This article was originally posted on Medium and has been re-published in All Things Black and Beautiful blog.
In an economic landscape where potential blossoms but resources remain scarce, only 4 percent of Black-owned businesses in the United States successfully navigate the startup stage. This statistic is staggering, considering the 20 percent entrepreneurship rate amongst African Americans.
Have you ever wondered about the upsurge of support systems that surround Black business owners? How effectively do these ecosystems foster economic success, and are they paving the way for sustainable growth?
As we wrap up Women’s History Month, let’s delve into the specific obstacles that Black female entrepreneurs encounter in today’s business landscape. This article will offer strategies to support Black-owned businesses and address the systemic barriers that impede the success of Black women entrepreneurs striving to stay competitive and impactful.
The Economic Conundrum
Black-owned businesses in the United States have experienced a commendable 14% increase since 2020. Yet, they still represent a small portion of overall firms and revenue. What is striking is that Black businesses typically operate in less profitable sectors compared to their counterparts. This is further fueled by limited access to essential networks and relationships that could help them make better business decisions.
Consider the wholesale industry, which generates 24% of business revenue in the US. Shockingly only 1% of Black women and 2% of Black men are entrepreneurs in this field. Similarly, many of the 10,312 Black-owned businesses in the retail industry are startups with limited experience and capacity to work with large retailers. These entrepreneurs possess highly innovative ideas catering for unique and unmet needs of underrepresented communities, but face challenges in terms of research and development resources. Furthermore, they struggle to leverage advanced eCommerce technologies and operating models, which hampers their competitiveness in today’s fast-paced global market.
Funding Female-Led Ventures
On average, Black entrepreneurs have significantly lower start-up capital than the North American average. Consequently, many businesses end up relying on debt to finance their ventures, resulting in a significant portion of their revenue being allocated towards debt servicing, further impeding their growth.
Black women entrepreneurs face greater challenges in accessing grants, venture capital, and bank funding compared to their counterparts. Despite representing 35% of Black business owners, they often struggle with cash flow and may need to supplement their revenue with additional jobs.
In a Sage study conducted in Atlanta, a city with the largest population of Black-owned businesses in the US, women entrepreneurs face difficulties in terms of awareness, clarity, and support about navigating government contracts. This missed opportunity results in an inability to generate consistent and dependable revenue. Moreover, this challenge is not unique to Atlanta; this issue is widespread and prevents Black business owners from tapping into ample government contracting opportunities.
Anecdotally, members of the All Things Black and Beautiful platform have shared their sentiments on the issue:
“I would tell my 5-year younger self that I made the right choice not getting a loan or getting funding that would require giving up equity. I focused instead on getting grants that didn’t require equity and didn’t require me to pay the money back”.
Mobola Imosili, Founder Teni and Tayo Creations, California
“”As a start-up, I initially bootstrapped my business for the first 3–4 years, using self-funds and funds from family to raise capital for the business.”
Deola “Abela” Paul-Iyang, CEO Abela® World (Nigeria based Manufacturer and Exporter)
Most Black female business owners prefer to fund their needs through bootstrapping, grant support, or by focusing on service-based offerings to quickly grow revenue. These methods prove effective but also limit the ability to achieve significant economic success.
Enhancing Ecosystems for Black Entrepreneurship
The journey to a thriving ecosystem for Black-owned businesses requires a multifaceted approach. Inclusive of public and private sectors, we must address systemic issues, provide capital, resources, and mentorship opportunities to foster growth and success.
In recent years, significant milestone investments were committed to minority-owned business incubation and growth programs such as Goldman Sachs and Amazon Black Business Accelerators. The efforts of organizations such as the U.S. Black Chamber of Commerce and SCORE are also commendable.
However, distinctive attention must be given to Black communities to ensure they utilize these resources effectively and realize desired economic transformation. While federal government investments have laid a strong foundation, more targeted approaches, particularly during the early stages of black-owned businesses, are necessary to make business decisions that fuel long-term success.
The current infrastructure falls short in meeting these needs. Black Americans make up 12.4% of the population, and to promote greater growth and inclusivity within this community, a comprehensive approach is needed. An integrated model that combines mentorship with targeted intervention in areas like access to capital, business and financial planning, operations and scaling, and marketing needs to emerge. Effective partnerships between larger organizations and grassroots institutions can have a profound impact on local initiatives.
Furthermore, bridging the economic equity gap necessitates tapping into wider opportunities in the global market. Currently, only 1% of U.S. businesses export their products, despite the vast consumer base outside the United States. This presents a significant potential for female-led Black-owned businesses to expand their sales and reach by leveraging online distribution platforms.
To that end, All Things Black and Beautiful and the WMarketplace have joined forces sharing a mission to empower Black women-owned brands. Together we are creating a tailored online Accelerator cohort that offers e-commerce training and invaluable connections.
By taking these steps, we can empower Black-owned businesses to become scalable, sustainable, and well-integrated into the broader business landscape.
Conclusion
Programs and organizations focusing on underrepresented communities play a vital role in creating a level playing field and driving meaningful change. Efforts made thus far are commendable, but we must go beyond individual initiatives and offer comprehensive systems of support and targeted interventions.
When we address systemic barriers, Black-owned businesses have equal opportunities for success and contribute significantly to economic growth. Moreover, fostering export readiness can further enhance the success rate of black businesses and strengthen their growth and resilience in under accessed sectors.
With the right resources and assistance, Black-owned businesses can tap into their creativity, compete in more lucrative sectors, and become scalable, sustainable, and well-integrated into the value chain.
We call on stakeholders and partners to join us in driving this systemic change forward. Let’s support and empower Black female entrepreneurs to succeed and build lasting legacies of success in our communities.
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