Black-Owned Businesses Leverage Social Networks to Grow

New advances in technology are making it possible for many Black business owners to overcome some of the pervasive discriminatory practices that have plagued the Black community for years by denying them equal access to capital and subsequently limiting the growth potential of their businesses. The emergence of online social networks has offered many Black business owners an opportunity to “level the playing field” by providing direct access to target audiences and opportunities for marketing, prospecting and brand enhancement.

According to 2002 U.S. Census data, there are approximately 1.2 million Black-owned businesses in the United States with total receipts of $89 billion. According to the National Black Chamber of Commerce, current annual receipts are in excess of $100 billion. Black-owned businesses represent one of the fastest growing segments of the small business market. The majority of Black-owned businesses are classified as “small businesses” with nearly 51% having gross receipts less than $10,000 compared to 34% of White-owned businesses, 29% of Asian-owned businesses and 40% of Hispanic-owned businesses.

Historically, Blacks have been denied equal credit market access due to racist and discriminatory practices, such as red-lining and not due to any reliable indicators suggesting they are a higher risk potential or have a higher default rate. As a result, Black-owned businesses have not been granted the same access as their White counterparts to financial start-up capital to get their businesses successfully up and running. According to a study in the Journal of Business and Economics Research, commercial banks generally extend smaller loan amounts to Black-owned business start-ups and black business start-ups possess less equity capital and operate smaller and less viable enterprises compared to their White counterparts who possess identical equity capital investment and educational backgrounds. Other studies have shown that businesses with greater access to financial capital in the early phases of start-up were more likely to develop into more profitable enterprises in the future.

Black-owned small business are primarily micro-businesses and often home-based. The small size of Black-owned businesses has resulted in a neglect of their needs and concerns by mainstream B2B advertisers.  Evidence of such neglect can be found in the relatively small and fragmented targeted databases that exist; even those databases that specialize in the collection, analysis and distribution of commercial data to facilitate B2B transactions. For example, Dunn & Bradstreet, probably the premier commercial credit reporting bureau, on its website claims to have only 70,000 African American owned businesses available in its database for B2B marketers. Similarly, the National Black Chamber of Commerce states on its website that it has approximately 100,000 businesses in its membership database notwithstanding that it acknowledges Census data that over 1.2 million Black-owned businesses exist in the United States.

The existence of Black social networks has changed the dynamics of doing business both online and offline. Black business owners that lack the funding and resources to market their products and services in more traditional ways have found social networking to be a relatively inexpensive, yet powerful vehicle for positively impacting their bottom line. Black business owners can take advantage of existing online platforms and tools that target Black audiences to build brand awareness and a base of loyal customers.  The low cost of entry affords any business owner the opportunity to establish an immediate web presence to begin successfully marketing products and services.

Not only do Black social networks offer African American small business owners and easy and inexpensive way to connect to African-Americans on local and national levels but also Black people internationally. It has never been easier for Black-owned businesses to extend their reach globally into other parts of the world, especially to Africa and other parts of the African Diaspora. To this end, online Black social networks have the potential to not only connect people with shared cultural interests but also a broader social potential to organize, financially empower, and unify Black communities around the world.