com
In its inaugural study, FitSmallBusiness.com editors said half of the best states for African American entrepreneurs are concentrated in the south, with Georgia topping the charts and Tennessee ranking No. 7 among the 50 states.
The report found that the leading states possessed robust economic incentives, lower average corporate tax rates and a higher number of African American-owned businesses. The study evaluated nine key economic indicators for black-owned startup businesses in each state, including the number, growth and survival rates for black-owned businesses, the cost of doing business, and different measurements of social and financial equality.
"Entrepreneurship is the backbone of the American economy and minority-owned businesses are no exception to that fact," said Michael De Medeiros, the special projects editor for FitSmallBusiness. "With this being the inaugural study, our goal was to focus on the data that paints an overall picture of what the African American entrepreneur faces in the business world."
Top 10 states for black entrepreneurs
1. Georgia2. Texas3. Florida4. California5. North Carolina6. Oklahoma7. Tennessee8. New York9. Mississippi10. ColoradoSource: FitSmallBusiness.com, based upon data from Kauffman Indicators of Entrepreneurship, WalletHub and U.S. News & World Report on financial optimism, government incentives, and overall business opportunity.
Data from the U.S. Census Bureau and the Kauffman Foundation's 2017 Index for Startup Activity revealed the top three cities where black-owned businesses are thriving are Memphis, Atlanta and Montgomery, Alabama. Black entrepreneurship in those areas has benefited by the relatively large number of African-Americans residing in the Southeast, a lower cost of living and an increase in incubators like Atlanta's Digital Undivided.
"The reason why these cities stand out so much is that the cost of living is much lower," Mandy Bowman, the founder of the Official Black Wallstreet app and website, told FastCompany magazine in a report on black entrepreneurs."The South also has a long history of entrepreneurship, especially through the Jim Crow era. People in these cities had no choice but to start their own businesses, and because of that history, I think it's something that's been ingrained in those cities."
According to the Atlanta Black Chamber of Commerce, Georgia is the third largest black consumer market in the nation with over $70 billion in African American spending.
Nationwide, black-owned firms grew 34% from 2007-2012, totaling 2.6 million companies, and minority small businesses in general increased 79% by 2017. The top 100 black-owned companies generated $30 billion in 2018, and 50% of all women-owned businesses last year were led by females of color, according to the FitSmallBusiness.com study.
"On the flip-side, there are still wide gulfs along racial lines in funding opportunities with blacks only making up 1% of venture-backed startup founders," FitSmallBusiness.com editor Valeria D'Orazio wrote in the study summary.
The study also included a survey of more than 1,306 Americans which found that nearly 47% think racism is a roadblock to the success of African American businesses. Other major roadblocks for black-owned businesses include a lack of venture capital, cited by 38.1% of respondents, and the difficulty of getting business loans, which was rated as a roadblock by 36.5% of those responding to the poll.
Despite such obstacles for African American entrepreneurs, the study showed that black Americans tend to be more optimistic than their white counterparts about their financial outlook.
More black respondents (22%) claimed to be "Very Optimistic" about their present financial prospects than whites in the survey (13%). Conversely, more whites (26%) claimed to be generally "Pessimistic" about their economic status than blacks (15%).
The survey also showed that more than half (53%) of respondents believe that black entrepreneurs have more business opportunities in 2020 than ever before. Additionally, more than a third (39%) of respondents believe that the U.S. economy would be in a better position if there were more opportunities for black entrepreneurs.