While Seattle is above average in the percentage of businesses owned by people of color, the great majority of those businesses — 73 percent — have Asian ownership.
Blacks and Hispanics make up about 15 percent of the population in the Seattle metro area — but they own less than 5 percent of the businesses, according to data released Thursday by the Census Bureau. Whites and Asians, on the other hand, are overrepresented as local business owners.
Nearly 300,000 businesses with at least one paid employee were surveyed nationwide for the inaugural Annual Survey of Entrepreneurs — a public-private partnership by the Census Bureau, the Ewing Marion Kauffman Foundation and the Minority Business Development Agency.
The data, which is for 2014, show there are 76,000 firms with paid employees in the Seattle metro area. About 15,000 of these businesses — almost 20 percent — are owned by people of color. That places Seattle above the national average of 17.5 percent.
However, the data show there isn’t much racial diversity among Seattle’s minority-owned businesses. The great majority of them — 73 percent — have Asian ownership.
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That ranks Seattle among the 50 largest U.S. metros, No. 2 behind San Jose, Calif., for the percentage of minority-owned business that are Asian-owned, according to my analysis.
The number of business owners in Seattle who are Asian or white is disproportionally high in relation to the size of those populations — but that’s true, to some extent, in most other metro areas, as well.
Not surprisingly, it boils down to finances, says William Bradford, dean emeritus and professor of finance at the University of Washington Foster School of Business, an expert on minority entrepreneurship and economic development.
“Asian and white families have higher average net worth — therefore savings — to start businesses,” he said, “and studies show that if you have more money to start your business, it is going to be more successful.”
Bradford says that’s partly because a larger amount of seed money can buffer the losses that new businesses often sustain, and can be used to make investments in expansion and growth. Additionally, new businesses in industries with higher capital requirements tend to face less competition, simply because fewer entrepreneurs can afford the entry costs. That results in a higher rate of success.
“In many Asian cultures, families combine resources to assist an individual who wants to start a new business,” he said. While there are examples of this type of support in other communities, it exists to a much lesser extent.
Outside of personal savings and assistance from family and friends, banks are the major source of financing for new businesses — and that has presented its own set of obstacles for people of color. “Studies show that Hispanics and African Americans — particularly the latter — are not treated equally by commercial banks,” Bradford said, “even if they come in with the same background and qualifications compared to white borrowers.” Asians, on the other hand, are treated similarly to whites when applying for loans, he said.
Bradford believes that for minority communities, entrepreneurship is an important driver of economic growth — and his own research shows that successful entrepreneurship can help reduce the racial wealth disparity. For example, black and Hispanic business owners are more likely to hire people within their communities, thus helping lower unemployment and increase neighborhood residents’ purchasing power.
And business owners can become role models who have far-reaching impacts on their communities. “If young Hispanics and African Americans see successful businesses run by people who look like them, that gives them room to aspire,” Bradford said, “and maybe tilts them away from doing negative things and toward things that are positive for society.”
in Seattle’s Central District, things have only gotten worse for black business in recent years, says De Charlene Williams: “They’re all gone — and the ones still here are hanging on by a thread.”
Williams runs the Central Area Chamber of Commerce in the same Madison Street building where her business — De Charlene Beauty Shop & Boutique — is located.
Gentrification, she says, has diminished the customer base of the neighborhood’s longtime black businesses: “What we thrived on was the community, and if you take all those people and push them out … and then you bring in the rich, they don’t want the small neighborhood businesses that are already here.”
But Bradford sees signs of an improving landscape for black and Hispanic entrepreneurship in the future. There’s been a huge increase in black enrollment in MBA programs, he says, and the same trend has occurred among Hispanics. He adds that in the 1970s, the No. 1 major for blacks going into college was education — now it is business.
“It takes time. You can’t start up a business just because you have a degree … But I believe over the next 10 years we’ll see a higher rate of successful black and Hispanic businesses,” Bradford said.
“I feel good, myself, about the future.”