Black History Month ended in February, so let’s take a look at the state of Black business ownership in the United States:
- 22% of Black adults say owning a business is essential to financial success. (Pew Research Center)
- In 2021, there were 161,031 businesses with a majority Black or African American ownership, an increase from 2017’s 124,004. The gross revenues of these companies rose significantly from 2017 to 2021, growing from $127.9 billion to $183.3 billion. (U.S. Census Bureau’s Annual Business Survey)
However,
Pew notes that “while Black-owned businesses have grown significantly in recent years, they still make up a small share of overall firms and revenue.” In addition, despite the growth, majority-Black-owned businesses “made up only about 3% of all U.S. firms that were classifiable by the race and ethnicity of their owners in 2021. And they accounted for just 1% of total gross revenue.” In comparison, in 2021, about 14% of the U.S. population was Black.” These businesses employed about 1.4 million workers in 2021.
Who are Black business owners?
Pew reports that 53% of the owners of majority-Black-owned businesses are men, 39% are women, and 8% have equal male/female ownership. This is a smaller gender gap than for all classifiable small businesses, which are 63% majority-owned by men and 22% majority-owned by women (14% are equally owned).
Pew’s analysis shows that 49% of Black business owners were aged 35 to 54 in 2021, 28% were 55 to 64, and 7% were younger than 35.
According to Pew, “When asked to choose from a list of important reasons why they opened” their businesses:
- 90%: The opportunity to earn more income, a desire to be their own boss, or wanting the best avenue for their ideas, goods, and services
- 88%: Balancing work and family life
- 85%: Having flexible hours
Most (70%) majority-Black-business owners say their small businesses are the primary source of their income.
The
Women and Minority Business Owner Spotlight report from Bank of America, released last fall, shows Black business owners were feeling optimistic about their company’s trajectories, with 71% planning to expand in the next year and 56% planning to hire additional employees.
Black entrepreneurs face many obstacles and challenges
Of course, there are challenges. And while all entrepreneurs encounter obstacles, minority business owners typically face more.
According to the Bank of America report, “Most Black entrepreneurs still face barriers accessing capital.” When surveyed, only 33% of the Black entrepreneurs say they have equal access to capital today, 32% say they’ll have it in the future (in 2040), and 35% believe they’ll never gain equal access.
So, how do Black entrepreneurs face these challenges? I asked several successful Black business owners to share their experiences and advice:
Regina Bonds—Life coach and podcaster. Bonds is known as the Confidence Coach and works with women to “improve, enhance, and elevate their lives.”
Charley Moore—Founder and CEO of Rocket Lawyer, an online legal services platform. A Gulf War veteran, Moore graduated from the United States Naval Academy and the University of California, Berkeley School of Law. He was an attorney for Yahoo in its early stages to its IPO; Moore founded Rocket Lawyer in 2008.
Rita Ricks—Entrepreneur, speaker, spiritual and business coach, and author of Permission Granted! A Journal Of Spiritual Epiphanies and #justfortoday: 365 Actions to Fuel Your Daily Rhythm. The former middle school teacher started her entrepreneurial career as a partner in a fashion boutique. She then founded a professional and personal development training company.
Uduimoh Umolu—Co-founder of Jon Basil Tequila, a high-end premium tequila. Umolu is a first-generation American from Chicago; his parents immigrated from Ghana. After recognizing there was a lack of Black representation in the spirits industry, Umolu started Jon Basil Tequila (named after his grandfather) in 2018.
Insights and advice
Rieva Lesonsky: Getting funding is challenging for all entrepreneurs. But, as you know, it’s harder for Black entrepreneurs to get money. Any funding advice?
Regina Bonds: As a Black female entrepreneur, I am well aware of the financial challenges that come with starting and running a business. I have learned that securing funding can be especially difficult for entrepreneurs like me. However, I have discovered a few strategies that have worked well for me and could work for others as well.
First, it is important to build a solid customer base and establish a brand that captures people’s hearts and minds. Utilize free social media platforms to showcase your brand story and promote your products or services daily. By leveraging these platforms effectively, you can attract potential customers, build relationships, and drive sales.
In addition, I found that my interpersonal skills were instrumental in building my business from the ground up. I made it a priority to connect with my customers, build trust, and deliver exceptional service. As a result, my sales performance remained consistent, and this caught the attention of payment processors like Stripe or Square. These payment processors offered me working capital because they recognized my consistency, positive sales numbers, and high volume of transactions month over month. This was the best funding option for me, as I was able to secure capital without the hassle of needing the extensive documentation a bank requires.
I recommend working with a payment processor consistently to increase your chances of receiving funding. By focusing on building a strong customer base, establishing a great brand, and leveraging free social media platforms, you can set yourself up for success as an entrepreneur, even in the face of financial challenges.
Charley Moore: Making sure you have the capital to start a business is stressful and can be challenging. When I was starting, I was lucky enough to have wonderful mentors to help me navigate the landscape. My first recommendation is to build a strong network. Creating a network will help you access funding opportunities, join industry groups, and connect with other entrepreneurs and investors. In addition to building your network, explore funding focused on traditionally underrepresented communities. This may be grants or loans from non-profit organizations or foundations.
Rita Ricks: I’ve been in business for almost 40 years, and from day one, I paid for a good accountant even when I could not pay myself. I want my numbers to be correct and my forms to be signed by a CPA. I meet with my CPA monthly, not just during tax time. I also meet with my banker quarterly to keep her updated on what and how my business is doing. During the pandemic, business owners with solid relationships with their CPAs and bankers had much easier access to funding.
Uduimoh Umolu: Showing and proving is usually a good way to go. Demonstrate as much as you can with limited resources so that you can establish a strong market fit. It forces you to become creative in your approach. Then, as you achieve different milestones on your own, it’s easier for a bank or investor to get behind you and start accelerating your growth.
Lesonsky: Last year I wrote about how Black business owners must navigate racism and biases that threaten their success. What is your advice for how to best do that?
Bonds: As a Black female entrepreneur, I know firsthand the effects of racism, both as a Black person and a woman. We are often overlooked and sometimes not even invited to the table where resources and opportunities are discussed. Many Black business owners are just figuring things out as they go. But I have been fortunate enough to find supportive friends who gave me a seat at the table of opportunity, and when I didn’t, I wasn’t afraid to create the table.
My advice to others would be to find your tribe and community. Despite the presence of racist individuals who don’t want to help us, there are people out there willing to assist. Educate yourself and stay informed about business, read articles, business journals, and whatever else is available.
Be confident when you come to the table and speak up not just for yourself, but for all Black entrepreneurs, including those who are yet to come. Be the help that you wish you had. I don’t believe in gatekeeping. If I have knowledge that can help fellow Black entrepreneurs, I am happy to share it. Grants, connections, and opportunities are available, but someone has to be bold enough to blaze the trail for others to follow.
Moore: My advice for navigating bias as an entrepreneur can be boiled down to a few steps:
- Build a professional network of your peers. Entrepreneurship can be very isolating, but it is essential to create a network where you can bounce ideas around and get support, especially as a minority entrepreneur.
- Look for alternative funding sources, initiatives, and grants available to minority founders.
- Support other traditionally underrepresented community businesses.
Ricks: As African Americans, we navigate racism and biases most days. So we continue holding our heads high and keep moving forward with an unyielding faith.
Umolu: Perspective is everything. Yes, there will be unconscious biases and sometimes even subconscious or overt racism. This can be seen as a barrier or opportunity. If you perceive it as your superpower, it can become the very thing you can use to connect with your audience authentically. You can open the door for so many other people and owners that look like you.
Lesonsky: Did you encounter problems when starting up, and how did you overcome them?
Bonds: When I started my entrepreneurial journey, I will never forget that someone I looked up to called me “ignorance on fire.” I laugh about it now, but at the time, I didn’t know what I was doing or even where to start.
However, one thing that has carried me through this journey is my passion. I always had a passion to follow my dreams and heart. The biggest problem I faced while starting was not understanding how business works and the steps to take to ensure legitimacy.
So, how did I overcome it? You have to be tenacious. I got around other entrepreneurs, joined business networking groups, hired a coach, read a lot of books, and last but certainly not least, I believed in myself and developed a winner’s mindset. Quitting was not an option for me. I believe that’s the reason why I have experienced so much success to date. There is always more to learn, but if you believe in yourself, there’s nothing you can’t achieve.
Moore: I grew up working in a family business, so I’ve lived with the ups and downs of entrepreneurship since I was a kid. People say baseball “is a game of failure” because a hall-of-fame hitter only succeeds 30% of the time and fails 70% of the time, but in business, you can fail over and over again and still win in the end. In business, you only have to be right once–in your life–to create generational wealth.
With that in mind, it’s hard to pick out one particular moment of failure. However, I will say that the people joining you on the journey ultimately embody both your successes and your failures. And ultimately, what feels great is sharing the wins with a dedicated group of people who all worked hard to overcome the necessary failure that it took to end up winners.
Ricks: Many years ago, a reporter asked me if I was not getting contracts because I’m Black. I responded, “How would I know that? Who is going to admit to that?” I still encounter challenges that stem from racism, and I get past it because I am not willing to allow ignorance to prevent me from manifesting my vision. Perseverance is in my DNA from those who came before me.
Umolu: That’s ultimately how we navigated the challenges. Rather than try to conform or make other people comfortable when we walk into a room, we lean into what makes us who we are. In all things. This allows and creates space for true and authentic connections that are more powerful.