Analytical Studies Branch Research Paper Series
Black Business Owners in Canada

Acknowledgements

This study was funded by Women and Gender Equality Canada (WAGE). The author would like to thank the following people for their helpful comments: Évelyne Bougie, Douwere Grékou, Sylvie Guilmette, Amélie Lafrance-Cooke, Danny Leung, Horatio Morgan, Patrice Rivard and WAGE examiners.

Abstract

This article examines the socioeconomic characteristics of Black business owners in Canada and compares them with the characteristics of their White Canadian and other racialized counterparts. It also explores the characteristics of businesses based on the racial profile of owners. The analysis is based on a new linkage between the Canadian Employer–Employee Dynamics Database (2018), the Census of Population (2001, 2006 and 2016) and the 2011 National Household Survey.

For the first time, these new data provide the opportunity for a more granular analysis of trends in business ownership by racial profile. In this paper, the term “business owners” refers to both the owners of private incorporated businesses and the owners of unincorporated businesses commonly referred to as self-employed workers.

The descriptive analysis presented in this document found that Canada had an estimated 66,880 Black business owners in 2018, accounting for 2.1% of all business owners. The proportion of Black business owners increased among both men and women from 2005 to 2018. A total of 70.4% of Black business owners are men, while 29.6% are women. Black business owners are generally immigrants, and, compared with their White or other racialized counterparts, they have lower incomes on average, are less likely to be married or in a common-law relationship, and are more likely to be single.

Black owners hold 2.9% of unincorporated businesses and 1.6% of incorporated businesses; they operate in almost all industries. Regardless of the type of business, those owned by Black people are on average smaller than those owned by White people or other racialized individuals. In addition, the financial performance of Black-owned businesses is on average weaker than that of White-owned businesses or businesses owned by people from other racialized groups.

1      Introduction

The ethnocultural composition of the Canadian population has changed considerably in recent decades. According to data from the Census of Population, the proportion of people from racialized groups^Note  almost doubled between 2001 and 2021, rising from 13.4% to 26.6%. Data from the 2021 Census highlight the differences between racialized groups and White Canadians (White people) with respect to employment and income. Regardless of their sex,^Note  although they are more active in the labour market than their White counterparts, racialized people were more likely to be unemployed. For example, racialized groups had a labour force participation rate of 67.9%, compared with 62.2% for White people, and an unemployment rate of 12.5%, compared with 9.5% for their White counterparts.^Note 

In 2021, the Black community (4.3%), the third-largest racialized group after the South Asian (7.1%) and Chinese (4.7%) populations, had an unemployment rate of 14.3%, the fifth highest of the 12 racialized groups reported in the census. In addition, Black men had the lowest income levels compared with other men. In 2020, the annual employment income of Black women and men averaged 84% and 69% that of their White counterparts, respectively.

To deal with these unfavourable labour market conditions, Black people and other racialized groups may turn to entrepreneurship. Business ownership can be an important driver of economic growth by promoting innovation and job creation. At the individual level, business ownership is generally associated with higher incomes than non-business owners (Grékou and Gueye, 2021). However, as with wage employment, there may be differences between racialized groups and White people in terms of business ownership. Unfortunately, unlike in the United States of America, few studies based on Canadian data have examined the characteristics of racialized business owners, maybe because of a lack of data on business ownership by racial identity. The Survey on Financing and Growth of Small and Medium Enterprises (SFGSME) and the Canadian Survey on Business Conditions (CSBC) collect information on the majority racial group that owns a business. While the results of these surveys provide the proportion of businesses that are majority-owned by racialized groups, the surveys are at the business level and do not provide information about the intersection with some individual characteristics of the owners.

Business ownership among Black people was identified as an area with a major lack of information. In 2020, members of the Parliamentary Black Caucus said that it is hard to change what cannot be measured,^Note  referring to the lack of data on the constraints faced by Black businesses and entrepreneurs in Canada. In December 2021, the federal government announced the creation of the Black Entrepreneurship Knowledge Hub.^Note  Under the responsibility of Innovation, Science and Economic Development Canada, the purpose of the hub is to conduct qualitative and quantitative research on business ownership in the Black community in Canada.

The purpose of this article is to fill the information gap by drawing a socioeconomic portrait of business owners (self-employed or owners of private incorporated businesses) in Canada by race. For the first time in Canada, time series on business ownership by individuals who identify as racialized are being made available. The article also explores the characteristics of Black-owned businesses and compares them with businesses owned by other racialized people or by White people. To do this, the article is based on a unique linkage of the Canadian Employer‒Employee Dynamics Database (CEEDD); the Census of Population (2001, 2006 and 2016); and the National Household Survey, which replaced the 2011 Census long-form questionnaire. The CEEDD is used to identify business owners, their characteristics and those of their businesses, while information on race is drawn from census data.

The data produced for this project provide an opportunity for a more granular analysis of trends in business ownership by racial profile. In addition, they can potentially be used to analyze microdata, including the intersection with other characteristics of businesses and their owners. As a result, these new series will provide decision makers with evidence to support them in developing public policy and adapted support programs (such as the Black Entrepreneurship Program launched by the federal government in 2021).

This article is divided into five sections. The following section presents the data and methodology. The third section compares the characteristics of Black business owners with those of other racialized groups and White people. The fourth section looks at the characteristics of businesses by the racial profile of their owners, and the fifth section presents the conclusion.

2      Data and Methodology

The data used in this article are from the 2018 Canadian Employer–Employee Dynamics Database (CEEDD), the Census of Population (2001, 2006 and 2016) and the 2011 National Household Survey (NHS). The CEEDD was created and is maintained by Statistics Canada and is the result of a linkage of Statistics Canada’s Business Register with a set of personal and business tax files and other administrative data. The CEEDD identifies business owners and their individual and family characteristics, including sex, age, marital status and immigration status. It also includes business characteristics, such as industry, number of employees, sales and investments. See Green et al. (2016) for more information on the CEEDD. The Census of Population long-form questionnaire collects information on whether an individual belongs to a racialized group. The Employment Equity Act defines visible minorities as “persons, other than Aboriginal peoples, who are non-Caucasian in race or non-white in colour.”

Given that the long-form questionnaire is sent to a sample of the population, linking census and NHS data to the CEEDD helped to determine the racial profile of 47.8% of business owners. Two identification methods were used to assign a racial profile to business owners who did not have to complete the long-form questionnaire. The first was based on the work of Rezai et al. (2013), which classified immigrants into a racialized group according to their country of birth and mother tongue. Using the sample of business owners who responded to the long-form questionnaire as a baseline for validation showed that the results of this method were 91.9% accurate for identifying Black individuals and 96.4% accurate for identifying other racialized groups. Applying this method made it possible to establish the racial profile of 62.0% of business owners (including those already identified in the census and the NHS).

Since the country of birth and mother tongue are available in the CEEDD only for immigrants, a mass imputation method was used to assign a racial profile to non‑immigrant owners who did not complete the long-form questionnaire. This method consists of creating imputation classes from variables related to the one needing imputation. The imputation classes created for this project were based on the person’s age, sex, income and postal code. This method filled in the missing information for specific individuals from available data on individuals with similar characteristics. Gueye et al. (2022) discuss in detail this imputation methodology and the validation exercises that were conducted.

When the analysis is limited to owners identified in the census or the NHS, the proportion of Black business owners is 1.4% versus 2.8% for a sample containing only imputed records or records for which the racial profile is determined using the methodology by Rezai et al. (2013). The rate of owners identified as belonging to a racialized group is also higher in this group. These differences are attributable in part to a higher proportion of immigrants within the group for which the racial profile was assigned according to the methodology used by Rezai et al. (2013) or imputed (28.5% versus 17.3%). Black permanent resident immigrants represented 62.7% of the Black population aged 15 years and older in 2021 (2021 Census). Of the other racialized groups, 72.3% have an immigrant background. When temporary residents are added, 70.7% of Black individuals and 81.5% of other racialized groups in Canada in 2021 were immigrants.^Note 

For the sake of brevity, the rest of the article does not differentiate between the observed group and the group whose racial profile was imputed or determined using the methodology of Rezai et al. (2013). The analytical sample is limited to business owners who were at least 15 years old in 2018. In this article, unless otherwise specified, the term “business owner”^Note   refers to both the owners of a private incorporated business and the owners of an unincorporated business commonly referred to as self-employed workers.^Note  The owners of an unincorporated business, who are not required to have a business number, are excluded from the analytical sample.^Note  It should be noted that there are differences between Black people, White people and other racialized groups with respect to the type of business generally owned. Since becoming self-employed is less expensive than starting a private business, the financial constraint is less drastic for Black people, who have among the lowest income levels. Self-employment therefore becomes a more accessible option for them. As reported by Baldwin et al. (2011), entrepreneurs often start with an unincorporated business before making the transition to incorporation if they can cover the cost and establish the organizational form required to limit liability.

While the data and methodology used in this article produce reliable aggregate results that are comparable with other data sources, it is important to note that they are not without limitations. First, the fact that racial identity is imputed for approximately 38% to 42% of business owners is a potential source of bias in the results. Second, the classification method of Rezai et al. (2013) is also associated with a margin of error of 4% to 8%, which is an additional source of inaccuracy.

This article examines a number of individual and business characteristics but omits a few that may have differences between business owners belonging to different groups. At the individual level, having work experience, having previous business ownership, living in a rural area or having children aged younger than 16 years are factors that may influence the propensity for business ownership but are not included in this study. In addition, the education level, holding of a managerial position or mother tongue (for non-immigrants) are characteristics that may be useful but are not yet available in the CEEDD. Therefore, several other avenues of research can clearly be considered. This study is limited to business owners, but it may be useful to consider differences and similarities in business ownership rates between the Black population and other groups. Such research would help to both assess the representativeness of the Black community in business ownership and compare the results with those from the United States, where research on the entrepreneurship of African Americans is more extensive.

3      Who are Black business owners in Canada?

This section provides a comparative analysis of selected individual and family characteristics of Black business owners compared with those of their White counterparts and other racialized counterparts.

3.1    More than two-thirds of Black business owners are men

In Canada, the number of Black business owners is estimated at 66,880 in 2018, representing 2.1% of all business owners (Table 1). More than two-thirds (70.4%) of Black business owners are men, and 29.6% are women. Regardless of their race, men make up the largest proportion of business owners. The gap between men and women is proportionally higher among the Black population. For both men and women, the proportion of Black business owners is lower than for Black individuals in the general population. In 2018, 2.4% of male business owners belonged to the Black community, while Black people represented 3.0% and 3.7% of working-age men (15 years and older) according to the 2016 and 2021 censuses, respectively. Among female business owners, 1.7% were identified as Black, but 3.1% (2016) and 3.8% (2021) of women aged 15 years and older came from the Black community. The situation is different for other racialized groups, among whom the proportion of male and female business owners is higher than their proportion in the general population aged 15 years and older.

3.2    The proportion of Black business owners has increased over time

One of the benefits of linking the CEEDD with the census is that it provides, for the first time, an opportunity to analyze trends in business ownership among racialized groups. Chart 1 shows that the proportion of owners of incorporated businesses and unincorporated businesses (self‑employed workers) who identify as members of the Black community increased between 2005 and 2018 for both men and women but at different rates. The proportion of Black men among self-employed men almost doubled during this period, from 1.8% in 2005 to 3.5% in 2018. Among women, the percentage of Black women among self-employed workers also increased (from 1.3% to 2.2%) but less quickly than for men, thus widening the gender gap in self-employment. The share of Black people among the owners of incorporated businesses also increased. Black women, who accounted for 1.0% of female owners of an incorporated business in 2005, accounted for 1.5% of them in 2018. The same was true for men, where the proportion of Black men among those who owned an incorporated business increased 0.6 percentage points, from 1.1% in 2005 to 1.7% in 2018. The fact that the proportion of Black people is increasing faster among self-employed workers than among incorporated business owners can be explained by differences in characteristics between the various legal forms of a business. In fact, incorporated businesses are generally larger, are more productive and use more capital than unincorporated businesses (Baldwin et al., 2011). Incorporated businesses therefore require a larger initial investment. 

Data table for Chart 1



Data table for chart 1
Table summary
This table displays the results of Data table for chart 1 Self-employed, men, Self-employed, women, Private incorporated business owners, men and Private incorporated business owners, women, calculated using percent units of measure (appearing as column headers).

	Self-employed, men	Self-employed, women	Private incorporated business owners, men	Private incorporated business owners, women
	percent
2005	1.8	1.3	1.1	1.0
2006	1.8	1.4	1.2	1.0
2007	2.0	1.5	1.3	1.1
2008	2.0	1.6	1.3	1.1
2009	2.2	1.7	1.3	1.2
2010	2.1	1.7	1.4	1.2
2011	2.1	1.7	1.4	1.2
2012	2.3	1.7	1.5	1.3
2013	2.4	1.7	1.5	1.3
2014	2.5	1.8	1.6	1.4
2015	2.6	1.9	1.6	1.4
2016	2.8	2.0	1.7	1.4
2017	3.1	2.1	1.7	1.5
2018	3.5	2.2	1.7	1.5
Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2005 to 2018), Census of Population (2001, 2006, 2016) and National Household Survey (2011).

3.3    More than half of Black business owners are immigrants

The vast majority of Canadians who identify as belonging to a racialized group have an immigrant background. The data from the 2021 Census of Population show that 70.9% of racialized individuals aged 15 years and older in Canada are immigrants; the proportion is 62.7% among the Black population. These data are consistent with the distribution of business owners by race and immigrant status. Immigrants represent 64.8% of Black male business owners and 67.9% and 70.9% of women and men in other racialized groups, respectively (Chart 2). With the exception of White people, Black women are less likely to be immigrants; immigrants nonetheless account for more than half of Black female business owners. Most immigrant business owners have been in Canada for more than five years.

Black female business owners (46.5%) are more likely to have been born in Canada than their male counterparts (35.2%). The same is true for other racialized groups, but the gap between men (29.0%) and women (32.1%), while statistically significant, is smaller.

The fact that most Black or racialized business owners are immigrants is an interesting result. As reported by Picot and Ostrovsky (2021), the literature has established that the higher self-employment rate among immigrants is in part because of the constraints they face in finding suitable paid employment. Immigrants may not be aware of the funding and support opportunities available to them; this unawareness would be an obstacle in terms of performance and growth. A report by the Canadian Black Chamber of Commerce (2021) indicates that, generally speaking, the Black community is not aware of the financing programs offered by the Business Development Bank of Canada or by Export Development Canada. This finding is also reflected in the Canadian Survey on Business Conditions from the second quarter of 2021.^Note  Businesses owned by racialized groups (12.0%) in general or the Black population in particular (13.6%) were twice as likely as all businesses (5.9%) to be unaware of the support or credit programs related to the COVID-19 pandemic. Moreover, it could be more difficult for immigrants to access credit at financial institutions because a good credit score takes years to build. Leung et al. (2018) determined that immigrants are less likely to obtain credit from formal financial institutions.

Data table for Chart 2



Data table for chart 2
Table summary
This table displays the results of Data table for chart 2 White people, Black people, Other racialized groups, Men and Women, calculated using percent units of measure (appearing as column headers).

	White people		Black people		Other racialized groups
	Men	Women	Men	Women	Men	Women
	percent
Recent immigrants	0.8	0.6	10.2	6.4	10.6	7.5
Established immigrants	7.6	7.3	54.6	47.1	60.3	60.4
Non-immigrants	91.6	92.1	35.2	46.5	29.0	32.1
Note: "Recent immigrants" refers to immigrants who arrived in Canada between 2013 and 2018. Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2018), Census of population (2001, 2006, 2016) and National Household Survey (2011).

3.4    More than half of Black immigrant business owners come from five countries

Given that more than half of Black owners have an immigrant background, it is important to examine their countries of origin. A Statistics Canada article (2019a) revealed that until 1990, most Black immigrants to Canada came from the Caribbean and Bermuda—mainly from Haiti and Jamaica. However, the distribution has changed since the early 1990s; 65.1% of Black immigrants admitted between 2011 and 2016 come from Africa—mainly Nigeria, Cameroon and the Democratic Republic of the Congo. These distributions are consistent with the distributions of Black immigrant business owners. The top five countries of origin of Black immigrant business owners are Nigeria (14.2%), Jamaica (12.1%), Ethiopia (10.5%), Haiti (10.2%) and Somalia (4.7%); these countries represent more than half of these owners (Chart 3). Among both men and women, close to 70% of immigrant business owners come from 10 countries located either in the Caribbean and Bermuda or in Africa. Except for the top 10 countries, the Democratic Republic of the Congo (2.3%) is the only one of the hundred other countries of birth to have a proportion of Black immigrant business owners of more than 2.0%.

Using the Longitudinal Immigration Database, which is a component of the CEEDD, Li (2001) showed that the country of origin can affect the probability of a person becoming self‑employed. He determined that immigrants from Western Europe or West Asia were more likely to be business owners than their counterparts from Africa or the Caribbean—the main regions of origin of the Black population in Canada.

Data table for Chart 3



Data table for chart 3
Table summary
This table displays the results of Data table for chart 3 Men, Women and Total, calculated using percent units of measure (appearing as column headers).

	Men	Women	Total
	percent
Nigeria	12.9	18.1	14.2
Jamaica	11.5	13.8	12.1
Ethiopia	12.2	5.8	10.5
Haiti	11.0	7.7	10.2
Somalia	5.6	2.0	4.7
Trinidad and Tobago	4.0	6.4	4.6
Ghana	4.8	3.9	4.5
Cameroon	3.5	3.3	3.4
Kenya	2.6	5.0	3.2
Eritrea	2.3	2.6	2.4
Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2018), Census of Population (2001, 2006, 2016) and National Household Survey (2011).

3.5    The proportion of Black Business owners is higher in Ontario and Quebec, the provinces with the largest Black populations

The vast majority (73.9%) of Black Canadian business owners in Canada live in Ontario or Quebec. Ontario alone (50.6%) accounts for just over half of Black business owners, while 23.3% live in Quebec (Table 2). They are followed by Alberta (15.0%) and British Columbia (5.4%). This finding is consistent with both the distribution of the Black population aged 15 years and older and the results of a survey of 700 Black female business owners in Canada conducted by the Black Business and Professional Association (BBPA). Most business owners from a racialized group other than Black settle in Ontario (51.4%) and British Columbia (21.9%). Furthermore, while the number of White business owners is highest in Ontario, its proportion (33.7%) is nevertheless lower than the proportions of Black and other racialized business owners.

The rate of Black business ownership is higher in the provinces where there is a large Black community. Ontario (2.8%), Quebec (2.5%) and Alberta (2.2%) have the highest rates of Black ownership among the provinces, and this may suggest that Black owners offer products and services that are generally intended for their communities. For example, a restaurant owner who specializes in Haitian cuisine would be more likely to settle in the Montréal metropolitan area, home of the largest proportion of Haitians in Canada. In the BBPA survey, 87.9% of respondents said that they had started a business because they saw an opportunity to offer goods or services. In addition, some of these female entrepreneurs reported that their primary motivation for starting a business came from a desire to meet the needs of their community.



3.6    Black business owners are on average six years younger than their White counterparts

For both men and women, Black business owners and those from other racialized groups are on average 47 years of age, 6 years younger than their White counterparts (53 years) (Chart 4). The Black population is younger than the general population in Canada. Among Black people, 80.6% of men and 78.7% of women are aged younger than 50 years (Statistics Canada, 2019b), while the proportion in the total population is 63.4% and 61.3% for men and women, respectively. Despite the young Black population, the vast majority of business owners in this community are aged older than 40 years.^Note  This finding suggests that there is a need to gain experience and accumulate capital, two criteria that are generally acquired over time (Shinnar and Young, 2008).

Data table for Chart 4



Data table for chart 4
Table summary
This table displays the results of Data table for chart 4 White people, Black people and Other racialized groups, calculated using years units of measure (appearing as column headers).

	White people	Black people	Other racialized groups
	years
Men	53	47	47
Women	53	47	47
Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2018), Census of Population (2001, 2006, 2016) and National Household Survey (2011).

3.7    Black business owners are less likely to be married or in a common-law relationship than their White counterparts or other racialized counterparts

Several studies have found that family composition is a factor that can influence the decision about whether to start a business (Lin et al., 2000; Ozcan, 2011; Eliasson and Westlund, 2013). Grékou and Gueye (2021) showed that the likelihood of owning a business is higher among people who are married or in a common-law relationship and among widowed, divorced or separated individuals than among single people. Budig (2006) argued that the positive effect marriage has on the probability of starting a business can be explained by the increase in family wealth. Among both men and women, Black people (69.6% for men and 65.3% for women) were not only less likely to be in a relationship, but also more likely to be single (Chart 5). In addition, people from other racialized groups (77.4% for women and 80.0% for men) are more likely to be married or in a relationship than White and Black people, regardless of sex. These differences could help explain possible disparities between groups in terms of access to or retention of business ownership.

3.8    The incomes of Black business owners are lower on average than the incomes of White people or other racialized groups

Despite the continued diversification of the Canadian population, inequalities in income and access to employment can still be observed between racialized groups and White people. Data from the 2021 Census show that people who identify as belonging to a racialized group are more likely than White people to be unemployed, even though they are more active in the labour market.

In addition, the total income before tax of racialized men is on average $11,140 less than that of their White counterparts. The gap is smaller for women, but still in favour of White people (+$5,560 than the income of women belonging to racialized groups). These income differences between White people and racialized groups within the general population are also noticeable among business owners. Among male business owners, the incomes of Black individuals ($56,100) are the lowest on average (Chart 6). They earned $9,500 less than their counterparts from other racialized groups and $43,300 less than White men. There is no statistically significant difference between Black women ($55,700) and their racialized counterparts ($54,800). However, on average, they earned more than $16,000 less than White women.

Financial considerations are an important factor for the creation or survival of a business (Evans and Leighton, 1989; Leung et al., 2018; Grékou and Gueye, 2021). In the BBPA study, 81.4% of Black female business owners reported having used their own funds to start their business. Some added that access to financing and the costs of loans are major obstacles to owning a business. This finding is consistent with the hierarchical theory of Myers and Majluf (1984) that personal funds are the primary source of financing, followed by loans. Considering the importance of financial resources in business ownership, the low level of income of Black individuals compared with White individuals and other racialized groups could be an obstacle for both owners (staying in business and growing) and employees (accessing business ownership).

Data table for Chart 5



Data table for chart 5
Table summary
This table displays the results of Data table for chart 5 White people, Black people, Other racialized groups, Men and Women, calculated using percent units of measure (appearing as column headers).

	White people		Black people		Other racialized groups
	Men	Women	Men	Women	Men	Women
	percent
Married or common-law	77.3	75.8	69.6	65.3	80.0	77.4
Widowed, divorced or separated	9.6	13.4	10.2	13.1	6.0	10.0
Single	13.0	10.8	20.1	21.6	14.0	12.6
Not specified	0.0	0.0	0.1	0.0	0.0	0.0
Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2018), Census of Population (2001, 2006, 2016) and National Household Survey (2011).

Data table for Chart 6



Data table for chart 6
Table summary
This table displays the results of Data table for chart 6 White people, Black people and Other racialized groups, calculated using dollars units of measure (appearing as column headers).

	White people	Black people	Other racialized groups
	dollars
Men	99,400	56,100	65,600
Women	71,800	55,700	54,800
Note: All numbers are significantly different except for Black Women versus both Black men and other racialized women. Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2018), Census of Population (2001, 2006, 2016) and National Household Survey (2011).

3.9    Black people are more likely to be new business owners than White people and other racialized groups

In this section, recent immigrants were removed from the sample as it is possible that they were not in Canada between 2013 and 2017. After having determined the racial profile of business owners in 2018,^Note  the longitudinal nature of the CEEDD helped to determine whether they were also business owners in previous years, given that their 2018 racial profile is assumed to be the same across time.

Among Black male business owners in 2018, 48.1% were in business throughout the period from 2013 to 2017, compared with 57.9% for men belonging to other racialized groups and 72.5% for White people (Table 3). This is also true among women who were business owners in 2018; the proportion who were also business owners between 2013 and 2017 is lower among Black women (46.3%) than among their White (66.2%) or other racialized (53.5%) counterparts.

Conversely, among Black men, 14.0% of business owners were entrants, or individuals who were not business owners between 2013 and 2017 but became owners in 2018, compared with 9.4% among men from other racialized groups and 5.5% among White men. The same is true for Black women (13.9%) compared with White women (6.9%) and women from other racialized groups (9.8%).

These differences in the number of years of activity as a business owner between 2013 and 2017 could be related to the type of ownership.^Note  Grékou and Liu (2018) determined that self-employed people had lower survival rates than owners of private incorporated businesses. A study focusing on motivations to enter or exit business ownership would help to determine whether survival is less likely among Black people because of their employment situation. For example, did the Black people who became self-employed do so to get out of unemployment or did they end their business activities as soon as they found payroll employment?



4      Which types of businesses do Black individuals own?

In this second part of the article, the unit of analysis is the business, to determine whether the characteristics of businesses vary according to the majority racial profile in business ownership. Since private incorporated businesses generally differ from unincorporated businesses (Baldwin and Rispoli, 2010; Baldwin et al., 2011), they will be examined separately. A methodology based on the work of Grékou et al. (2018) to identify businesses owned by women and men was used to assign a racial profile to a business. A business is said to belong to a racial group (White people, Black people and other racialized groups) if more than half of its shares are held by individuals who identify with that group. In the event of equal shares, the business is assigned to Black people and to other racialized groups (in this order). For example, if Black people and those from other racialized groups each hold 50% of the shares, the business is said to be owned by Black people. However, when White people and other racialized groups each hold 50%, the business is said to be owned by another racialized group.

4.1    Black people own a higher proportion of unincorporated businesses than private incorporated businesses

Table 4 shows that 2.9% of unincorporated businesses and 1.6% of incorporated businesses are Black-owned. This finding indicates that Black people are more likely to be unincorporated self-employed workers than incorporated business owners. Individuals belonging to other racialized groups own 21.8% of unincorporated businesses and 24.2% of incorporated businesses.

An alternative definition to majority ownership is participation, meaning that a business would be considered Black if at least one of the owners identified as Black. According to this definition, 3.1% of unincorporated businesses and 2.2% of incorporated businesses are owned by Black people. The fact that the two definitions produce almost similar results for Black people suggests that Black business owners tend to be sole proprietors or associate with other Black people. The definition based on majority ownership will be used in the remainder of the article.



4.2    Transportation and warehousing, and professional, scientific and technical services are the main fields of activity of Black-owned businesses

The distribution by industry—defined by the two-digit North American Industry Classification System code—is almost the same for unincorporated businesses, whether they are owned by Black people, White people or other racialized groups. The transportation and warehousing industry (34.3%) has the largest number of Black-owned unincorporated businesses (Table 5). It is followed by real estate and rental and leasing (13.4%) and professional, scientific and technical services (10.4%), which represent the first- and third-largest industries of unincorporated businesses owned by White people or other racialized groups. The transportation and warehousing industry (19.8%) has the second-largest number of unincorporated businesses owned by other racialized groups. The agriculture, forestry, fishing and hunting industry, the second largest for unincorporated businesses owned by White people (17.7%), accounts for 1.1% and 1.5%, respectively, of businesses owned by Black people and other racialized groups. The construction industry and the administrative and support, waste management and remediation services industry round out the top five industries for private unincorporated businesses owned by Black people or other racialized groups.

Among private incorporated businesses, professional, scientific and technical services account for the largest number of businesses, regardless of the racial group to which the owners belong (17.7%, 21.3% and 19.8% for businesses owned by White people, Black people and other racialized groups, respectively). Transportation and warehousing (14.2%), health care and social assistance (12.3%), construction (9.8%), and retail trade (7.8%) are the other four industries that include the largest number of private incorporated businesses owned by Black people. These industries are also the top five for businesses owned by other racialized groups, but in a different order than that of Black people.

The distribution by industry of Black-owned private incorporated businesses is comparable to that of businesses owned by other racialized groups but somewhat different from that of White-owned businesses. For example, Black‑owned private incorporated businesses are about twice as likely to be in the transportation and warehousing or health care and social assistance industries as White-owned businesses. The top five industries for Black-owned private incorporated businesses account for 65.4% of all private incorporated businesses owned by this community, while these same industries represent 52.5% of White-owned private incorporated businesses. Conversely, White-owned businesses have a stronger presence in agriculture, forestry, fishing and hunting; mining, quarrying, and oil and gas extraction; and utilities.



4.3    Businesses owned by Black people are on average smaller than those owned by White people or other racialized groups

Unincorporated businesses owned by Black people are generally smaller than those owned by other groups in terms of the size of the business measured by the number of employees. In fact, 95.6% of unincorporated businesses owned by Black people have fewer than one employee, compared with 92.7% and 89.6% for those owned by other racialized groups and White people, respectively (Chart 7). This finding is not surprising, because unincorporated self-employed workers often carry out their activities individually. However, it should be noted that unincorporated businesses owned by White people (10.3%) are twice as likely to have at least one employee as businesses owned by Black people (4.4%). A total of 7.3% of unincorporated businesses owned by other racialized groups have at least one employee.

The distribution by employment size is less concentrated for private incorporated businesses, although more than half of them had fewer than one employee regardless of the racial profile of the owners. Black-owned private incorporated businesses are generally smaller than those owned by their White or other racialized counterparts. A total of 91.2% of Black-owned private incorporated businesses have fewer than five employees compared with 87.9% for other racialized groups and 83.1% for White people. Conversely, Black-owned businesses (8.8%) are almost half as likely as White-owned businesses (17.0%) to have five or more employees. Compared with businesses owned by other racialized groups, Black-owned businesses are 1.4 times less likely to have five or more employees.

These results reflect the importance of small and medium-sized enterprises (SMEs) to the Canadian economy and are consistent with those of ISED^Note  (2019), which found that in 2017, 89.6% of employment came from small (fewer than 100 employees) and medium‑sized (100 to 499 employees) enterprises. Moreover, when only SMEs are considered, about 98% of businesses are small, regardless of whether they belong to racialized groups (ISED, 2020).

Data table for Chart 7



Data table for chart 7
Table summary
This table displays the results of Data table for chart 7 White people, Black people, Other racialized groups, UB and IB, calculated using percent units of measure (appearing as column headers).

	White people		Black people		Other racialized groups
	UB	IB	UB	IB	UB	IB
	percent
less than 1 employee	89.6	51.0	95.6	60.9	92.7	49.7
1 to 4 employees	7.8	32.1	3.4	30.3	5.8	38.2
5 to 19 employees	2.3	12.4	0.9	6.9	1.4	9.9
20 to 99 employees	0.2	4.0	0.1	1.7	0.1	2.1
100 or more employees	0.0	0.5	0.0	0.2	0.0	0.2
Notes: "UB" refers to unincorporated businesses and "IB" stands for incorporated businesses. Sources: Statistics Canada, Canadian Employer–Employee Dynamics Database (2018), Census of Population (2001, 2006, 2016) and National Household Survey (2011).

4.4    Financial performance is lower for Black-owned businesses

This section is limited to private incorporated businesses and provides some financial results for businesses by the racial profile of owners. The literature has shown that the financial performance of businesses varies based on certain owner characteristics (Fairlie and Robb, 2009, for gender differences; Bemrose and Lafrance-Cooke, 2022, comparing persons with disabilities with those without disabilities).

As shown in Table 6, Black-owned businesses perform less well financially on average than those owned by White people or other racialized groups. In fact, Black-owned businesses have the lowest levels of gross income and profit, followed by those owned by other racialized groups. In addition, the amounts reported by businesses owned by White people are on average nearly three times higher than those reported by businesses owned by Black people and twice as high as those of businesses owned by other racialized groups. However, spending and debt levels are lower for Black-owned businesses.

Investment, measured by physical capital held, is also lower on average for businesses owned by Black people ($190,800) than for businesses owned by White people ($617,600) or other racialized groups ($274,400). The gap between Black-owned and White-owned businesses is not attributable to the extreme values of some large White-owned businesses that would affect the average. Median values also reveal differences in favour of White-owned businesses over Black-owned businesses.

These different financial performances do not necessarily indicate that Black-owned businesses are less profitable. The rate of return on assets (net income divided by total assets) and profit margin (difference between income and costs expressed as a percentage of income) are measures frequently used to estimate a business’s profitability. Black-owned businesses (5.2%) have on average a lower rate of return on assets than those owned by White people (10.6%) or other racialized groups (9.3%). This means that Black-owned businesses have a weaker capacity to use their assets to generate gains. In addition, the profit margin is also to the advantage of White-owned businesses (14.9% compared with 8.5% for Black-owned businesses), meaning that White-owned businesses have a better ability to profit from their activities and have more room to maneuver to cope with rising costs or competition. Although these ratios are good indicators of business profitability, they may be affected by factors other than the racial profile of owners, such as the business sector.

Fairlie and Robb (2007) explain that White-owned businesses in the United States are more successful than Black-owned businesses because the latter are less likely to come from a family of business owners and to have worked in the family business. Such a hypothesis could explain in part the differences in performance between businesses owned by Black and White people in Canada. The vast majority of Black business owners in Canada are immigrants and thus constitute the first generation of their families in the country.

Unsurprisingly, the value of exports differs according to the racial profile of the owners of the exporting business. On average, exports of Black-owned businesses ($884,100) are equivalent to about 53% of those of businesses of other racialized groups ($1,667,000) and 25% of exports of White-owned businesses ($3,540,000). However, the propensity to export is comparable between businesses owned by White people, Black people or other racialized groups. Immigration has a positive effect on trade between Canada and the countries of origin of immigrants (Wagner, Head and Ries, 2002). In addition, immigrant entrepreneurs export mainly to their country of origin (Fung, Grekou and Liu, 2019; Morgan, Sui and Malhotra, 2021), probably because of their understanding of the market needs and their knowledge of local languages. The data used in this document show that 31.6% of immigrant-owned exporting businesses have exported to the country of origin of their immigrant owners. Black entrepreneurs (57.1%) are more likely to export goods or services from Canada to their country of origin, followed by those from other racialized groups (36.0%). Among the businesses owned by White immigrants, 19.8% exported to the country of origin of the owners.



5       Conclusion

For the first time in Canada, administrative data have been used to determine the intersection between the racial profile (White people, Black people or other racialized groups) of business owners—meaning unincorporated self-employed workers and private incorporated business owners—and selected sociodemographic (e.g., sex, immigrant status, age or marital status) and economic (income, ownership type and longevity as a business owner) characteristics. This article also explored the differences and similarities in the characteristics of businesses owned by White people, Black people and other racialized groups. This work, which aligns with the federal government’s effort to fill a data gap on Black business owners to better inform public policy, was made possible thanks to a linkage between the 2018 Canadian Employer–Employee Dynamics Database; the 2001, 2006 and 2016 Census of Population; and the 2011 National Household Survey. These new data will enable a more disaggregated analysis of trends in business ownership by racial profile combined with other individual and business characteristics.

There were an estimated 66,880 Black business owners in 2018, the vast majority of whom were men (70.4% versus 29.6% for women). Black people account for 2.1% of all business owners, and more than half of them have an immigrant background.

On average, Black business owners and those of other racialized groups are about six years younger than their White counterparts. There are income gaps in favour of White people and other racialized groups compared with Black people. In addition, Black people are not only less likely than White people and other racialized groups to be married or in a relationship, but also more likely to be single. Black business owners generally reside in Ontario (50.6%) or Quebec (23.3%). Black business ownership rates are also higher in provinces with higher Black populations (Ontario [2.8%], Quebec [2.5%] and Alberta [2.2%]).

Black-owned businesses—defined as businesses in which individuals who identify as Black hold more than half of the shares—account for 2.9% of unincorporated businesses and 1.6% of incorporated businesses. The distribution by industry of unincorporated Black-owned businesses is comparable to that of other groups. More than 97% of these businesses have fewer than five employees, regardless of the racial profile of their owners.

The difference between Black-owned businesses and those owned by White people or other racialized groups is more apparent for private incorporated businesses. Although professional, scientific and technical services are the industry with the largest number of businesses for all types of owners, the distribution by industry differs somewhat between Black- and White-owned businesses. Moreover, Black-owned businesses are generally smaller (number of employees) than those owned by White people or other racialized groups. Income, sales, assets, investments and export value are on average at least twice as low for Black-owned businesses compared with those owned by White people.

Although the findings are comparable to results from previous research, it is clear that the imputation of the racial profile of some business owners could affect the accuracy of the data. To reduce the amount of imputed data, it is possible, for example, to include more censuses or surveys in which racial profile information is collected. In future research, it would be interesting to examine the determinants of business ownership among Black people and see how they differ from those of other groups. Such an analysis would provide a better understanding of the factors that influence the decision of Black people to become business owners. The CEEDD would also enable tracking the trajectory of business owners. In other words, it would be possible to track for a period of time a cohort whose members became business owners in a given year and determine their performance with respect to survival and growth, among other factors. It may also be interesting to see how Canadian-born Black people compare with Black immigrants in terms of the labor market in general and business ownership in particular.

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