The State of Minority Business Enterprises: An Overview of the 2007 Survey of Business Owners

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The State of Minority Business Enterprises: An Overview of the 2007 Survey of Business Owners
U.S. Department of Commerce, Minority Business Development Agency
by Sumiye “Sue” Obuko, Ph.D. and Mark Planting
Fiscal year 2015

 

State of Minority Business Enterprises: An Overview of the 2007 Survey of Business Owners CoverTable of Contents

FORWARD

LIST OF TABLES AND FIGURES

EXECUTIVE SUMMARY

INTRODUCTION

NATIONAL PICTURE

GEOGRAPHIC PICTURE

INDUSTRY PICTURE

MBDA STRATEGIC GROWTH INITIATIVE (SGI) FIRMS AND NON-SGI FIRMS

CONCLUSIONS

APPENDIX A: RESEARCH METHODOLOGY

APPENDIX B: RELATIVE STANDARD ERROR TABLES

APPENDIX C: MAPS

REFERENCES

ABOUT THE MINORITY BUSINESS DEVELOPMENT AGENCY

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Forward

The changing demographics and economic landscape are increasingly positioning minority business enterprises (MBEs) as important contributors to the economic growth and productivity of the United States. These businesses are creating jobs and supporting the economic development of their respective communities, while promoting the placement of their goods and services in both domestic and global markets.

This report, The State of Minority Business Enterprises: An Overview of the 2007 Survey of Business Owners examines minority businesses operating in 2007 and the growth of these firms since 2002. It does so by analyzing and comparing data from the U.S. Census Bureau’s 2002 and 2007 Survey of Business Owners (SBO) and identifies the economic conditions under which MBEs operated as well as economic and business changes that occurred during the interval. We pick up from the Minority Business Development Agency’s (MBDA) last report issued in 2006 and look forward to offering even greater insight as we await the upcoming release of the 2012 SBO this year. This report adds to the body of research to ensure that we continue to capture and analyze the data and factors that impact the growth and global competitiveness of MBE’s.

Upon careful review of the data, some inspiring elements emerged. More minority-owned businesses were established at every level of the growth spectrum-from small lifestyle enterprises to high-growth companies in technology, manufacturing and other burgeoning industry sectors in 2007. These businesses created millions of jobs nationwide at a faster pace than their nonminority counterparts. According to the report, minority-owned firms ms generated more than $1 trillion in annual sales in 2007 and employed over 5.8 million workers during that same period-a 24 percent growth in employment since 2002. Employment by nonminority-owned firms ms by comparison was flat during the same period. These trends are not surprising given the fact that the 2007 national economy was still relatively robust despite the start of an economic recession.

In addition, larger minority businesses with annual gross receipts of $500,000 or more represented over 77 percent of all minority-owned firms’ gross receipts and 75 percent of all their employment in 2007. These firms provided millions of people with steady income jobs, and contributed to the nation’s economic vitality.

Despite the growth in the number of MBEs, entrepreneurial parity was not achieved in 2007. Nonminority businesses still outpaced minority-owned firms in average gross receipts across all industry sectors, with the notable exception of minority- owned firms in the management of companies and enterprises (accounting, administration, operations, and finance). Improved access to capital and new markets continues to be an essential tool for minority-owned businesses to start, expand and reach their full potential.

As seismic national and global demographic shift unfold, the face of American business is changing. If the U.S. is to remain globally competitive, it has to leverage these new levels of diversity as it gives American businesses a strategic advantage around the world. Engaging minority-owned firms is no longer an ethical imperative; it is also a commercial and economic one. Minority-owned businesses are a vital part of the economic engine of our country. As minority firms continue to grow in size, scale and capacity, we anticipate even greater opportunity for them in the global marketplace.

MBDA is committed to the growth, expansion and support of minority-owned businesses and promoting awareness of the critical importance of these firms to U.S. global competitiveness. At MBDA, we understand the importance of not just capturing data, but the need to analyze and disseminate information to a broad group of stakeholders. We are excited to share this information as we endeavor to shape public policy and to educate local, state and federal decision-makers, while engaging MBEs to grow their businesses in size, scale and impact. We hope that this report proves useful and we look forward to continuing to provide the best information available to empower existing and emerging minority-owned firms.

Alejandra Y. Castillo
National Director
Minority Business Development Agency

 

List of Tables & Figures

List of Tables

Table 1: Growth in Number of Firms and Receipts for Employer and Non-Employer Firms, 2002- 2007

Table 2: Growth in Number of Firms, Receipts and Employees for Employer Firms, 2002-2007

Table 3: Change in Average Gross Receipts for Employer and Non-Employer Firms by Minority Group, 2002-2007

Table 4: Top Five States for Minority Firms (Employer and Non-Employer) by Minority Group, 2007

Table 5: Share of Minority Firms (Employer and Non-Employer) and Minority Population by State, 2007

Table 6: Minority Firms (Employer and Non-Employer) by State and Minority Group, 2007

Table 7: Change in Employer and Non-Employer Minority Firms and Gross Receipts for All Firms and Population, 2002- 2007

Table 8: Top Five Combined Statistical Areas for Minority Firm (Employer and Non-Employer) Concentration, 2007

Table 9: Top Five Industry Sectors for Minority Firm (Employer and Non-Employer) Concentration, 2007

Table 10: Number of Firms (Employer and Non-Employer) by Industry Sector, 2007

Table 11: Distribution of Firms (Employer and Non-Employer) by Group and Industry, 2007

List of Figures

Figure 1: Change in Number of Firms and Gross Receipts for Employer and Non-Employer Firms, 2002-2007

Figure 2: Number of Minority Firms, Total Receipts, and Paid Employment Compared to Parity Estimates, 2007

Figure 3: Percentage of Minority Population, Number of Employer and Non-Employer Firms and Gross Receipts by Minority Group, 2007

Figure 4: Parity Comparison for Number of Employer and Non-Employer Minority Firms, 2002 and 2007

Figure 5: Parity Comparison for Total Receipts for Employer and Non-Employer Minority Firms, 2002 and 2007

Figure 6: Parity Comparison for Paid Employment for Employer Minority Firms, 2002 and 2007

Figure 7: Distribution for Minority-Owned Firms (Employer and Non-Employer) by Industry, 2007

Figure 8: Distribution of Nonminority Firms (Employer and Non-Employer) by Industry, 2007

Figure 9: Industries with the Highest Average Gross Receipts for Minority Firms and Nonminority Firms (Employer and Non-Employer), 2007

Figure 10: SGI and Non-SGI Firms as a Percentage of Minority Firms, 2007

Figure 11: Change in the Number of Firms, Gross Receipts and Paid Employment for All Minority and All Nonminority Firms, 2002-2007

Figure 12: U.S. Map of Minority Firms (Employer and Non-Employer), by State Concentration, 2007

Figure 13: U.S. Map of Change in Concentration of Minority Firms (Employer and Non-Employer) by State, 2002-2007

Figure 14: U.S. Map of Change in Gross Receipts of Minority Firms (Employer and Non-Employer) by State, 2002-2007

 

Executive Summary

This report, The State of Minority Business Enterprises: An Overview of the 2007 Survey of Business Owners, provides an overview of minority business enterprises (MBEs) operating in 2007 and the growth of these firms since 2002. The report is part of the research generated by the Minority Business Development Agency (MBDA) to understand factors that impact a firm’s performance in order to develop strategies and programs that promote the growth and global competitiveness of MBEs.

The data presented in this report is based on the 2007 Survey of Business Owners (2007 SBO) and the 2002 Survey of Business Owners (2002 SBO) published by the U.S. Census Bureau. Data in this report include statistics for employer firms, those with paid employees; and non- employer firms, those without paid employees.

Trends in the growth of minority-owned firms, both large and small, are presented in this report through comparisons between all U.S. firms and nonminority- owned firms, taking into consideration the market share of the U.S. minority population. This report also assesses the entrepreneurial parity of these firms, measured by the percentage share of minority-owned firms, their gross sales and paid employees, relative to the share of the U.S. minority population ages 18 and older. The data indicates both positive and negative trajectories as the U.S. economy grew, while homes sales and personal wealth were on the decline.

Key Findings

Minority-owned businesses continued to outpace the growth of nonminority firms in the number of firms and gross receipts between 2002 and 2007.

  • In 2007, MBEs represented 21.9 percent (5.8 million) of all classifiable firms.1 MBEs grossed 9.4 percent ($1 trillion) of all annual gross receipts generated by classifiable firms, and MBEs with employees represented 10.3 percent (5.8 million) of all paid employees of classifiable firms.

  • The number of minority-owned firms grew at a pace more than four times that of nonminority firms2 from 2002 to 2007. Minority-owned firms increased 45.5 percent, from 4 million in 2002 to 5.8 million in 2007. Nonminority firms increased at a rate of 10.9 percent, rising from 18.5 million firms in 2002 to 20.5 million firms in 2007.

  • Between 2002 and 2007, gross receipts of minority-owned firms grew 55 percent (from $661.1 billion to $1 trillion), which was more than double that of nonminority firms at 22.2 percent (from $8.1 trillion to

     $9.9 trillion).

  • Regardless of size, minority-owned firms also outpaced the growth of nonminority firms in the number of firms, gross receipts and employment among larger firms (with receipts of $500,000 or more), and smaller firms (under $500,000 in receipts).

  • The number of larger minority firms (with receipts of $500,000 or more) increased 42.1 percent between 2002 and 2007, while nonminority firms of comparable size grew 9.8 percent.

  • Gross receipts of larger minority firms increased 59.2 percent, more than 2.5 times faster than the 22.2 percent growth of all nonminority firms’ gross receipts.3

  • Larger minority firms increased their number of employees by almost 27 percent, while similarly sized nonminority firms experienced a 7.7 percent reduction.

  • Compared to the 1997-2002 period, the 2002-2007 performance of minority-owned firms (for both employer and non-employer firms) showed more rapid growth in numbers of firms and gross receipts, than nonminority firms.4 The data indicates sustained improvement in the growth and performance of minority-owned firms since 1997.

Average gross receipts of minority-owned businesses remained smaller compared to nonminority firms in 2007.

  • Despite the significant growth of minority-owned firms, these firms had smaller average gross receipts ($178,000) compared to nonminority firms ($483,000) operating in 2007.

  • Average gross receipts of minority-owned firms grew slower than those of nonminority firms, 6.5 percent and 10.2 percent, respectively between 2002 and 2007.

Minority employer firms outpaced the growth in firms, gross receipts and employment – while employment at nonminority employer firms remained flat between 2002 and 2007.

  • The number of minority-owned firms with employees (“minority employer firms”) grew at a significantly higher rate, 21.7 percent, than nonminority employer firms, that declined by 2.6 percent between 2002 and 2007.

  • Gross receipts of minority employer firms increased by 54.3 percent compared to 22.4 percent for nonminority employer firms.

  • Between 2002 and 2007, paid employment grew faster at minority firms (24.4 percent) compared to that of nonminority firms (0.2 percent), all U.S. firms (5.9 percent), and publicly held firms (9.5 percent).

Entrepreneurial parity for minority-owned firms was not reached in 2007 when compared to the size of the U.S. minority population.

Entrepreneurial parity is a measure used to determine the level of minority business participation at a rate comparable to their proportion of the U.S. population. Parity would be reached when the share of the number of minority-owned firms, gross receipts and employment is equivalent to the percentage share of the minority population 18 years old and older.5

  • In 2007, the adult minority population6 represented 31.5 percent of the U.S. population 18 years old and older (71.5 million), up from 29 percent in 2002 (62.5 million).

  • Although the minority adult population represented 31.5 percent of the U.S. population in 2007, minority- owned businesses (5.8 million) accounted for only 21.9 percent of all classifiable firms (26.3 million) in 2007, generated 9.4 percent (about $1 trillion) of classifiable firms’ gross receipts of $10.9 trillion, and employed 10.3 percent (5.8 million) of all classifiable firms’ paid employees (56.6 million).

  • The gap in entrepreneurial parity for minority-owned firms narrowed in terms of number of firms between 2002 and 2007, but widened slightly for paid employees and for gross receipts. Minority-owned firms represented 21.9 percent of all classifiable firms in 2007, up from 17.6 percent in 2002. The difference in share of the number of firms (4.3 percent) between 2002 and 2007 was greater compared to the difference in share of the minority adult population (2.5 percent), for which the parity gap narrowed.

  • The share of minority gross receipts increased from 7.6 percent in 2002 to 9.4 percent in 2007, and paid employees from 8.5 percent to 10.3 percent. Parity in gross receipts would have required an additional $2.4 trillion in 2007, compared to $1.8 trillion in million in 2002. Parity in paid employees would have required 12 million more employees in 2007, compared to 11.4 million in 2002.

  • According to the data, no minority-owned firms, despite their general growth, reached parity in gross receipts and employment compared to that of all classifiable firms, except for Asian-owned firms.7 These firms exceeded parity in number of firms compared to their adult population share in 2002.

States showing the fastest growth in MBE gross receipts in 2007 included Vermont, Washington, Utah, Nevada and Missouri suggesting growth beyond the most concentrated MBE states (California, Texas, Florida, New York and Georgia).

  • Minority firms did not approach parity in any state, and the gap was wide for all states, except for Florida.

  • In 2007, minority-owned firms were most concentrated in five states: California (1,220,580); Texas (723,057); Florida (680,069); New York (537,544); and Georgia (263,356). These five states represented 59.5 percent of all MBEs in the U.S. and 50.9 percent of the nation’s total minority population.

  • States showing the fastest rates of growth in gross receipts were: Vermont with 193.1 percent growth; Washington with 142.5 percent; Utah with 101.5 percent; Nevada with 99.4 percent; and Missouri with 82.7 percent. Only Nevada ranked among the top five states with highest rates of growth in both the number of minority-owned firms and in gross receipts. Twenty-eight of the 50 states also had percentage changes in gross receipts greater than in the number of firms, suggesting improved overall performance of minority firms in these states.

  • The number of minority-owned firms also grew fastest in five states: 91.3 percent in Georgia; 87.2 percent in Nevada; 84.5 percent in Alabama; 66.1 percent in North Carolina; and 66 percent in Florida.

Minority-owned firms were widely distributed among all 19 industry sectors in 2007.8

  • Minority-owned firms were most concentrated in the following industry sectors: health care and social assistance; administrative and support and waste management and remediation services; professional, scientific, and technical services; and other services.9

  • Average gross receipts of minority-owned firms by industry sector were smaller compared to those of their nonminority counterparts, except for minority-owned firms in the management of companies and enterprises industry sector. Average gross receipts for MBEs in the management of companies and enterprises industry sector were $2.3 million compared to $1.8 million for nonminority firms in 2007. The difference between the two groups of firms in this industry increased from that in 2002, when the average gross receipts for nonminority-owned firms was $1.2 million and for minority firms, $1.3 million.10

Conclusion

Minority-owned enterprises grew in number of firms at a much faster pace than their gross receipts, average gross sales, or paid employment between 2002 and 2007. The data also demonstrate that minority-owned firms outperformed the growth of nonminority-owned firms in all four measures during the same period. Despite these gains, however, gross receipts and average sales of minority- owned firms remained lower than those of nonminority firms. While entrepreneurial parity narrowed, in terms of the numbers of minority-owned businesses between 2002 and 2007, the gap widened slightly for paid employment and gross receipts. MBEs did not close the parity gap in terms of number of firms, gross receipts and paid employment when compared to their share of the U.S. adult population.

Minority-owned employer firms continued to be an engine of job opportunities between 2002 and 2007, despite the above mentioned disparities in parity. As the data suggest, minority-owned firms contributed to the U.S. economy with positive growth in employment regardless of firm size, while nonminority-owned firms experienced a decline in employment among their larger firms, along with a very modest increase in employees among their smaller firms.

The data in the report indicates that advancing the economic and financial performance of minority-owned businesses must be a national priority. The state of minority businesses in 2007 suggests this will require expanding opportunities for these firms and convening government, educational institutions and the private sector to develop solutions that effectively enable MBEs to be successful, while addressing barriers to market entry.

The data in this report also surfaces the importance of these strategies for increasing average gross receipts, enabling these firms to hire workers, and, in turn, build more sustainable communities, cities, and states. Moving forward, research that builds upon the state of minority businesses could explore more opportunities to help these firms enhance capacities, increase access to capital and strive towards greater economic parity.

 

Introduction

This report, The State of Minority Business Enterprises: An Overview of the 2007 Survey of Business Owners, provides an overview of minority-owned businesses operating in 2007 and the growth of these firms since 2002. The report is part of the research generated by the Minority Business Development Agency (MBDA) to understand factors that impact a firm’s performance in order to develop strategies and programs that promote the growth and survival of minority business enterprises (MBEs). Trends in the growth of minority-owned firms, both in number and gross receipts, are also presented in this report.11 These trends are based on comparisons between all U.S. firms and nonminority-owned firms, taking into consideration the market share of the U.S. minority population. In the end, this report assesses the entrepreneurial parity of these firms, measured by the percentage share of minority-owned firms, their gross sales and paid employees, relative to the share of U.S. minority population age 18 and older.

The findings presented in this report are based on data from the 2007 Survey of Business Owners (2007 SBO) and the 2002 Survey of Business Owners (2002 SBO) published by the U.S. Census Bureau. Data in this report include statistics for employer firms, those with paid employees; and non-employer firms, those without paid employees. A more detailed research methodology is included in Appendix A of the report.

 

National Picture

In this report, “classifiable firms” refer to all U.S. firms less publicly held, foreign-owned, non-profit and other firms whose ownership cannot be classified in terms of race, ethnicity or gender. In 2007, MBEs in the United States represented 21.9 percent (5.8 million) of all classifiable firms. MBEs grossed 9.4 percent ($1 trillion) of all annual gross receipts generated by classifiable firms, and MBEs with employees represented 10.3 percent (5.8 million) of all paid employees of classifiable firms. These positive trends for MBEs are significant given the 2007 national economic profile where some businesses managed to flourish in the midst of declining home sales and personal wealth.

Growth in Number of Firms

The number of minority-owned firms grew at a pace more than four times that of nonminority firms from 2002 to 2007.12 Minority-owned firms increased 45.5 percent, from 4 million in 2002 to 5.8 million in 2007. Nonminority firms increased at a rate of 10.9 percent, rising from 18.5 million firms in 2002 to 20.5 million firms in 2007 (Table 1).

Table 1: Growth in Number of Firms and Receipts for Employer and Non-Employer Firms, 2002-2007

 

Group

 

Year

Number of All Firms

Percent Change

Annual Gross Receipts for All Firms ($1,000s)

Percent Change

 

African American

2007

1,921,864

 

60.5%

$135,739,834

 

53.1%

2002

1,197,567

$88,641,608

American Indian and Alaska Native

2007

236,691

 

17.5%

$34,353,842

 

27.8%

2002

201,387

$26,872,947

 

Asian

2007

1,549,559

 

40.4%

$506,047,751

 

54.9%

2002

1,103,587

$326,663,445

 

Hispanic

2007

2,260,269

 

43.6%

$350,661,243

 

58.0%

2002

1,573,464

$221,927,425

Native Hawaiian and Other Pacific Islander

2007

37,687

 

30.2%

$6,319,357

 

47.7%

2002

28,948

$4,279,591

 

Total Minority

2007

5,759,209

 

45.5%

$1,024,801,958

 

55.0%

2002

3,958,610

$661,148,403

 

Nonminority

2007

20,535,651

 

10.9%

$9,924,659,916

 

22.2%

2002

18,521,646

$8,122,392,743

 

All Classifiable Firms

2007

26,294,860

 

17.0%

$10,949,461,874

 

24.7%

2002

22,480,256

$8,783,541,146

Publicly Held and Other Firms

2007

798,048

 

61.4%

$19,082,058,036

 

38.1%

2002

494,399

$13,820,117,758

 

All Firms

2007

27,092,908

 

17.9%

$30,031,519,910

 

32.9%

2002

22,974,655

$22,603,658,904

Sources: Survey of Business Owners (SBO); Geographic Area Series: Economy-Wide Estimates of Business Ownership by Gender, Hispanic or Latino Origin, and Race, 2002; Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. RSEs are available in Appendix B.


Between 2002 and 2007, the data reveal that the number of African American firms grew the fastest at 60.5 percent, followed by Hispanic firms at 43.6 percent, and Asian firms at 40.4 percent. The growth in number of Native Hawaiian and Other Pacific Islander firms and American Indian and Alaska Native firms, was 30.2 percent and 17.5 percent, respectively (Figure 1).

Between 2002 and 2007, the data reveal that the number of African American firms grew the fastest at 60.5 percent, followed by Hispanic firms at 43.6 percent, and Asian firms at 40.4 percent. The growth in number of Native Hawaiian and Other Pacific Islander firms and American Indian and Alaska Native firms, was 30.2 percent and 17.5 percent, respectively (Figure 1)

Growth in Gross Receipts for All Firms, Employer and Non-Employer

A key indicator of minority business growth can be found in the assessment of firms’ gross receipts. MBEs experienced a 55 percent increase in gross receipts between 2002 and 2007, which was more than double that of nonminority firms at 22.2 percent. In 2002, gross receipts of minority firms were $661.1 billion and $1 trillion in 2007. During this same time period, nonminority firms had sales of $8.1 trillion in 2002 and $9.9 trillion in 2007.

Compared to the 1997-2002 period, the data demonstrate an increase in the number of firms and gross receipts between 2002 and 2007. During the latter period, the rise in the number of minority-owned firms (both employer and non-employer) was significant, 45.5 percent compared to 35 percent between 1997 and 2002. Moreover, gross receipts for minority businesses increased by 55 percent during the same period, much higher than the 13 percent growth of the previous five-year period.13

Among minority firms, the gross receipts of Hispanic firms grew the fastest at 58 percent, followed by Asian firms at 54.9 percent, and African American firms at 53.1 percent between 2002 and 2007.14 In 2002, Asian firms generated $326.7 billion compared to $506 billion in 2007. Hispanic firms had gross receipts of $221.9 billion in 2002 and $350.7 billion in 2007. African American firms were at $88.6 billion and $135.7 billion in 2002 and 2007 respectively. While gross receipts of Native Hawaiian and Other Pacific Islander firms and American Indian and Alaska Native firms grew at a slower pace between 2002 and 2007, at 47.7 percent and 27.8 percent, respectively, their pace of growth was still higher than that of nonminority firms during the same period.15

Growth in Numbers of Firms, Gross Receipts and Employment for Employer Firms

The number of minority-owned firms with employees also experienced an increase in gross receipts and paid employment compared to those of nonminority-owned employer firms. Minority employer firms grew at a significantly higher rate, 21.7 percent, than nonminority employer firms, which declined by 2.6 percent between 2002 and 2007. This rapid growth aligned with the increase in number of employees in minority firms, 24.4 percent. Nonminority firms during the same period only increased their paid employees by 0.2 percent (Table 2).

As shown in Table 2, the growth rate of gross receipts of minority employer firms was more than double that of nonminority employer firms, at 54.3 percent and 22.4 percent, respectively. Hispanic and Asian firms grew the fastest by 24.7 percent and 24.4 percent, respectively, during the same period.16 Growth of other minority firms was slower with African American firms only growing at a rate of 12.7 percent, and American Indian and Alaska Native firms declining 3.4 percent during the same period.

Table 2: Growth in Number of Firms, Receipts and Employees for Employer Firms, 2002-2007

 

Group

 

Year

 

Number of Employer Firms

 

Percent Change

 

Annual Gross Receipts ($1,000s)

 

Percent Change

Number of Employees of Employer Firms

 

Percent Change

 

African American

2007

106,566

 

12.7%

$97,144,898

 

47.6%

909,552

 

20.6%

2002

94,518

$65,799,425

753,978

 

American Indian and Alaska Native

2007

23,662

 

-3.4%

$27,494,075

 

25.0%

185,037

 

-3.3%

2002

24,498

$21,986,696

191,270

 

Asian

2007

397,426

24.4%

$453,574,194

55.8%

2,807,771

26.8%

2002

319,468

$291,162,771

2,213,948

 

Hispanic

2007

248,852

24.7%

$279,920,707

55.9%

1,908,161

24.2%

2002

199,542

$179,507,959

1,536,795

 

Native Hawaiian and Other Pacific Islander

2007

4,151

 

**12.4%

$5,250,301

 

49.9%

37,801

 

28.9%

2002

3,693

$3,502,157

29,319

 

Total Minority

2007

766,533

21.7%

$860,492,119

54.3%

5,816,114

24.4%

2002

629,831

$557,774,029

4,675,382

 

Nonminority

2007

4,423,435

-2.6%

$9,154,650,843

22.4%

50,810,440

0.2%

2002

4,542,233

$7,481,478,680

50,692,834

 

All Classifiable Firms

2007

5,189,968

 

0.4%

$10,015,142,962

 

24.6%

56,626,554

 

2.3%

2002

5,172,064

$8,039,252,709

55,368,216

Publicly Held and Other Firms

2007

545,594

 

54.7%

$19,043,685,514

 

38.0%

60,683,564

 

9.5%

2002

352,720

$13,796,996,645

55,398,389

 

All Firms

2007

5,735,562

3.8%

$29,058,828,476

33.1%

117,310,118

5.9%

2002

5,524,784

$21,836,249,354

110,766,605

Sources: Survey of Business Owners (SBO): Geographic Area Series: Economy-Wide Estimates of Business Ownership by Gender, Hispanic or Latino Origin, and Race, 2002; Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. Note: The ** denotes that the value is not significantly different from zero at the 90 percent confidence interval. RSEs are available in Appenidix B.


Hispanic and Asian employer firms grew faster than all other racial/ethnic firms in gross receipts at 55.9 percent and 55.8 percent respectively between 2002 and 2007.17 Gross receipts of Hispanic firms were $179.5 billion in 2002 and $279.9 billion in 2007. Asian firms grew from $291.2 billion in 2002, to $453.6 billion in 2007. Gross receipts of Native Hawaiian and Other Pacific Islander firms increased by 49.9 percent, and African American firms grew by 47.6 percent during the same period.18 The growth in gross receipts of American Indian and Alaska Native firms was 25 percent, despite the decline in their number of firms, from 24,498 to 23,622.

Between 2002 and 2007, the rate of hiring of minority employer firms outpaced that of nonminority firms. The percentage increase in employees of minority-owned firms was 24.4 percent, while that of nonminority firms was only 0.2 percent and that for all U.S. firms, 5.9 percent. Paid employment increased at Native Hawaiian and Other Pacific Islander firms from 29.3 thousand in 2002 to 37.8 thousand in 2007, or 28.9 percent.19 The growth rate in employment for Asian firms was 26.8 percent, from 2.2 million to 2.8 million in 2007, followed closely by Hispanic firms at 24.2 percent, from 1.5 million to 1.9 million in 2007. African American firms increased employment by 20.6 percent. American Indian and Alaska Native firms showed a decline in employees of 3.3 percent, reflecting a decrease in the number of firms over this period.

Although minority-owned firms average smaller gross receipts and employment compared to nonminority firms, the findings indicate that minority-owned firms employ a greater number of workers per dollar of sales generated by their firms compared to nonminority and all U.S. firms. While gross receipts generated by minority-owned firms represented about 8.6 percent of all classifiable firms’ gross receipts and three percent of the receipts generated by all U.S. firms, the number of employees at minority-owned firms represented 10.4 percent of all workers employed by classifiable firms, and five percent of all employees at U.S. firms in general.

Average Gross Receipts

Average gross receipts of minority-owned firms grew at a slower pace compared to that of nonminority-owned firms between 2002 and 2007 (6.5 percent versus 10.2 percent). These disparities could be due to the differences in relative size of gross receipts and number of firms. Gross receipts of nonminority firms were much greater, almost 10 times larger than those of minority firms, while the number of nonminority firms was four times larger than the number of minority firms. Although the pace of growth of gross receipts (55 percent) and number (45.5 percent) of minority-owned firms was considerably higher than those of nonminority firms (22.2 percent and 10.9 percent, respectively), minority-owned firms would still need to grow at a faster rate to reach the average size of their nonminority counterparts. Moreover, comparisons in size of firms are heavily influenced by their industry sector that is analyzed later in the report.

Among minority-owned firms, average gross receipts of Native Hawaiian and Other Pacific Islander firms grew the fastest (13.4 percent), followed by Asian firms (10.3 percent), and Hispanic firms (10 percent). African American-owned firms were the only ones to register negative growth of average gross receipts between survey periods. The average gross receipts of African American firms declined 4.6 percent between 2002 and 2007 as did publicly held firms whose average receipts declined 14.5 percent.

The decline in average gross receipts for African American firms can be largely attributed to the challenges in accessing adequate capital to grow in size and scale (Table 3). Moreover, African American and Hispanic households continue to have much lower household net worth compared to nonminority and Asian households.20 As one of several characteristics for MBEs, low net worth is one of the barriers that curtail the ability of these firms to access capital from traditional sources such as bank loans, which often require large amounts of collateral for loan approvals or guarantees of personal credit.

Table 3: Change in Average Gross Receipts for Employer and Non-Employer Firms by Minority Group, 2002-2007

Group

Average Gross

Receipts per Firm

Percent

2002

2007

Change

African American

$74,018

$70,629

-4.6%

American Indian and Alaska Native

$133,439

$145,142

8.8%

Asian

$296,002

$326,575

10.3%

Hispanic

$141,044

$155,141

10.0%

Native Hawaiian and Other Pacific Islander

$147,837

$167,680

13.4%

Total Minority

$167,015

$177,941

6.5%

Nonminority

$438,535

$483,289

10.2%

Publicly Held and Other Firms

$27,953,369

$23,910,915

-14.5%

All Firms*

$983,852

$1,108,464

12.7%

Sources: Survey of Business Owners (SBO): Geographic Area Series: Economy-Wide Estimates of Business Ownership by Gender, Hispanic or Latino Origin, and Race, 2002; Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. Note: The values are calculated from U.S. Census data and statistical significance could not be tested. The * denotes the average for all firms.


Entrepreneurial Parity

In this report, entrepreneurial parity is an aspirational benchmark for the economic potential of MBEs and defined as a rate comparable to the percentage of minorities in the U.S. population. Parity would therefore be reached when the performance of minority-owned firms approaches the percentage share of the minority population 18 years old and over.21 The measures examined here for exploring entrepreneurial parity include: number of minority-owned firms, total receipts and paid employees.22

In 2007, the 18 and older minority population represented 31.5 percent of the total U.S. population, or an estimated population of 71.5 million. Minority-owned businesses (5.8 million) accounted for 21.9 percent of all classifiable firms (26.3 million) in 2007, an increase of four percent since 2002. Minority firms also represented 9.4 percent (about $1 trillion) of all classifiable firms’ gross receipts of $10.9 trillion, and employed 10.3 percent (5.8 million) of all classifiable firms’ paid employees. Figures 2 and 3 provide more detail.

Minority firms also represented 9.4 percent (about $1 trillion) of all classifiable firms' gross receipts of $10.9 trillion, and employed 10.3 percent (5.8 million) of all classifiable firms' paid employees.

Although minority-owned firms did not reach parity with all classifiable firms in 2007, their gross receipts and number of firms increased since 2002. Compared to 2002, the number of minority-owned firms grew four percent, from 18 percent in 2002 to 21.9 percent in 2007. Gross receipts from minority firms also increased by almost two percent, from 7.6 percent to 9.4 percent, and employment, by almost two percent, from 8.5 percent to 10.3 percent. (See Table 1) 23

Despite their general growth, no minority group reached parity in gross receipts and employment compared to that of all classifiable firms, except for Asian firms which exceeded parity in the number of firms compared to their adult population share in 2002.24 For minority- owned firms, three factors can be correlated with their survival rates - educational attainment, level of capital at establishment, and length of business experience. Among Asian firms, these variables were higher compared to other minority groups. American Indian and Alaska Native firms approached parity, representing one percent of the U.S. population 18 years and older and owned 0.9 percent of classifiable U.S. businesses (Figure 3).

Percentage of Minority Population, Number of Employer and Non-Employer Firms and Gross Receipts by Minority Group, 2007

The gap in entrepreneurial parity narrowed in terms of number of firms between 2002 and 2007, but widened slightly for paid employees and gross receipts. The same number of firms – 2.5 million – would have been required in 2007 as in 2002 to reach parity. More importantly, parity in gross receipts would have required an additional $2.4 trillion in 2007, compared to $1.8 trillion in 2002. Twelve million more workers would have also been required in 2007, compared to 11.4 million in 2002, to reach entrepreneurial parity between minority and nonminority firms. Thus, despite gains in the number of surviving firms, minority businesses faced greater hurdles in increasing gross receipts and employment (See Figures 4, 5 and 6).

Parity Comparison for Total Receipts of Minority Firms (Employer and Non-Employer), 2002 and 2007 (in trillons)

Parity Comparison for Paid Employees for Employer Minority Firms (in millions), 2002 and 2007

Further analysis is needed to identify reasons why minority-owned firms have not reached parity in gross receipts, numbers of firms, and paid employees. More specifically, research is needed to understand why the rapid growth in numbers of MBEs has not been accompanied by corresponding increases in their gross receipts and/or employment. Factors that include size of minority-owned firms, limitations to accessing capital (especially in the early years of operations), industries in which minority firms operated, the role of technology in advancing growth in some industries and not others, and other competitive hurdles, such as education and training, as well as the national and international economic conditions that may disproportionately affect minority businesses, could be further explored in additional research. An assessment of this type would also have to weigh the importance of each factor and outline what measures would be the most likely to facilitate the path to parity.

 

GEOGRAPHIC PICTURE

This next section examines data on the concentration of MBEs across the U.S., exploring states and regions (i.e., combined statistical areas or CSAs), that have the largest numbers of minority-owned firms.

Analysis by States

All 50 states and the District of Columbia have minority business enterprises. In 2007, the largest MBEs were in five states: California (1,220,580); Texas (723,057); Florida (680,069); New York (537,544); and Georgia (263,356). These five states represented 59.5 percent of all MBEs in the U.S. (Table 4) and 50.9 percent of the nation’s total minority population in 2007. All five minority classifications had the highest concentrations in four of the five states where minority-owned businesses were most concentrated: California, Texas, Florida, and New York. New Jersey was also included in the top five states in which Asian and Hispanic firms were located. Oklahoma had a high concentration of Native American firms. Native Hawaiian and Other Pacific Islander firms included Hawaii in the top five states in which their firms were located.

Table 4: Top Five States for Minority Firms (Employer and Non-Employer) by Minority Group, 2007

State Ranking

State Number of Firms

Percentage of Firms in
Minority Group

All Minority

1

California

1,220,581

21.2%

2

Texas

723,057

12.6%

3

Florida

680,069

11.8%

4

New York

537,544

9.3%

5

Georgia

263,356

4.6%

 

Total

3,424,607

59.5%

African American

1

New York

537,544

10.6%

2

Georgia

263,356

9.6%

3

Florida

680,069

9.4%

4

Texas

723,057

8.0%

5

California

1,220,581

7.2%

 

Total

3,424,607

44.8%

American Indian and Alaska Native

1

California

1,220,581

19.3%

2

Oklahoma

44,941

9.0%

3

Texas

723,057

8.0%

4

New York

537,544

5.5%

5

Florida

680,069

4.1%

 

Total

3,206,192

45.9%

Asian

1

California

1,220,581

32.8%

2

New York

537,544

12.7%

3

Texas

723,057

7.4%

4

New Jersey

182,489

4.4%

5

Florida

680,069

4.2%

 

Total

3,343,740

61.5%

Hispanic

1

California

1,220,581

25.1%

2

Florida

680,069

19.9%

3

Texas

723,057

19.8%

4

New York

537,544

8.5%

5

New Jersey

182,489

3.0%

 

Total

3,343,740

76.4%

Native Hawaiian and Other Pacific Islander

1

Hawaii

68,542

30.3%

2

California

1,220,581

24.3%

3

New York

537,544

4.9%

4

Florida

680,069

4.7%

5

Washington

71,465

3.2%

 

Total

2,578,201

67.4%

Source: Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. RSEs are in Appendix B.


Compared to the states achieving parity for minorities overall, specific minority firms did not approach parity in any state, and the gap was large for all states, except for Florida. In Florida, the percent of minority firms was 34.9 percent, and the share of the minority population was 39.2 percent (Tables 5 and 6).

Table 5: Share of Minority Firms (Employer and Non-Employer) and Minority Population by State, 2007

 

State

 

Minority Firms

Minority as a Percent of all Classifiable Firms in State

Minority Population

 

State Share

Alabama

70,538

19.0%

1,452,100

31.4%

Alaska

11,746

17.7%

231,765

33.9%

Arizona

85,227

18.0%

2,595,390

40.9%

Arkansas

23,637

10.3%

680,985

24.0%

California

1,220,581

36.7%

20,929,573

57.3%

Colorado

59,647

11.3%

1,393,151

28.7%

Connecticut

39,832

12.5%

897,960

25.6%

Delaware

11,349

16.3%

270,315

31.3%

District of Columbia

22,505

43.8%

396,829

67.5%

Florida

680,069

34.9%

7,152,463

39.2%

Georgia

263,356

30.1%

3,961,161

41.5%

Hawaii

68,542

59.4%

966,822

75.3%

Idaho

6,815

4.7%

216,025

14.4%

Illinois

223,007

20.6%

4,499,726

35.0%

Indiana

40,706

8.7%

1,044,751

16.5%

Iowa

8,129

3.3%

279,783

9.4%

Kansas

18,249

8.0%

535,943

19.3%

Kentucky

20,221

6.2%

509,254

12.0%

Louisiana

83,279

22.9%

1,619,485

37.7%

Maine

3,392

2.3%

59,817

4.5%

Maryland

164,130

32.2%

2,355,763

41.9%

Massachusetts

64,998

11.3%

1,307,532

20.3%

Michigan

108,932

13.8%

2,259,016

22.4%

Minnesota

31,074

6.5%

741,771

14.3%

Mississippi

46,791

21.3%

1,199,955

41.1%

Missouri

42,744

8.9%

1,039,240

17.7%

Montana

4,287

3.9%

112,835

11.8%

Nebraska

8,814

5.8%

274,191

15.5%

Nevada

45,533

21.6%

1,078,395

42.0%

New Hampshire

4,837

3.6%

87,393

6.6%

New Jersey

182,489

24.2%

3,285,966

37.8%

New Mexico

48,976

32.3%

1,135,982

57.7%

New York

537,544

28.4%

7,664,298

39.7%

North Carolina

131,728

17.0%

2,940,320

32.5%

North Dakota

1,773

3.0%

64,304

10.1%

Ohio

82,387

9.5%

1,983,616

17.3%

Oklahoma

44,941

13.9%

1,019,398

28.2%

Oregon

31,659

9.4%

731,833

19.5%

Pennsylvania

96,208

10.1%

2,264,554

18.2%

Rhode Island

9,823

10.6%

218,956

20.7%

South Carolina

57,557

16.5%

1,530,152

34.7%

South Dakota

2,882

3.9%

108,076

13.6%

Tennessee

68,218

12.8%

1,401,255

22.8%

Texas

723,057

34.2%

12,460,762

52.1%

Utah

16,042

6.8%

468,024

17.7%

Vermont

1,794

2.4%

29,281

4.7%

Virginia

138,256

22.4%

2,525,365

32.7%

Washington

71,465

13.5%

1,548,537

23.9%

West Virginia

4,433

3.8%

115,265

6.4%

Wisconsin

26,030

6.2%

817,994

14.6%

Wyoming

2,655

4.6%

66,263

12.7%

Total U.S.

5,759,209

28.0%

102,529,590

34.0%

Sources: Population Division, U.S. Census Bureau, Table 4: Estimates of the Population by Race and Hispanic Origin for the United States and States: July 1, 2007 (SC-EST2007-04); Census Survey of Business Owners Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. RSEs are in Appendix B.

 

Table 6: Minority Firms (Employer and Non-Employer) by State and Minority Group, 2007

State Total Minority African American American Indian and Alaska Native Asian Hispanic Native Hawaiian and Other Pacific Islander

Alabama

70,538

56,712

3,068

6,908

4,439

254

Alaska

11,746

1,048

6,852

2,148

S

186

Arizona

85,227

10,039

9,106

16,333

52,667

S

Arkansas

23,637

13,239

2,653

3,322

5,436

92

California

1,220,581

137,891

45,569

508,969

566,573

9,174

Colorado

59,647

9,174

4,619

14,482

33,762

633

Connecticut

39,832

14,787

1,626

11,081

14,081

104

Delaware

11,349

6,507

S

2,989

1,533

36

District of Columbia

22,505

15,764

507

3,278

3,428

S

Florida

680,069

181,496

9,747

64,931

450,137

1,772

Georgia

263,356

183,864

5,975

46,222

32,574

1,145

Hawaii

68,542

1,067

1,548

56,872

4,374

11,403

Idaho

6,815

358

1,367

1,269

3,875

S

Illinois

223,007

106,626

5,391

59,367

56,567

569

Indiana

40,706

22,127

2,207

8,756

8,558

177

Iowa

8,129

2,190

604

2,834

2,455

178

Kansas

18,249

5,643

2,227

4,833

5,763

S

Kentucky

20,221

10,402

1,014

5,559

3,663

85

Louisiana

83,279

59,909

2,682

10,365

11,068

125

Maine

3,392

743

714

1,107

979

51

Maryland

164,130

102,173

3,301

35,881

25,774

294

Massachusetts

64,998

20,542

2,294

26,578

19,410

260

Michigan

108,932

72,554

6,079

21,589

10,770

487

Minnesota

31,074

12,454

2,890

11,371

5,002

S

Mississippi

46,791

40,615

727

4,002

1,828

72

Missouri

42,744

24,685

2,895

9,752

6,178

323

Montana

4,287

231

2,343

646

1,131

S

Nebraska

8,814

2,856

690

2,277

3,063

17

Nevada

45,533

8,658

1,775

17,542

18,035

582

New Hampshire

4,837

750

S

2,211

1,441

47

New Jersey

182,489

60,340

2,883

67,755

68,374

453

New Mexico

48,976

1,943

8,313

3,321

37,195

134

New York

537,544

204,004

13,071

196,825

193,183

1,852

North Carolina

131,728

83,919

8,024

20,157

21,301

451

North Dakota

1,773

163

988

412

287

25

Ohio

82,387

52,136

2,989

18,198

9,722

S

Oklahoma

44,941

10,449

21,212

6,736

7,663

150

Oregon

31,659

4,041

4,263

12,647

11,338

636

Pennsylvania

96,208

44,664

2,858

31,313

22,777

410

Rhode Island

9,823

3,217

395

1,999

5,765

34

South Carolina

57,557

43,812

1,648

6,658

5,971

213

South Dakota

2,882

207

1,729

452

595

8

Tennessee

68,218

45,726

2,708

11,178

8,700

415

Texas

723,057

154,283

18,997

114,297

447,589

1,196

Utah

16,042

1,144

1,462

4,646

9,238

691

Vermont

1,794

S

410

649

470

S

Virginia

138,256

63,363

3,353

44,576

28,579

405

Washington

71,465

S

6,526

37,373

17,795

1,197

West Virginia

4,433

S

S

1,526

899

9

Wisconsin

26,030

11,276

2,641

6,785

5,619

S

Wyoming

2,655

124

469

398

1,728

9

Total U.S.

5,759,209

1,921,864

236,691

1,549,559

2,260,269

37,687

Source: Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. Note: “S” denotes suppressed data. RSEs are in Appendix B.

 

Growth in Number of Firms

As previously stated, minority-owned firms grew faster than all nonminority firms between 2002 and 2007 (45.5 percent versus 10.9 percent respectively). In each of the 50 states and the District of Columbia, the growth in the number of minority-owned firms exceeded the 10.9 percent national growth rate of nonminority firms. The growth rates were at least double or higher for all states, except in Wyoming where there was a growth rate of 11.3 percent (Table 7).

The number of minority-owned firms also grew fastest in five states: 91.3 percent in Georgia; 87.2 percent in Nevada; 84.5 percent in Alabama; 66.1 percent in North Carolina; and 66 percent in Florida. The growth in minority population in these states was much slower than the growth in the numbers of minority businesses, and closer to the 12 percent growth for the country. The growth in minority population was 22 percent in Georgia, 7.1 percent in Alabama, 15.5 percent in North Carolina, and 18.2 percent in Florida. The state of Nevada was much higher at 38.6 percent.

Table 7: Percentage Change in Employer and Non-Employer Minority Firms and Gross Receipts for all Firms and Population, 2002-2007

State

Change in Number of Firms

Change in Gross Receipts

Change in Minority Population

Alabama

84.5%

50.3%

7.1%

Alaska

31.0%

-45.1%

10.9%

Arizona

52.7%

83.1%

25.6%

Arkansas

56.4%

68.0%

13.7%

California

33.3%

45.2%

9.7%

Colorado

34.9%

34.7%

16.3%

Connecticut

46.7%

71.1%

12.0%

Delaware

58.5%

S

20.0%

District of Columbia

33.8%

S

-3.8%

Florida

66.0%

74.4%

18.2%

Georgia

91.3%

66.7%

22.0%

Hawaii

28.1%

46.0%

1.5%

Idaho

30.1%

54.0%

28.5%

Illinois

45.5%

S

7.9%

Indiana

50.0%

48.6%

16.5%

Iowa

48.1%

38.6%

20.9%

Kansas

33.7%

59.9%

11.5%

Kentucky

44.8%

S

12.8%

Louisiana

45.1%

46.7%

-4.5%

Maine

32.8%

37.3%

28.8%

Maryland

48.6%

S

12.7%

Massachusetts

38.3%

35.0%

10.7%

Michigan

47.8%

31.1%

4.3%

Minnesota

43.0%

72.0%

18.9%

Mississippi

57.2%

28.1%

4.9%

Missouri

43.9%

82.7%

10.8%

Montana

21.6%

80.6%

15.6%

Nebraska

53.2%

S

18.4%

Nevada

87.2%

99.4%

38.6%

New Hampshire

42.3%

S

34.5%

New Jersey

34.1%

52.2%

9.6%

New Mexico

24.4%

46.0%

9.5%

New York

27.1%

57.2%

2.7%

North Carolina

66.1%

72.0%

15.5%

North Dakota

25.0%

S

18.7%

Ohio

40.6%

37.5%

7.1%

Oklahoma

32.1%

71.0%

10.6%

Oregon

55.3%

42.0%

20.6%

Pennsylvania

62.9%

71.2%

12.9%

Rhode Island

49.6%

51.4%

13.2%

South Carolina

55.3%

56.2%

8.1%

South Dakota

39.4%

S

15.1%

Tennessee

65.3%

63.8%

13.9%

Texas

47.3%

60.0%

17.0%

Utah

62.7%

101.5%

30.2%

Vermont

31.3%

193.1%

21.8%

Virginia

51.3%

65.4%

13.5%

Washington

45.0%

142.5%

17.8%

West Virginia

20.3%

S

15.8%

Wisconsin

47.5%

77.5%

13.6%

Wyoming

11.3%

14.4%

17.0%

United States

45.5%

55.0%

12.0%

Sources: Population Division, U.S. Census Bureau, Table 4: Estimates of the Population by Race and Hispanic Origin for the United States and States: July 1, 2007 (SC-EST2007-04), Census Survey of Business Owners Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. Note: “S” indicates data was suppressed by U.S. Census. RSEs are in Appendix B.

 

Growth in Gross Receipts

Between 2002 and 2007, gross receipts of minority-owned firms grew at a faster pace, 55 percent,25 than all U.S. firms, (33 percent) and faster than the growth of receipts for nonminority-owned firms at 22.2 percent. In fact, gross receipts for minority-owned firms grew faster than gross receipts for nonminority-owned firms in all states but two: Wyoming (14.4%) and Alaska (-45.1%).

States showing the fastest rates of growth in gross receipts were: Vermont, with 193.1 percent growth; Washington, with 142.5 percent; Utah with 101.5 percent; Nevada with 99.4 percent; and Missouri with 82.7 percent. Only Nevada ranked among the top five states with highest rates of growth in number of minority-owned firms and in gross receipts. Twenty-eight of the 50 states had percentage changes in gross receipts greater than in the number of firms, suggesting improved overall performance of minority firms in these states (See Table 7). Data on minority-owned businesses by state is also in Appendix C.

Combined Statistical Areas26

Combined statistical areas (CSAs) provide another picture of concentration of minority-owned firms.27 Five CSAs had the largest number of minority-owned firms: Los Angeles- Long Beach-Riverside, CA CSA; New York-Newark- Bridgeport, NY-NJ-CT-PA CSA; Miami-Fort Lauderdale- Pompano Beach, FL Metro Area; Washington-Baltimore- Northern Virginia, DC-MD-VA-WV CSA; and San Jose- San Francisco-Oakland, CA CSA. Together, these regions had 2,344,399 minority-owned businesses, representing 40.7 percent of all minority firms in the United States (Table 8).

The data also suggest that:

  • Hispanic firms were concentrated in the Miami-Fort Lauderdale-Pompano Beach, FL Metro area (28.3 percent), the Los Angeles-Long Beach-Riverside, CA CSA (15.9 percent), and New York-Newark-Bridgeport, NY-NJ-CT-PA CSA (11.4 percent).

  • Asian firms were concentrated in the Los Angeles-Long Beach-Riverside, CA CSA (18.2 percent), the New York-Newark-Bridgeport, NY-NJ-CT-PA CSA (16.3 percent), and the San Jose-San Francisco-Oakland, CA CSA (9.2 percent).

  • African American firms were concentrated in the New York-Newark-Bridgeport, NY-NJ-CT-PA CSA (13 percent), Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA (7.1 percent), and Atlanta- Sandy Springs-Gainesville, GA-AL CSA (6.8 percent).

  • The largest number of American Indian and Alaska Native firms was in the Los Angeles-Long Beach- Riverside, CA CSA (10.4 percent), the New York- Newark-Bridgeport, NY-NJ-CT-PA CSA (6.2 percent), and the San Jose-San Francisco-Oakland, CA CSA (3.1 percent).

  • Native Hawaiian and Other Pacific Islander firms were concentrated in the Honolulu, HI Metro Area CSA (17.8 percent), the Los Angeles-Long Beach-Riverside, CA CSA (12.4 percent), and the San Jose-San Francisco-Oakland, CA CSA (6.4 percent).

According to the data in Table 8, Asian and Hispanic firms were heavily represented in their respective top five CSAs. For Hispanic firms, the Dallas-Fort Worth, Texas CSA replaced San Jose-San Francisco-Oakland, CA CSA among the top five CSAs for firms operating in 2007 compared to those operating in 2002.

Table 8: Top Five Combined Statistical Areas (CSA) for Minority Firm (Employer and Non-Employer) Concentration, 2007

CSA Ranking

CSA Number of Fimrs Percentage of Firms in Minority Group

All Minority

1

Los Angeles-Long Beach-Riverside, CA CSA

727,374

12.6%

2

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

690,970

12.0%

3

Miami-Fort Lauderdale-Pompano Beach, FL Metro Area

428,457

7.4%

4

Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA

257,137

4.5%

5

San Jose-San Francisco-Oakland, CA CSA

240,461

4.2%

 

Total

2,344,399

40.7%

African American

1

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

249,796

13.0%

2

Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA

135,684

7.1%

3

Atlanta-Sandy Springs-Gainesville, GA-AL CSA

130,940

6.8%

4

Chicago-Naperville-Michigan City, IL-IN-WI CSA

102,722

5.3%

5

Miami-Fort Lauderdale-Pompano Beach, FL Metro Area

99,595

5.2%

 

Total

718,737

37.4%

American Indian and Alaska Native

1

Los Angeles-Long Beach-Riverside, CA CSA

24,500

10.4%

2

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

14,626

6.2%

3

San Jose-San Francisco-Oakland, CA CSA

7,348

3.1%

4

Tulsa-Bartlesville, OK CSA

6,364

2.7%

5

Oklahoma City-Shawnee, OK CSA

5,375

2.3%

 

Total

58,213

24.6%

Asian

1

Los Angeles-Long Beach-Riverside, CA CSA

282,467

18.2%

2

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

252,394

16.3%

3

San Jose-San Francisco-Oakland, CA CSA

142,838

9.2%

4

Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA

70,273

4.5%

5

Chicago-Naperville-Michigan City, IL-IN-WI CSA

54,940

3.5%

 

Total

802,912

51.8%

Hispanic

1

Miami-Fort Lauderdale-Pompano Beach, FL Metro Area

320,083

28.3%

2

Los Angeles-Long Beach-Riverside, CA CSA

359,773

15.9%

3

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

258,430

11.4%

4

Houston-Baytown-Huntsville, TX CSA

105,064

4.6%

5

Dallas-Fort Worth, TX CSA

71,055

3.1%

 

Total

1,114,405

63.5%

Native Hawaiian and Other Pacific Islander

1

Honolulu, HI Metro Area

6,721

17.8%

2

Los Angeles-Long Beach-Riverside, CA CSA

4,672

12.4%

3

San Jose-San Francisco-Oakland, CA CSA

2,311

6.1%

4

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

2,068

5.5%

5

Seattle-Tacoma-Olympia, WA CSA

998

2.6%

 

Total

16,770

44.5%

Source: Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007.
 

INDUSTRY PICTURE

The 2007 SBO data also showed that minority-owned firms are represented in all 19 industry sectors designated by the North American Classification System (NACS) (Table 9). The industry sectors in which minority-owned firms were most concentrated, however, differed from those of nonminority firms.

In 2007, minority-owned firms were most heavily concentrated in the category of “other services”28 that combines a series of industries not necessarily related to one another: health care and social assistance. Most minority-owned firms were distributed in the following industry sectors: other services (16.9 percent); health care and social assistance (13.1 percent); administrative and support and waste management and remediation services (10.5 percent); professional, scientific, and technical services (10 percent); and construction (9.6 percent).

The rankings of concentration in nonminority firms differed from those of minorities. Nonminority firms were most heavily concentrated in: professional, scientific, and technical services (14.1 percent); construction (12.8 percent); other services (11.7 percent); retail trade (10 percent); and real estate and rental and leasing (9.3 percent) (See Figure 8).

Among minority groups, five industry sectors were most represented, but the rankings differed among minority sub- groups (See Table 9).

  • African American firms had the highest concentration in health care and social assistance (19 percent); followed by other services (18.7 percent); administrative and support and waste management and remediation services (11.3 percent); transportation and warehousing (8.8 percent); and professional, scientific, and technical services (8.5 percent). Transportation and warehousing ranked fourth in 2007, replacing the 2002 fourth ranked industry, retail trade.

  • For American Indian and Alaska Native firms, most firms were in construction (15.9 percent); followed by other services (14.6 percent); health care and social assistance (10.6 percent); professional, scientific, and technical services (10.1 percent); administrative and support; waste management and remediation services (9.6 percent). In 2007, administrative and support and waste management and remediation services (10.5 percent) replaced retail trade which ranked fifth in 2002.

  • Asian firms were concentrated in other services (18.6 percent); professional, scientific, and technical services (13.8 percent); retail trade (12.3 percent); health care and social assistance (10.6 percent); and accommodation and food services (8.6 percent). The 2007 rankings remained the same as those in 2002.

  • Hispanic firms had their highest concentrations in construction (15.1 percent) and other services (14.9 percent). These industries were followed by administrative and support and waste management and remediation services (13.9 percent); health care and social assistance (10.4 percent); and transportation and warehousing (8.9 percent). Fifth ranked transportation and warehousing replaced retail trade which was fifth in 2002.

  • For Native Hawaiian and Other Pacific Islander firms, the concentration of firms was highest in other services (14 percent) and construction (13.2 percent). These industry sectors were followed by: retail trade (10.3 percent); health care and social assistance (9.9 percent); and professional, scientific, and technical services (9.6 percent). Compared to 2002, administrative support real estate, and rental and leasing dropped out of the top five, and were replaced in 2007 by other services and health care and social assistance.

Table 9: Top Five Industry Sectors for Minority Firm (Employer and Non-Employer) Concentration, 2007

Industry
Sector
Rankings

Industry Sector Number of Firms Percentage of Firms
in Minority Group

All Minority

1

Other services (except public administration)#

972,980

16.9%

2

Health care and social assistance

754,919

13.1%

3

Administrative and support and waste management and remediation services

606,667

10.5%

4

Professional, scientific, and technical services

575,857

10.0%

5

Construction

551,209

9.6%

 

Total

3,461,632

60.1%

African American

1

Health care and social assistance

365,140

19.0%

2

Other services (except public administration)#

358,443

18.7%

3

Administrative and support and waste management and remediation services

216,763

11.3%

4

Transportation and warehousing

168,386

8.8%

5

Professional, scientific, and technical services

163,761

8.5%

 

Total

1,272,493

66.2%

American Indian and Alaska Native

1

Construction

37,693

15.9%

2

Other services (except public administration)#

34,545

14.6%

3

Health care and social assistance

25,112

10.6%

4

Professional, scientific, and technical services

23,886

10.1%

5

Administrative and support and waste management and remediation services

22,714

9.6%

 

Total

143,950

60.8%

Asian

1

Other services (except public administration)#

287,831

18.6%

2

Professional, scientific, and technical services

213,705

13.8%

3

Retail trade

190,830

12.3%

4

Health care and social assistance

164,224

10.6%

5

Accommodation and food services

133,729

8.6%

 

Total

990,319

63.9%

Hispanic

1

Construction

340,770

15.1%

2

Other services (except public administration)#

337,637

14.9%

3

Administrative and support and waste management and remediation services

313,313

13.9%

4

Health care and social assistance

234,824

10.4%

5

Transportation and warehousing

200,567

8.9%

 

Total

1,427,111

63.1%

Native Hawaiian and Other Pacific Islander

1

Other services (except public administration)#

5,264

14.0%

2

Construction

4,991

13.2%

3

Retail trade

3,880

10.3%

4

Health care and social assistance

3,723

9.9%

5

Professional, scientific, and technical services

3,619

9.6%

 

Total

21,477

57.0%

Source: Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. Note: # “Other Services” includes establishments not provided for elsewhere in the classification system that are engaged in activities such as equipment and machinery repairing, promoting religious activities, grant-making, advocacy, providing dry-cleaning and laundry services, personal care services, and dating services. It does not include public administration.

Figures 7 and 8 illustrate the breakdown and distribution of MBEs by industry sector.

Distribution for Minority-Owned Firms (Employer and Non-Employer) by Industry, 2007

Distribution of Nonminority Firms (Employer and Non-Employer) by Industry, 2007

Besides the top five industry sectors in which most minority-owned firms are concentrated, several other industry sectors ranked among the top five for some minority groups as discussed above. African American and Hispanic firms were heavily engaged in transportation and warehousing, while retail trade was ranked high for Asian firms and Native Hawaiian and Other Pacific Islander firms. Asian-owned firms also leaned more towards accommodation and food services industries (8.6 percent). Tables 10 and 11 illustrate how minority-owned firms fared by industry sector in the number and distribution.

Table 10: Number of Firms (Employer and Non-Employer) by Industry Sector, 2007

 

Industry

 

Non- minority

 

Minority

 

African American

 

American Indian and Alaska Native

 

Asian

 

Hispanic

Native Hawaiian and Other Pacific Islander

Total for all sectors

20,535,651

5,759,209

1,921,864

236,691

1,549,559

2,260,269

37,687

Agriculture, forestry, fishing and hunting

230,324

24,420

4,347

5,026

5,125

10,201

S

Mining, quarrying, and oil and gas extraction

112,197

4,757

S

814

913

2,328

**31

Utilities

15,613

3,684

1,316

248

474

1,866

6

Construction

2,801,960

551,209

125,818

37,693

70,722

340,770

4,991

Manufacturing

501,340

81,949

16,041

4,985

26,375

36,619

623

Wholesale trade

564,280

126,845

19,384

4,810

60,458

43,971

631

Retail trade

2,092,957

525,859

148,181

19,776

190,830

186,417

3,880

Transportation and warehousing

800,148

432,204

168,386

12,916

74,117

200,567

2,274

Information

300,182

63,789

23,442

3,002

17,428

21,435

414

Finance and insurance

824,119

137,969

42,100

4,573

42,099

51,715

1,030

Real estate and rental and leasing

2,101,589

345,806

92,655

12,410

116,035

130,365

2,528

Professional, scientific, and technical services

3,139,979

575,857

163,761

23,886

213,705

185,420

3,619

Management of companies and enterprises

14,079

963

196

31

441

282

**13

Administrative and support and waste management and remediation services

 

1,484,238

 

606,667

 

216,763

 

22,714

 

75,485

 

313,313

 

3,542

Educational services

456,910

111,860

47,727

5,193

29,515

33,144

614

Health care and social assistance

1,505,794

754,919

365,140

25,112

164,224

234,824

3,723

Arts, entertainment, and recreation

1,000,423

196,639

86,357

13,506

40,220

63,918

2,625

Accommodation and food services

499,375

241,031

40,959

5,385

133,729

65,602

1,316

Other services (except public administration)

2,113,414

972,980

358,443

34,545

287,831

337,637

5,264

Industries not classified

8,273

1,534

487

132

613

425

S

Source: Statistics for All U.S. Firms by Industry, Gender, Ethnicity, and Race for the U.S., States, Metro Areas, Counties, and Places, 2007. Note: “S” indicates data was suppressed by Census. The ** indicates that the values are not significantly different from zero at the 90 percent confidence interval. RSEs are in Appendix B.

 

Average Gross Receipts

Minority-owned firms generated the largest average gross receipts in the following six industries: management of companies and enterprises; manufacturing; mining, quarrying, and oil and gas extraction; retail trade; wholesale trade; and accommodations and food services. With the exception of wholesale trade for which data was not available,29 nonminority-owned firms had the highest average receipts in the same industries as minority-owned firms. As previously stated, the average gross receipts for all minority-owned firms was $177,941 per firm, compared to $483,289 for nonminority firms, making the average gross receipts for nonminority firms 2.7 times greater than that of minority-owned firms. Average gross receipts for minority-owned firms by industry sector were also lower compared to those of nonminority firms with the exception of the management and enterprises industry sectors. For firms operating in 2007, minority-owned firms had greater average gross receipts in the management of companies and enterprises sector ($2.3 million) compared to nonminority- owned firms ($1.8 million). The difference between the two groups of firms in this industry widened from that in 2002, when the average gross receipts for nonminority firms was $1.1 million and, for minority firms, $1.3 million.30

Minority-owned firms in the management of companies and enterprises industry sector also had the largest average gross receipts compared to any other industry sector, followed by manufacturing with average gross receipts of $801,000. Among nonminority firms, the industry sector with the highest average sales was manufacturing with $2.4 million - three times that of minority firms. Average gross receipts for both minority-owned and nonminority firms were much smaller for mining, quarrying and oil and gas extraction; retail trade; and accommodations and food services; however, the difference between the two groups was significantly large with minority-owned firms generating fewer gross receipts on average (Figure 9).

Industries with the Highest Average Gross Receipts for Minority Firms and Nonminority Firms (Employer and Non-Employer), 2007

 

MBDA Strategic Growth Initiative (SGI) Firms and Non-SGI Firms

This last section of the report assesses the importance of firm size and analyzes their growth by the number of firms, gross receipts, average gross receipts and number of paid employees. Both employer and non-employer firms are included in the analysis.

Minority businesses were divided into two groups: those that generated $500,000 or more in annual gross receipts, and those that generated less than $500,000 in annual gross receipts. Under the MBDA Strategic Growth Initiative (SGI), minority-owned companies with sales of $500,000 or more are considered to have high potential for growth in the future.31 These firms are more likely to be employer firms (firms with employees), and may be in the technology sector or other high growth industries such as advanced manufacturing, renewable energy, and health care among other industry sectors.

Non-SGI firms are defined as minority-owned companies, with annual gross receipts less than $500,000. These firms are generally small, with few or no employees, other than the entrepreneur who started the firm. An example of a non-SGI firm would be a lifestyle company started by a sole proprietor.

In 2007, there were 276,441 SGI firms compared to 194,552 in 2002. These firms generated $793.7 billion in gross receipts ($498.5 billion in 2002), and employed 4.4 million workers (3.4 million in 2002). SGI firms accounted for 12.5 percent of all classifiable firms, grossing $500,000 or more, and employed 9.1 percent of all workers paid by those larger classifiable firms. Non-SGI firms accounted for 5.5 million firms, grossed about $231.1 billion in receipts, and employed 1.4 million workers. Figure 10 offers a comparison of SGI and non-SGI firms.

 Figure 10 offers a comparison of SGI and non-SGI firms.

Growth in Number of Firms

SGI firms grew considerably faster than nonminority firms in the same size category. The number of SGI firms increased 42.1 percent between 2002 and 2007, while nonminority firms with receipts of $500,000 or greater grew 9.8 percent (Figure 11).

The number of non-SGI firms also grew at a faster rate of 40.2 percent, than did nonminority firms with sales less than $500,000, which increased 12 percent, during this period. As Figure 10 reveals, non-SGI firms represented 95.2 percent of all minority firms in 2007.

Change in the Number of Firms, Gross Receipts and Paid Employment for All Minority and All Nonminority Firms, 2002-2007

Growth in Gross Receipts

As discussed previously, gross receipts of all minority firms increased 55 percent between 2002 and 2007, more than double the 22.2 percent of all nonminority-owned firms. Growth in gross receipts of SGI firms was also faster at 59.2 percent compared to non-SGI firms at 36.0 percent. Data for nonminority firms by size of receipts were unavailable for comparison.32 (Figure 11)

Average Gross Receipts

In 2007, the average gross receipts of SGI businesses were smaller than that of nonminority firms with sales of $500,000 or more. SGI firms had $2.9 million in average sales, while nonminority firms of the same size had average sales of $4.6 million. SGI average gross receipts represented 63 percent of nonminority firms with $500,000 or more in gross receipts. Average gross sales of non-SGI firms were $42,000 in 2007, compared to $58,000 for nonminority firms with less than $500,000 in sales, or 72 percent of nonminority average gross sales.

Growth in Paid Employees

Minority-owned firms continued to demonstrate a robust growth of employment compared to their nonminority counterparts regardless of firm size. Between 2002 and 2007, SGI firms out performed nonminority firms of the same size in growth of paid employees. During the same period, non-SGI firms increased their number of workers by 13.1 percent between 2002 and 2007. Nonminority firms with sales less than $500,000 added only 1.8 percent to their employment.

 

CONCLUSIONS

The number of minority-owned enterprises grew at a much faster pace than their gross receipts, average gross sales, or paid employment between 2002 and 2007. The data also demonstrate that minority-owned firms outperformed the growth of nonminority-owned firms in all four measures during the same period.

Gross receipts and average sales of minority-owned firms remained lower than those of nonminority firms. While minority-owned businesses narrowed the gap in entrepreneurial parity in terms of numbers between 2002 and 2007, the gap widened slightly for paid employment and gross receipts. MBEs have yet to close the parity gap in terms of number of firms, gross receipts and paid employment when compared to their share of the adult population in the U.S., which was 31.5 percent in 2007.

Minority-owned employer firms continued to be an engine of job opportunities between 2002 and 2007, despite a lack of parity. As the data indicates, minority-owned firms contributed to the U.S. economy with positive growth in employment regardless of firm size, while nonminority- owned firms experienced a decline in employment among their larger firms, along with a very modest increase in employees among their smaller firms. The increase in employment for minority firms was 24.4 percent, compared to just 0.2 percent for nonminority firms between 2002 and 2007. Among larger firms, employment at SGI minority firms grew by 26.8 percent compared to a decline of 7.7 percent for nonminority firms of the same size during the same period.

The data in this report indicate that advancing the economic and financial performance of minority-owned businesses remains an important national priority. The state of minority businesses in 2007, especially their upward growth, demonstrates the critical importance of expanding opportunities for these firms. Government agencies, educational institutions and the private sector must collaborate on solutions that effectively enable MBEs to be successful, while addressing barriers that include disparities in access to capital and particular characteristics, such as household net income, educational attainment and social networks, confronting these business owners.

The Minority Business Development Agency (MBDA) has expanded existing programs and developed new ones in support of the growth and global competitiveness of minority-owned businesses. These programs address the specific needs of MBEs, and take into account the changing environment in which minority businesses operate. MBDA continues to strengthen and develop new partnerships with government agencies, corporations, non-profit organizations and educational institutions to support minority business growth.

The data in this report substantiates MBDA’s core strategy to build MBEs of size and scale, increasing average gross receipts, thereby enabling these firms to hire workers and, in turn, build more sustainable communities, cities and states. Moving forward, research that builds upon the state of minority businesses could explore more opportunities to help these firms enhance capacities, increase access to capital, and strive towards greater economic parity.

 

APPENDIX A: Research Methodology

Definitions

The data in this report analyzed business measures for all firms (employer firms and non-employer firms) from the U.S. Census Bureau’s 2007 Survey of Business Owners (2007 SBO) and the 2002 Survey of Business Owners (2002 SBO). This report also uses estimates from the U.S. Census Bureau’s Population Estimates Program (July 2013) to determine total population and minority population by state.

Minority-Owned Firms

For this report, the definition of “minority-owned firm” was extracted from the 2002 and 2007 SBO. The U.S. Census Bureau tabulates the data to show totals for all minority firms, as well as values for each racial/ethnic group. These totals, however, do not equal the sum of the values for each racial/ethnic group because survey reporters can select more than one racial/ethnic category. In 2007, in particular and in accordance with the Office of Management and Budget (OMB) guidelines, each business owner/survey respondent had the option of selecting more than one race; therefore, businesses could be tabulated in more than one racial group. Thus, owners that reported more than one race may be counted more than once in this report.

Nonminority-Owned Firms

In this report, nonminority firms are defined as all firms minus those that are publicly held, not-for-profit, or foreign-owned firms. The variable for nonminority firms also does not include minority firms. Our definition differs from the U.S. Census Bureau’s definition of nonminority firms. In their case, the nonminority definition excludes firms which are owned equally by minority and nonminority owners. The definition used in this report, however, includes firms owned equally by minority and nonminority owners in the nonminority totals, and is consistent with definitions used in the prior MBDA report, The State of Minority Business Enterprises, An Overview of the 2002 Survey of Business Owners. However, the U.S. Census did not publish data on nonminority firms in their 2002 SBO.

Minority Population

Minority population is calculated from the U.S. Census Bureau Population estimates as total population less non- Hispanic white alone (i.e. single race) population. The racial classification used in this report adheres to Office of Management and Budget (OMB), Statistical Directive No.15: “Race and Ethnic Standards for Federal Agencies and Administrative Reporting,” Federal Register 43:19269-19270, May 4, 1978. New standards were adopted by OMB in October 1997 and were implemented by all federal agencies on January 1, 2003. The categories are American Indian and Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White. There are also two categories for data on ethnicity: “Hispanic or Latino” and “Not Hispanic or Latino.” MBDA adheres to the U.S. Census definition of nonminority, single race Non- Hispanic White.

Reliability of Estimates33

The values in this report are, in part, estimated from a sample, and will differ from the figures that would have been obtained from a complete census. Two types of possible errors are associated with estimates based on data from sample surveys: sampling errors and non-sampling errors. The accuracy of a survey result depends not only on the sampling errors and non-sampling errors measured, but also on the non-sampling errors not explicitly measured. For particular estimates, the total error may exceed the measured error. The following is a description of the sampling and non-sampling errors associated with this tabulation.

Sampling variability. The particular sample used for this survey is one of a large number of all possible samples of the same size that could have been selected using the same sample design. Estimates derived from the different samples would differ from each other. The relative standard error (RSE) and standard error are measures of the variability among the estimates from all possible samples. The estimated relative standard errors and estimated standard errors presented in the tables reflect the sampling variability, and thus measure the precision with which an estimate from the particular sample selected for this survey approximates the average result of all possible samples. Relative standard errors and standard errors are applicable only to those published cells in which sample cases are tabulated. A relative standard error is an expression of the standard error as a percent of the quantity being estimated.

The sample estimate and an estimate of its relative standard error can be used to estimate the standard error and then construct interval estimates with a prescribed level of confidence that the interval includes the average results of all samples. To illustrate, if all possible samples were surveyed under essentially the same condition, and estimates calculated from each sample, then:

Approximately 68 percent of the intervals from one standard error below the estimate to one standard error above the estimate would include the average value of all possible samples.

Approximately 90 percent of the intervals from 1.6 standard errors below the estimate to 1.6 standard errors above the estimate would include the average value of all possible samples.

Thus, for a particular sample, one can say with specified confidence that the average of all possible samples is included in the constructed interval.

Example of a confidence interval. Suppose the estimate is 51,707 and the estimated relative standard error is 2 percent. The standard error is then 2 percent of 51,707 or 1,034. An approximate 90 percent confidence interval is found by first multiplying the standard error by 1.6 and then adding and subtracting that result from the estimate to obtain the upper and lower bounds. Since 1.6 x 1,034 = 1,654, the confidence interval in this example is 51,707 + or - 1,654 or the range 50,053 to 53,361.

For the Characteristics of Businesses and Characteristics of Business Owners datasets, some data are expressed as percentages with standard errors rather than relative standard errors as indicated above. Construction of the confidence interval is illustrated by the following example.

Example of a confidence interval for percentage data. Suppose the estimate is 76.9 and the estimated standard error is 0.4 percent. An approximate 90 percent confidence interval is found by first multiplying the standard error by 1.6 and then adding and subtracting that result from the estimate to obtain the upper and lower bounds. Since 1.6 x 0.4 = 0.64, the confidence interval in this example is 76.9 + or - 0.64 or the range 76.26 to 77.54.

Non-sampling errors. All surveys and censuses are subject to non-sampling errors. Non-sampling errors are attributable to many sources, including the inability to obtain information for all cases in the universe, imputation for missing data, data errors and biases, mistakes in recording or keying data, errors in collection or processing and coverage problems.

While explicit measures of the effects of these non- sampling errors are not available, adjustments are made to the published relative standard errors to account for error associated with imputation of missing data. It is believed that most of the important operational and data errors were detected and corrected through an automated data edit designed to review the data for reasonableness and consistency. Quality control techniques were used to verify that operating procedures were carried out as specified.

Unpublished estimates. Some unpublished estimates can be derived directly from datasets by subtracting published estimates from their respective totals. However, the estimates obtained by such subtraction would be subject to poor response, high sampling variability, or other factors that may make them potentially misleading.

This Report. All of the data comparisons in this report, except where noted, are significant at the 90 percent confidence interval. Where data was computed from U.S. Census data and the standard error was not available, the standard error was estimated as the square root of the sum each of the standard error times the estimate squared. The 2002 standard errors were not available for total minority estimates. The standard error for total nonminority is estimated as the square root of the standard error for white firms (times) the number of white firms (squared) (plus) the standard error for Hispanic firms times the number of Hispanic firms squared. When testing comparisons between total minority and nonminority estimates, the Census standard error for total nonminority was used as a proxy for the standard error of this report’s computed value for total nonminority.

The U.S. Census Bureau population statistics used in this report did not include measures of standard error; therefore no tests for significance could be made for these data. For information on the reliability of individual minority group estimates and their relative standard errors, please visit the U.S. Census Bureau website at www.census.gov/econ/sbo/.

A detail of the RSE for select tables is included in Appendix B. The standard error was not available where data was calculated from U.S. Census data rather than taken from Census reports; these areas are marked “NA.”

APPENDIX B:

Relative Standard Error Tables

Table A: Relative Standard Error (percent) for Number of All Firms, Receipts of All Firms for Table 1

Group Year RSE of Estimate (percent)
for Number of Firms
RSE of Estimate (percent) for Annual Gross Receipts

 

African American

2007

0

3

2002

1

1

 

American Indian and Alaska Native

2007

1

3

2002

2

6

 

Asian

2007

0

1

2002

0

2

 

Hispanic

2007

0

2

2002

0

3

Native Hawaiian and Other Pacific Islander

2007

4

6

2002

6

5

 

Total Minority

2007

0

1

2002

NA

NA

 

Nonminority

2007

0

0

2002

NA

NA

 

Publicly Held and Other Firms

2007

0

0

2002

0

0

 

All Firms

2007

0

0

2002

0

0

 

Table B: Relative Standard Error (percent) for Number of Employer Firms, Receipts of Employer Firms for Table 2

 

Group

 

Year

RSE of Estimate (percent) for Number of Firms

 

RSE of Estimate (percent) for Annual Gross Receipts

 

African American

2007

1

3

2002

1

1

 

American Indian and Alaska Native

2007

2

4

2002

2

4

 

Asian

2007

0

1

2002

1

2

 

Hispanic

2007

1

2

2002

1

3

Native Hawaiian and Other Pacific Islander

2007

6

7

2002

7

10

 

Total Minority

2007

0

1

2002

0

1

 

Nonminority

2007

0

0

2002

NA

NA

 

Publicly Held and Other Firms

2007

0

0

2002

0

0

 

All Firms

2007

0

0

2002

0

0

 

Table C: Relative Standard Error (percent) for Top Five States for Minority Firms by Minority Group, 2007 for Table 4

State Ranking 

State RSE of Estimate (percent) for Number of Firms

All Minority

1

California

0

2

Texas

0

3

Florida

0

4

New York

1

5

Georgia

1

African American

1

New York

1

2

Georgia

1

3

Florida

1

4

Texas

1

5

California

1

American Indian and Alaska Native

1

California

3

2

Oklahoma

5

3

Texas

3

4

New York

6

5

Florida

4

Asian

1

California

0

2

New York

1

3

Texas

1

4

New Jersey

2

5

Florida

1

Hispanic

1

California

0

2

Florida

1

3

Texas

0

4

New York

1

5

New Jersey

1

Native Hawaiian and Other Pacific Islander

1

Hawaii

6

2

California

9

3

New York

10

4

Florida

17

5

Washington

17

 

Table D: Relative Standard Error (percent) for Share of Minority Firms and Minority Population by State, 2007 for Table 5

State 

RSE of Estimate (percent) for Number of Firms

Alabama

2

Alaska

4

Arizona

1

Arkansas

2

California

0

Colorado

2

Connecticut

2

Delaware

2

District of Columbia

2

Florida

0

Georgia

1

Hawaii

1

Idaho

5

Illinois

1

Indiana

1

Iowa

4

Kansas

3

Kentucky

3

Louisiana

1

Maine

8

Maryland

1

Massachusetts

1

Michigan

1

Minnesota

2

Mississippi

1

Missouri

2

Montana

8

Nebraska

4

Nevada

1

New Hampshire

7

New Jersey

1

New Mexico

1

New York

1

North Carolina

1

North Dakota

9

Ohio

1

Oklahoma

3

Oregon

3

Pennsylvania

1

Rhode Island

3

South Carolina

2

South Dakota

9

Tennessee

1

Texas

0

Utah

4

Vermont

11

Virginia

1

Washington

1

West Virginia

8

Wisconsin

1

Wyoming

11

 

Table E: Relative Standard Error (percent) for Minority Firms by State and Minority Group, 2007 for Table 6

 

State

RSE of Estimate (percent)

 

Minority

 

African American

 

American Indian and Alaska Native

 

Asian

 

Hispanic

 

Native Hawaiian and Other Pacific Islander

Alabama

2

1

8

5

6

33

Alaska

4

8

5

3

1

29

Arizona

1

1

6

2

2

S

Arkansas

2

2

12

7

5

57

California

0

1

3

0

0

9

Colorado

2

4

6

3

2

12

Connecticut

2

3

16

4

4

61

Delaware

2

2

S

6

9

59

District of Columbia

2

2

27

7

6

S

Florida

0

1

4

1

1

17

Georgia

1

1

7

2

2

22

Hawaii

1

7

14

1

7

6

Idaho

5

13

20

8

7

S

Illinois

1

1

8

2

3

14

Indiana

1

1

15

1

6

32

Iowa

4

12

22

5

7

56

Kansas

3

7

6

5

6

S

Kentucky

3

3

24

8

8

43

Louisiana

1

1

14

2

3

62

Maine

8

15

24

13

17

95

Maryland

1

1

11

1

3

24

Massachusetts

1

3

17

2

3

25

Michigan

1

1

5

2

6

22

Minnesota

2

2

6

3

6

S

Mississippi

1

1

23

5

10

29

Missouri

2

2

14

3

2

25

Montana

8

22

9

15

15

S

Nebraska

4

7

28

9

7

0

Nevada

1

3

13

2

3

20

New Hampshire

7

15

S

7

11

32

New Jersey

1

2

7

2

1

28

New Mexico

1

8

6

6

1

33

New York

1

1

6

1

1

10

North Carolina

1

1

7

2

4

27

North Dakota

9

27

17

14

26

42

Ohio

1

2

7

3

4

S

Oklahoma

3

4

5

4

7

33

Oregon

3

8

13

3

4

20

Pennsylvania

1

1

14

2

2

34

Rhode Island

3

6

22

8

3

43

South Carolina

2

2

15

4

4

34

South Dakota

9

34

9

23

16

63

Tennessee

1

2

13

3

4

23

Texas

0

1

3

1

0

13

Utah

4

11

10

5

6

12

Vermont

11

S

38

10

17

S

Virginia

1

1

10

2

2

19

Washington

1

S

9

2

2

17

West Virginia

8

S

S

10

21

30

Wisconsin

1

3

8

4

7

S

Wyoming

11

18

10

21

14

0

Note: “S” indicates data was suppressed by Census

 

Table F: Relative Standard Error (percent) for Top Five Combined Statistical Areas (CSA) for Minority Firm Concentration, 2007 for Table 8

CSA Ranking

 CSA

RSE of Estimate (percent) for Number of Firms

All Minority

1

Los Angeles-Long Beach-Riverside, CA CSA

0

2

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

0

3

Miami-Fort Lauderdale-Pompano Beach, FL Metro Area

1

4

Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA

1

5

San Jose-San Francisco-Oakland, CA CSA

1

African American

1

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

1

2

Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA

1

3

Atlanta-Sandy Springs-Gainesville, GA-AL CSA

1

4

Chicago-Naperville-Michigan City, IL-IN-WI CSA

1

5

Miami-Fort Lauderdale-Pompano Beach, FL Metro Area

1

American Indian and Alaska Native

1

Los Angeles-Long Beach-Riverside, CA CSA

3

2

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

6

3

San Jose-San Francisco-Oakland, CA CSA

8

4

Tulsa-Bartlesville, OK CSA

6

5

Oklahoma City-Shawnee, OK CSA

10

Asian

1

Los Angeles-Long Beach-Riverside, CA CSA

1

2

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

1

3

San Jose-San Francisco-Oakland, CA CSA

1

4

Washington-Baltimore-Northern Virginia, DC-MD-VA-WV CSA

2

5

Chicago-Naperville-Michigan City, IL-IN-WI CSA

2

Hispanic

1

Miami-Fort Lauderdale-Pompano Beach, FL Metro Area

1

2

Los Angeles-Long Beach-Riverside, CA CSA

1

3

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

1

4

Houston-Baytown-Huntsville, TX CSA

2

5

Dallas-Fort Worth, TX CSA

2

Native Hawaiian and Other Pacific Islander

1

Honolulu, HI Metro Area

6

2

Los Angeles-Long Beach-Riverside, CA CSA

13

3

San Jose-San Francisco-Oakland, CA CSA

15

4

New York-Newark-Bridgeport, NY-NJ-CT-PA CSA

13

5

Seattle-Tacoma-Olympia, WA CSA

15

 

Table G: Relative Standard Error (percent) for Top Five Industry Sectors for Minority Firm Concentration, 2007 for Table 9

Industry Sector
Ranking

Industry Sector RSE of Estimate
(percent) for Number of Firms

All Minority

1

Other services (except public administration)

0

2

Health care and social assistance

0

3

Administrative and support and waste management and remediation services

0

4

Professional, scientific, and technical services

1

5

Construction

0

African American

 

1

Health care and social assistance

0

2

Other services (except public administration)

0

3

Administrative and support and waste management and remediation services

1

4

Transportation and warehousing

1

5

Professional, scientific, and technical services

1

American Indian and Alaska Native

1

Construction

2

2

Other services (except public administration)

3

3

Health care and social assistance

3

4

Professional, scientific, and technical services

3

5

Administrative and support and waste management and remediation services

3

Asian

1

Other services (except public administration)

0

2

Professional, scientific, and technical services

1

3

Retail trade

1

4

Health care and social assistance

1

5

Accommodation and food services

1

Hispanic

1

Construction

1

2

Other services (except public administration)

0

3

Administrative and support and waste management and remediation services

1

4

Health care and social assistance

1

5

Transportation and warehousing

0

Native Hawaiian and Other Pacific Islander

1

Other services (except public administration)

5

2

Construction

8

3

Retail trade

12

4

Health care and social assistance

8

5

Professional, scientific, and technical services

12

 

Table H: Relative Standard Error (percent) of Distribution for Minority-Owned and All Classifiable Firms by Industry, 2007 for Figure 7 and Figure 8

 

Industry

RSE of Estimate (percent) for Nonminority Firms

 

RSE of Estimate (percent) for Minority Firms

Accommodation and food services

1

1

Administrative and support and waste management and remediation services

1

0

Agriculture, forestry, fishing and hunting

2

2

Arts, entertainment, and recreation

1

1

Construction

1

0

Educational services

2

1

Finance and insurance

1

1

Health care and social assistance

1

0

Industries not classified

13

9

Information

1

1

Management of companies and enterprises

2

7

Manufacturing

1

1

Mining, quarrying, and oil and gas extraction

2

8

Other services (except public administration)

1

0

Professional, scientific, and technical services

1

1

Real estate and rental and leasing

1

1

Retail trade

1

1

Transportation and warehousing

1

0

Utilities

6

4

Wholesale trade

2

1

Total for all sectors

0

0

 

Table I: Relative Standard Error (percent) for Industries with the Highest Average Gross Receipts (thousands) for Minority Firms and All Firms, 2007 for Figure 9

 

Industry

Number of Firms Receipts

 

RSE of Estimate (percent) for Nonminority Firms

 

RSE of Estimate (percent) for Minority Firms

 

RSE of Estimate (percent) for Nonminority Firms

 

RSE of Estimate (percent) for Minority Firms

Accommodation and food services

1

1

1

1

Administrative and support and waste management and remediation services

1

0

1

2

Agriculture, forestry, fishing and hunting

2

2

2

6

Arts, entertainment, and recreation

1

1

1

6

Construction

1

0

1

2

Educational services

2

1

2

3

Finance and insurance

1

1

1

4

Health care and social assistance

1

0

1

1

Industries not classified

13

9

11

11

Information

1

1

1

5

Management of companies and enterprises

2

7

2

5

Manufacturing

1

1

1

3

Mining, quarrying, and oil and gas extraction

2

8

2

11

Other services (except public administration)

1

0

1

1

Professional, scientific, and technical services

1

1

1

1

Real estate and rental and leasing

1

1

1

2

Retail trade

1

1

1

2

Transportation and warehousing

1

0

1

2

Utilities

6

4

6

8

Wholesale trade

2

1

2

3

Total for all sectors

0

0

0

1

 

Table J: Relative Standard Error (percent) for Number of Firms by Industry Sector, 2007 for Table 10

 

Industry

RSE of Estimate (percent)

 

Nonminority

 

Minority

 

Black or African American

American Indian and Alaska Native

 

Asian

 

Hispanic

Native Hawaiian and Other Pacific Islander

Total for all sectors

0

0

0

1

S

0

4

Agriculture, forestry, fishing and hunting

0

2

5

7

5

3

S

Mining, quarrying, and oil and gas extraction

1

8

S

23

16

8

97

Utilities

4

4

7

39

21

6

30

Construction

0

0

1

2

1

1

8

Manufacturing

1

1

3

3

3

2

 

Wholesale trade

0

1

2

4

1

2

 

Retail trade

0

1

1

4

1

2

12

Transportation and warehousing

0

0

1

4

1

0

11

Information

1

1

2

6

3

3

19

Finance and insurance

0

1

2

11

2