Black-Owned Businesses To Invest In
Supporting black businesses is the most active way of closing the racial wealth gap between the blacks as a historically oppressed group. This would encourage the cycle of economic growth. Support is instrumental in increasing the growth of new businesses and creating employment. For the black community in the North America, seeing representation in the big books would boost the morale of the young entrepreneurs in the community. This will eventually lead to a more diversified economy which is objectively better for everyone.
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What Are Black-Owned Businesses?
A minority business enterprise (MBE) is defined as a “business [that] is at least 51 percent owned by [citizens who are Asian, Black, Hispanic, and Native American] or, in the case of a publicly owned business, one or more such individuals own at least 51 percent of the stock,” according to the National Minority Supplier Development Council (NMSDC) of the United States. The minority owner(s)/shareholders should influence the administration and everyday operations.
Further, a Black-owned business is defined as one whose owner is a “citizen of African ancestry,” which includes both foundational black citizens and African immigrants, according to the NMSDC.
A recent survey shows that 96 percent of all Black-owned businesses in the US are non-employer companies. This means that these firms have no paid employees but are subject to tax from the government. These businesses are usually extremely small-scale and contribute little to the economy. These companies are usually left out of official statistics making it difficult to get a full look at the community. The remaining 4% are employer companies. The study shows that almost 30% of Black-owned employer firms operate in healthcare. Some of these companies have grown to become major forces contributing to economic growth.
Challenges Faced by Black-Owned Businesses
Unfortunately, many Black-owned businesses suffer discrimination but it needn’t be so. Outlined below are some of the challenges faced by Black-owned businesses and how investing in Black-owned businesses or Black-owned stocks will go a long way:
1. Access to Capital
A February 2021 survey by the Canadian Black Chamber of Commerce found that nearly three quarters of the surveyed businesses had either raised capital from within the community or themselves instead of taking a loan from a bank. The report explicitly states, “”One of the reasons behind this lack of comfortability with speaking to financial institutions about funding is many respondents felt that they will be denied.” The report found that this was “especially shared among immigrant entrepreneurs.”
History is full of examples such as Pat McGrath of Pat McGrath Labs, Cathy Hughes, founder and owner of Urban One, and Richelieu Daniels, founder of global skin and hair care company Shea Moisture (later acquired by Unilever) who were rejected by various investors before their success.
2. Mentorship and Financing
Mentorship can have a major influence on the performance of new businesses and SMEs (small to medium enterprises). Mentors assist you in broadening your network and also provide the necessary financial literacy. They may also share with you insights learned from their own experiences, which are difficult to find even in the greatest business books.
In the same study by the CBCC, a majority of the respondents said that “subject matter expertise, personal development, strategy and a sense of community (either with the Black community at large, or with professionals more generally)” were among their non-financial needs. “Training and professional development (including financial literacy, tips on writing funding proposals and applications),” is a service that the respondents feel they could hugely benefit from.
View the full report by the CBCC here.
3. Lower Earning Potential
Traditionally, industries with lower earning potential like childcare, salons & barbershops, and home services are largely owned by the Black community. However, even in Black-dominated sectors, it is not uncommon for businesses owned by other races to earn more annually than their Black counterparts.
It is the same story in the more lucrative sectors. Black businesses in industries like HVAC contracting, Construction, Mental healthcare, etc., earn less than their white competitors. It is a loss on both fronts. According to a report by Investopedia, in 2017, Black-owned businesses made an average of 75,000 CAD annually, and white businesses averaged a whopping 695,000 CAD in the same year.
Black-Owned Stocks to Invest In
- Total assets: $1.24 Billion
- Total revenue: $310.5 Million
- Earnings per share: $0.29/share
Urban One(UONE) was founded in 1980 by a Black entrepreneur, Cathy Hughes. It was first called Radio One. After purchasing a Washington, D.C. radio station then known as WOL-AM in 1987, she broadcast black-centric content on the radio, gaining a massive following from black people all over America. As a result, most of the company’s media properties are geared toward African-Americans. It operates 55 radio stations and owns most of the syndicated Reach Media and its digital branch Interactive One and cable network, TV One, making it the largest black-owned media corporation in the United States.
In 1999, Radio One sold its first shares, making Cathy Hughes the first Black-American woman and the first to own a publicly-traded company. Over time, Radio One purchased several radio stations, providing different kinds of black content to suit the tastes of various black people all over America.
In 2017, the company rebranded, changing its name to Urban One as it expanded into television (TV One); two more radio groups, one local and the other syndicated; radio station Reach Media ; a digital media company, One Digital, and a branded content agency called One Solution.
*All above figures as of September 2021
Broadway Financial Corp.
- Total assets: $1.04 billion
- Total revenue: $10.66 million
- Earnings per share: $0.06/share (all stats are based on June 2021)
Broadway Federal Savings and Loan Association(BYFC) was created in 1946 by a group of civic-minded individuals to provide banking services to minorities in the greater Los Angeles region who any existing financial institutions did not serve. On November 26, 1946, the bank was formed with a $150,000 initial investment. On January 11, 1947, it began operations in a three-room office at 4329 South Broadway.
Real Estate guru H.A. Howard served as the corporation’s first president until September 1949. Then, Dr. H. Claude Hudson, an investor and community activist, took over the firm’s leadership. The company saw fast growth under Dr. Hudson.
On August 26, 2020, Broadway Financial Corp announced that it would join with CFBanc Corporation, located in Washington, DC, as a “transformational merger of equals” that would establish the United States’ biggest Black-led Minority Depository Institution having over $1 billion in assets.
*All above figures as of September 2021
RLJ Lodging Trust
- Total Assets: $5.12 Billion
- Total Revenue: $547.57 million
- Earnings per share: $1.81/share (all stats are based on September 2021)
The RLJ Lodging Trust (RLJ) is a real estate investment trust that owns over 103 hotels in 23 states and the District of Columbia in the United States of America. RLJ Lodging was founded in 2000 by Robert L. Johnson and Thomas J. Baltimore Jr. as RLJ Development to capitalize on the upside potential of “premium-branded, focused-service, and compact full-service hotels.” It wasn’t until 2011 that RLJ became a publicly listed company. The company merged with FelCor Lodging Trust, gaining 37 more properties.
*All above figures as of September 2021
Digital Directory of Black-owned Businesses In Canada
Uber Canada and the Canadian Black Chamber of Commerce (CBCC) have launched Black Business Direct, a new national web directory for Canadian Black-owned businesses. The directory is a concise, user-friendly resource that allows Canadians to find and support local Black-owned companies in their communities. Companies may join the directory for free, and consumers can see it for free.
Black Business Direct results from a collaborative effort to create a community-based platform that connects Black-owned companies. The Black community has long had to continue regional and crowd-sourced listings to advertise and expand access to Black entrepreneurs and enterprises. Black Business Direct, according to the CBCC, is the most recent version of the organization’s efforts to identify and uplevel firms across the country.
Our Final Thoughts
Supporting Black businesses is the best way to push the economy forward. It is not beneficial to the Black community but to society as a whole. It is a great way to bridge the racial wealth gap while still fostering the country’s growth.
Frequently Asked Questions
You may invest in a small business by either lending money to it or purchasing stock. You can get a return in interest, dividends, or purchasing a portion of the firm. If you acquire stock, you will be entitled to a percentage of the company's earnings over time. It will also allow you to profit as the firm grows since your shares will appreciate over time.
You could create a brokerage account with a brokerage firm allowing you to purchase and sell Black-owned stocks. Some of the best online brokers in Canada include Questrade, Qtrade direct investing(great for researching businesses), Weathsimple Trade and Interactive Brokers.