Five Keys To The Success Of Black-Owned Businesses

America’s 3.12 million Black-owned businesses generate $206 billion in annual revenue and support 3.56 million U.S. jobs, according to a new Brookings Institute report entitled Black-Owned Businesses in U.S. Cities: The Challenges, Solutions, and Opportunities for Prosperity.

Many successful Black entrepreneurs are household names. Jay-Z, built upon his success as a hip-hop artist by launching commercial ventures, including Rocawear, a hip hop clothing brand founded in 1999 with Damon Dash, his co-founder in Roc-A-Fella Records, and Roc Nation, a multi-disciplinary entertainment agency in 2008. Based on his business success, Jay-Z has achieved billionaire status.

Other moguls have parlayed their entertainment success into highly profitable business ventures. Oprah Winfrey (OWN Network) is worth an estimated $2.5 billion. Sean “P. Diddy” Combs runs Combs Enterprises, which oversees brands involved with spirits, entertainment, fashion, fragrance, marketing, and music. By 2019, he had an estimated net worth of $740 million. Grammy winner Rihanna founded Fenty Beauty, which raked in $570 million in profit in only 15 months after its launch. The company creates products for different skin types and tones. Cathy Hughes, founder and chairperson of Urban One, Inc, was the sales manager of Howard University’s radio station. She started working at a radio station in her hometown of Omaha, Nebraska and eventually purchased her own station in 1980. She is now one of the most successful Black businesswomen in the U.S.

Not every successful Black entrepreneur started in the entertainment industry, of course. Daymond John founded the street-smart, fashionable men’s apparel line FUBU (“For Us, By Us”) by converting have of his home into a factory. Robert Smith, founder and CEO of Vista Equity Partners, one of the world’s largest private equity firms, was listed by Forbes as one of “America’s Richest Self-Made Billionaires.”

What makes these people so successful?

1. Entrepreneurial Spirit: Black entrepreneurs, such as Jay-Z, Sean Combs, and Daymond John recognized the business opportunities associated with the hip hop music scene and expanded into various industries including other forms of entertainment, fashion, and beauty products. They seized opportunities in the same way that Madam C.J. Walker, America’s first self-made millionaire did by running her own cosmetics manufacturing company in the late 1800s.

This spirit has been fueled by a desire for economic empowerment and a determination to create opportunities for themselves and their communities. In his visit to the state of Milwaukee last December, U.S. President Joe Biden spoke on the importance of Black-owned businesses by saying, “Where Black small businesses go, everything benefits. The community benefits… and it gives hope and prospects for people.”

2. Technology and Social Media: Modern forms of communication, including Instagram, TikTok, and Facebook, have provided Black-owned businesses with platforms to market their products and services, reach wider audiences, and connect with customers globally. While many of the most popular social media platforms have helped Black-owned businesses, platforms specifically made for black audiences, such as Spill and Fan Base have similar interfaces to those of other social media outlets, but cater to Black audiences.

3. Supportive Ecosystems: In the 21^st Century, and especially since the COVID lockdowns threatened the existence of countless businesses, there has been growing emphasis on supporting Black-owned firms in both the public and private sectors. The SBA is committed to supporting the development and growth of minority-owned small businesses and entrepreneurs from underserved communities. The federal agency does this through loan programs, counseling and training opportunities, contracting certifications, and business development programs. In the private sector, Simfoni is a firm that supports supplier diversity programs.

Danielle Fallon-O’Leary, contributor for the U.S. Chamber of Commerce, named 22 resources that Black-owned businesses can use to help them grow. Among the more notable ones is Black Owned Everything, a company that promotes other Black-owned businesses through its website and Instagram page with over 300k followers. Another is the Coalition to Back Black Businesses, which has provided over 1,400 Black small businesses with more than $14 million in grant money. These resources, along with many others, can be essential to the success of Black-owned businesses overall.

4. Consumer Awareness and Community Support: In recent years, consumers have more actively sought to patronize Black-owned businesses as a way to contribute to economic equality and empowerment. Support can come in various forms, including word-of-mouth referrals, community events, and collaborations with other businesses and organizations.

SCORE provides suggestions of ways to help support Black-businesses and organizations, including relationships with Black business owners and including them in social circles and community groups, as well as offering them advice and resources to help them succeed within the community.

5. Policy and Advocacy Efforts: Advocacy organizations and policymakers have been working to address systemic barriers that have historically impeded the success of Black-owned businesses. This includes advocating for policies that promote equitable access to capital, resources, and opportunities for Black entrepreneurs. For instance, the Black Business Association has been advocating for Black-owned businesses since 1970 and continues to provide them with networking opportunities, training, and financial support. Other similar advocacy groups include the National Black Chamber of Commerce, U.S. Black Chambers, Inc. and many others. The mission of the Main Street Alliance is to build a thriving, equitable economy.

Challenges

Despite progress, there still is a long way to go. While the African Americans comprise approximately 14% of the U.S. population, only 2.3% are owners of employer firms. Significant challenges still hinder Black entrepreneurship today.

Racism: A study published by Intuit QuickBooks on Feb. 1, 2024, found that 44% of Black-owned businesses have turned away customers because of racially charged statements. Further, 45% say the fear of racial stereotypes almost stopped them from starting their business. Continued advocacy, education, community efforts, and even social media platforms can help Black business owners overcome the barriers to success due to racism.

Access to capital

Another study by Intuit QuickBooks showed that in 2022, roughly 57% of Black-owned businesses were denied loans from a bank when they first started their business, a figure significantly higher than the 37% of non-Black business owners who were denied loans during that same period. The study also found that on average, starting a business cost $5,000 more for Black business owners than non-Black business owners.

The Biden Administration put support of minority businesses among its priorities. For instance, The Small Business Community Navigators Pilot Program provided $100 million in funding to 51 organizations, including U.S. Black Chambers of Commerce and the National Urban League, which worked with local groups to connect entrepreneurs to resources to help their small businesses recover and thrive.

Biden claims credit for the largest-ever direct federal investment in small business incubators and accelerators; the Minority Business Development Agency (MBDA) Capital Readiness Program awarded 43 non-profit community-based organizations $125 million in funding to support underserved entrepreneurs launch and scale their small businesses.

Additionally, the SBA delivered $50 billion to small businesses in Fiscal Year 2023, with major increases in support for underserved businesses, including Black-owned businesses. Since 2020, the share of the SBA’s loan portfolio going to minority-owned businesses has increased from 23% to over 32%. The number and dollar value of SBA-backed loans to Black-owned businesses has more than doubled since 2020. This is vital support at a time when more than 80% of small business loan applications are being rejected by big banks.

The success of Black-owned businesses hinges on a combination of innovation, community engagement, and strategic adaptability. Embracing technological advancements and leveraging online platforms for marketing and sales can enhance visibility and accessibility. Cultivating strong networks within the community and fostering partnerships can amplify support and create a sustainable customer base. Success in the 21st century for Black-owned businesses involves a blend of expanding access to capital, embracing technology, fostering community connections, and upholding values that promote the economic growth of Black businesses.

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