African-American businesses, also known as Black-owned businesses or Black businesses, originated in the days of slavery before 1865. Emancipation and civil rights permitted businessmen to operate inside the American legal structure starting in the Reconstruction Era (1863–77) and afterwards. By the 1890's, thousands of small business operations had opened in urban areas. The most rapid growth came in the early 20th century, as the increasingly rigid Jim Crow system of segregation moved urban Blacks into a community large enough to support a business establishment. The National Negro Business League, Promoted by college president Booker T. Washington the League opened over 600 chapters, reaching every city with a significant Black population.
African Americans have operated virtually every kind of company, but some of the most prominent Black-owned businesses have been insurance companies, banks, recording labels, funeral parlors, barber shops, beauty salons, restaurants, soul food restaurants, record stores, and bookstores.
By 1920, there were tens of thousands of Black businesses, the great majority of them quite small. The largest were insurance companies. The League had grown so large that it supported numerous offshoots, serving bankers, publishers, lawyers, funeral directors, retailers and insurance agents. The Great Depression of 1929-39 was a serious blow, as cash income fell in the Black community because of very high unemployment, and many smaller businesses closed down. During World War II many employees and owners switched over to high-paying jobs in munitions factories. Black businessmen generally were more conservative elements of their community, but typically did support the Civil Rights Movement. By the 1970s, federal programs to promote minority business activity provided new funding, although the opening world of mainstream management in large corporations attracted a great deal of talent. Black entrepreneurs originally based in music and sports diversified to build "brand" names that made for success in the advertising and media worlds.
Black entrepreneurship can be traced back to when the African Americans were first forcibly brought to North America in the 17th century. Many African Americans who gained their own freedom out of slavery opened their own businesses, and even some enslaved African Americans were able to operate their own businesses, either as skill tradespeople or as minor traders and peddlers. Enslaved African Americans operated businesses both with and without their owners' permission.
Free blacks facing a generally hostile environment occasionally operated small businesses.
Profit-making businesses were created by more free and enslaved African Americans than one might realize from the usual survey of antebellum America. When the opportunity presented itself, it was taken by these men and women, sometimes timidly, sometimes whole-heartedly, and often endorsed by the masters of the enslaved.
As a young slave, Lunsford Lane recalls selling a basket of peaches for money he could keep and very soon, he says, "plans for money-making took the principal possession of my thoughts." In six to eight years he had amassed one thousand dollars, enough to purchase his freedom, as we read from The Narrative of Lunsford Lane (1842).
William J. Brown was born into a free black family in Rhode Island and as a young man faced discrimination and often unethical treatment from whites as he strove to pursue a trade and career. In his selection from his Life of William J. Brown of Providence, R. I. (1883) we read his frustrating experiences as a store clerk and apprentice shoemaker.
James Forten, Sr., a freeman and grandfather of Charlotte Forten (see #3: Free-born), learned the sail-making trade after the Revolution, bought his employer's business, and later became the wealthiest black man in Philadelphia. In this 1835 article from the white journal The Anti-Slavery Record, a white reporter describes a visit to Forten's sailmaking business.
After being emancipated by his master in 1820, William Johnson became a successful black businessman in Natchez, Mississippi, operating a barber shop, loaning money and acquiring real estate.
Free-born in Philadelphia, Mifflin Gibbs became a businessman, lawyer, politician, and abolitionist. For several years he operated a clothing store in San Francisco, which he we learn from his autobiography Shadow and Light (1902).
After purchasing her freedom in St. Louis, Elizabeth Keckley moved to Washington, DC, and became the dressmaker for Mary Todd Lincoln, producing elegant gowns for the capital's elite women. Her 1868 autobiography Behind the Scenes display her ardor and initiative in creating her business and her life.
Emancipation and civil rights permitted businessmen to operate inside the American legal structure starting in the Reconstruction Era (1863–77) and afterwards. By the 1890s, thousands of small business operations had opened in urban areas.
The South had relatively few cities of any size in 1860, But during the war, and afterward, refugees both black and white flooded in from rural areas. The growing black population produced a leadership class of ministers, professionals, and businessmen. These leaders typically made civil rights a high priority. Of course, great majority of blacks in urban America were unskilled or low skilled blue-collar workers.Historian August Meier reports:
Memphis Tennessee was the base for Robert Reed Church (1839–1912), a freedman who became the South's first black millionaire. He made his wealth from speculation in city real estate, much of it after Memphis became depopulated after the yellow fever epidemics. He founded the city's first black-owned bank, Solvent Savings Bank and Trust, ensuring that the black community could get loans to establish businesses. He was deeply involved in local and national Republican politics and directed patronage to the black community. His son Robert Reed Church, Jr., became a major politician in Memphis. He was a leader of black society and a benefactor in numerous causes.
Black communities were undoubtedly negatively affected by the enforcement of racial segregation in cities and urban areas where blacks were limited in what residential areas they could occupy. Whether in the South or the North, segregation limited the social, educational, and economic progress of the varying black communities forced into this racist social practice. However, new economic, anthropological and census research conducted establishes how black communities in the North during the late 19th Century fought against racial segregation by donning new attitudes towards commerce and entrepreneurship. Racial segregation in the North during the late 19th Century saw a considerable rise in black entrepreneurship and black owned small businesses within their respective communities. These small business owners were able to take advantage of constraints placed upon the African American communities, and exploit a market of untapped black consumers that at the time were not allowed a great deal of purchasing power in white economic markets. This rise in “negro markets” as framed by St. Clair Drake and Horace R. Clayton in Black Metropolis occurred in the South Side of cities like Chicago where African Americans established a “black belt” of their own where the number of black owned businesses reached 2,500 by 1937 in South Side Chicago.
The nadir of race relations was reached in the early 20th century, in terms of political and legal rights. Blacks were increasingly segregated. However the more they were cut off from the larger white community, the more black entrepreneurs succeeded in establishing flourishing businesses that catered to a black clientele.
The most rapid growth came in the early 20th century, As the increasingly rigid Jim Crow system of segregation moved urban blacks into a community large enough to support a business establishment. The National Negro Business League, Promoted by college president Booker T. Washington the League opened over 600 chapters, reaching every city with a significant black population.
By 1920, there were tens of thousands of black businesses, the great majority of them quite small. The largest were insurance companies. The League had grown so large that it supported numerous offshoots, including the National Negro Bankers Association, the National Negro Press Association, the National Association of Negro Funeral Directors, the National Negro Bar Association, the National Association of Negro Insurance Men, the National Negro Retail Merchants' Association, the National Association of Negro Real Estate Dealers, and the National Negro Finance Corporation. The Great Depression of 1929-39 was a serious blow, as cash income fell in the black community because of unemployment, and many smaller businesses close down. During World War II many employees can indeed owners switched over to high-paying jobs in munitions factories. Black businessmen generally were more conservative elements of their community, but typically did support the civil rights movement. By the 1970s, federal programs to promote minority business activity provided new funding, although the opening world of mainstream management attracted a great deal of talent.
In urban areas, North and South, the size and income of the black population was growing, providing openings for a wide range of businesses, from barbershops to insurance companies. Undertakers had a special niche, and often played a political role.
Historian Juliet Walker calls 1900–1930 the "Golden age of black business." According to the National Negro Business League, the number black-owned businesses doubled from 20,000 1900 and 40,000 in 1914. There were 450 undertakers in 1900 and, rising to 1000. Drugstores rose from 250 to 695. Local retail merchants – most of them quite small – jumped from 10,000 to 25,000.
One of the leading centers of black business was Atlanta. According to August Meier and David Lewis, 1900 was the turning point as white businessmen reduced their contacts with black customers, black entrepreneurs rush to fill the vacuum by starting banks, insurance companies, and numerous local retailers and service providers. Furthermore, the number of black doctors and lawyers increased sharply. All this of course was in addition to the traditional businesses, such as undertakers and barbershops that had always depended on a black clientele. Durham, North Carolina, a new industrial city based on tobacco manufacturing and cotton mills, was noted for the growth of its black businesses. Durham lacked traditionalism based on plantation-era slavery, and practiced a laissez-faire that allowed black entrepreneurs to flourish.
College president Booker T. Washington (1856–1915), who ran the National Negro Business League was the most prominent promoter of black business. He moved from city to city to sign up local entrepreneurs into his national network the National Negro Business League.
By the 1920s, the federal government had set up a small unit to distribute information to black entrepreneurs, but no financial aid was forthcoming.
By far the most prominent black entrepreneur of the century of was Charles Clinton Spaulding (1874 – 1952), president of North Carolina Mutual Life Insurance Company in Durham North Carolina. It was the nation's largest black-owned business. It operated a system of industrial insurance, whereby its salesmen collected small premiums of about 10 cents every week from its clients. That provided them insurance for the following week; if the client died the salesman immediately arranged payment of the death benefit of about $100. That paid for suitable funeral, which was a high prestige event to the black community. Black undertakers also benefited and themselves became prominent business men. By 1970, they grossed more than $120 million for 150,000 race funerals each year.
African-American newspapers flourished in the major cities, with publishers playing a major role in politics and business affairs. Representative leaders included Robert Sengstacke Abbott (1870–1940), publisher of the Chicago Defender; John Mitchell, Jr. (1863–1929), editor of the Richmond Planet and president of the National Afro-American Press Association; Anthony Overton (1865–1946), publisher of the Chicago Bee, and Robert Lee Vann (1879–1940), the publisher and editor of the Pittsburgh Courier. Leon H. Washington Jr. founded the Los Angeles Sentinel in 1933.
John H. Johnson (1918–2005) was the founder of the Johnson Publishing Company in 1942. He rose from poverty to millionaire by the time he was thirty-one. In 1982, he became the first African American to appear on the Forbes 400. Johnson's Ebony and Jet magazines were among the most influential African-American media by 1950.
Most of the African-Americans in business were men, however women played a major role especially in the area of beauty. Standards of beauty were different for whites and blacks, and the black community developed its own standards, with an emphasis on hair care. Beauticians could work out of their own homes, and did not need storefronts. As a result, black beauticians were numerous in the rural South, despite the absence of cities and towns. They pioneered the use of cosmetics, at a time when rural white women in the South avoided them. As Blain Roberts has shown, beauticians offered their clients a space to feel pampered and beautiful in the context of their own community because, "Inside black beauty shops, rituals of beautification converged with rituals of socialization." Beauty contests emerged in the 1920s, and in the white community they were linked to agricultural county fairs. By contrast in the black community, beauty contests were developed out of the homecoming ceremonies at their high schools and colleges.
The most famous entrepreneur was Madame C.J. Walker (1867–1919); she built a national franchise business called Madame C.J. Walker Manufacturing Company based on her invention of the first successful hair straightening process. Marjorie Joyner (1896–1994) was the first black graduate of a beauty school in Chicago, where she got to know Madame Walker and became her agent. By 1919 Joyner was the national supervisor over Walker's 200 beauty schools. A major role was sending their hair stylists door-to-door, dressed in black skirts and white blouses with black satchels containing a range of beauty products that were applied in the customer's house. Joyner taught some 15,000 stylists over her fifty-year career. She was also a leader in developing new products, such as her permanent wave machine. She helped write the first cosmetology laws for the state of Illinois, and founded both a sorority and a national association for black beauticians. Joyner was friends with Eleanor Roosevelt, and helped found the National Council of Negro Women. She was an advisor to the Democratic National Committee in the 1940s, and advised several New Deal agencies trying to reach out to black women. Joyner was highly visible in the Chicago black community, as head of the Chicago Defender Charity network, and fundraiser for various schools. In 1987 the Smithsonian Institution in Washington opened an exhibit featuring Joyner's permanent wave machine and a replica of her original salon.
The leading beauty salon for black women in Washington was operated by the sisters Elizabeth Cardozo Parker (1900–1981) and Margaret Cardozo Holmes (1898–1991) from 1929 to 1971. The Cardozo Sisters Hair Stylists expanded to five storefronts stretching an entire city block near the campus of Howard University, with 25 employees assisting up to 200 clients a day. They had a voice in the national beauticians community, and demanded an end to discriminatory practices.
Rose Meta Morgan (1912–2008) founded the House of Beauty salon to promote African-American standards of beauty, in opposition to those "white" standards that sought silky straight hair and light skin. Born in rural Mississippi, she moved to Chicago as a child and showed entrepreneurial skills as a teenager. She relocated to New York City in 1938, where her small beauty shop became the world's largest African-American beauty parlor. She staged fashion shows in Harlem, and sold her brand of cosmetics designed "to glorify a woman of color". She was briefly married to the famous heavyweight boxing champion Joe Louis from 1955–58. In 1965 he founded New York City's only black commercial bank, Freedom National Bank; in 1972 she set up a franchise operation for beauticians. Vera Moore (b 1950) marketed her unique brands of Vera Moore Cosmetics, including some products developed by her husband. She opened stores and upscale malls, and had superstars as clients.
In addition to the more prominent businesses listed above, African Americans have strong traditions of owning and operating small businesses such as restaurants, drug stores, newsstands, corner stores, candy shops, liquor stores, groceries, bars, and gas stations.
African Americans also have a length history of ownership in music-related businesses, including record stores, nightclubs, and record labels. African-American bookstores were closely tied to radical political movements, including Black Power, black nationalism, pan-Africanism, and Marxism.
The term '"double duty dollar"' was used in the US from the early 1900s through the early 1960s, to express the notion that dollars spent with businesses hiring blacks simultaneously purchased a commodity and advanced the race. Where that concept applied, retailers who excluded African Americans as employees effectively excluded them as patrons too.
Religious leaders and social activists such as Booker T. Washington and Marcus Garvey urged their communities to redirect their dollars from suppliers who excluded African Americans to suppliers with more inclusive practices. Though the Swadeshi movement in India had much broader goals, Mohandas Gandhi also famously urged his countrymen, in the 1920s, to avoid funding their own subjugation by buying things from the British – things they could produce and trade independently, like cloth and clothing. In the 1940s and 1950s, Leon Sullivan applied the broader phrase selective patronage to note consumers' choice of suppliers as a tool a) to influence suppliers toward fairer, more just interactions with African Americans, and b) to build demand for African American suppliers. In retrospect the movement had little impact.
Minority entrepreneurship entered the national agenda in 1927 when Secretary of Commerce Herbert Hoover set up a Division of Negro Affairs to provide advice, and disseminate information to both white and black businessman on how to reach the black consumer. Entrepreneurship was not on the New Deal agenda after 1933. However, when Washington turned to war preparation in 1940, the Division of Negro Affairs tried to help black business secure defense contracts. Black businesses were not oriented toward manufacturing in the first place, and generally were too small to secure any major contracts. President Eisenhower disbanded the agency in 1953. With the civil rights movement at full blast, Lyndon Johnson coupled black entrepreneurship with his war on poverty, setting up special program in the Small Business Administration, the Office of Economic Opportunity, and other agencies. This time there was money for loans designed to boost minority business ownership. Richard Nixon greatly expanded the program, setting up the Office of Minority Business Enterprise (OMBE) in the expectation that black entrepreneurs would help defuze racial tensions and possibly support his reelection .
Most national corporations before the 1960s ignored the black market, and paid little attention to working with black merchants or hiring blacks for responsible positions. Pepsi-Cola was a major exception, as the number two brand fought for parity with Coca-Cola. The upstart soda brand hired Edward F. Boyd (1914–2007), a pioneer black advertiser. Boyd hired local black promoters who penetrated into black markets across the South and the urban North. Journalist Stephanie Capparell interviewed six men who were on the team in the late 1940s:
Pepsi advertisements avoided the stereotypical images common in the major media that depicted one-dimensional Aunt Jemimas and Uncle Bens whose role was to draw a smile from white customers. Instead it portrayed black customers as self-confident middle-class citizens who showed very good taste in their soft drinks. They were economical too, as Pepsi bottles were twice the size.
In 2002, African American-owned businesses accounted for 1.2 million of the US's 23 million businesses. As of 2011[update] African American-owned businesses account for approximately 2 million US businesses. Black-owned businesses experienced the largest growth in number of businesses among minorities from 2002 to 2011. The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 had as one goal to assist black-owned businesses land more federal contracts. It required federal agencies to open an Office of Minority and Women Inclusion (OMWI) to track their diversity efforts in workforce hiring and procurement.
In 2015 The US Census Reported that there were 2.6 million black or African American-owned firms nationally in 2012, up from 1.9 million or 34.5 percent from 2007. Many apps and online directories, have emerged offering a database of African American owned businesses that consumers can support.
Black entrepreneurs originally based in music and sports diversified to build "brand" names that made for success in the advertising and media worlds. The most prominent examples include media mogul Oprah Winfrey who became involved in numerous enterprises such as a book club that changed the way America reads. Basketball superstar Magic Johnson was named by Ebony magazine as one of America's most influential black businessmen in 2009, Johnson has numerous business interests, and was a part-owner of the Lakers for several years. Johnson also is part of a group of investors that purchased the Los Angeles Dodgers in 2012 and the Los Angeles Sparks in 2014.