By Khanyi Molomo
First Published: February 18, 2020
At its core, entrepreneurship is a lot like making art. An artist might use brushes and a blank canvas to create an art piece, while the entrepreneur uses capital and a business plan (with their expertise as the blank canvas) to create a business.
But of course, as a creative, you know that not all material is created equal. Some brushes have weak bristles, some paints retain color better, and some canvases are better than others. The material you use to create your artwork has a direct impact on the final product.
The same can be said about entrepreneurship. The financing, support, and other resources you obtain have a direct impact on the success of your business.
In an ideal world, access to resources would be equal, and the output of the maker could be judged on comparable grounds. Unfortunately, as many black business owners have found, this is not the case, and the effect of these materials weighs more heavily on them.
You may read about the rapid increase in the number of black-owned businesses, and wonder: Aren’t there more black-owned businesses than ever before? Haven’t these issues been addressed?
Well, not quite. You see, if they were addressed, then we’d see more successful black businesses. But black companies, together with Hispanic companies, have the highest failure rates.
So, what are some of these challenges that black makers are faced with, and what can we do about it?
Exposure to Other Entrepreneurs
When I started my writing business, my uncle was the first person I reached out to for guidance. He’s in a completely different industry and owns a brick-and-mortar business, but I turned to him because he’s the closest relative I have who’s a business owner. I needed advice on a lot of things – budgeting, marketing strategies, how to position yourself to attract ideal projects, and so much more. He helped me prepare for the challenges he experienced that I had no idea were coming.
Unfortunately, many black business owners don’t have access to mentors. The main reason? Not nearly as many black people, on average, have successful entrepreneurs within their families or social circles.
You might ask yourself what the actual value of a mentor is in this day and age. With so much information at our fingertips, can’t you just Google the information you need?
Well, of course, you can. But research reveals that mentoring has a significant impact on small business success. Mentors help you expand your network. They help you reach markets that can be difficult to access. They can also share with you lessons from their experiences, which is hard to come by, even from some of the best business books.
Lack of Funding and Resources
In addition to (the lack of) mentorship, black makers tend to lack access to funding and other resources critical to building a successful business.
Now, we know that funding is often the biggest challenge for new entrepreneurs, regardless of race. Almost no one gets to start armed with a check for the full amount they need to get things off the ground. So many of us resort to either digging into our own pockets or turning to family and friends for investments.
With black business owners specifically, Guidant Financial found that the most popular financing methods were cash and help from family and friends. Here’s one of the ways the racial wealth gap creates a challenge.
Although there’s a growing black middle class, according to the U.S. Census Bureau [PDF download], the average African-American household income is the lowest of all the races, at $40,258 per year, compared to $50,486 for Hispanic households, $68,145 for White households, and $81,1331 for Asian households.
So, if you’re a black entrepreneur and you’ve resorted to using your own cash, or you’ve decided to turn to your family and friends for funding, you’ll almost inevitably start with lower capital.
Without proper financing, it’s difficult to get the employees you need, to advertise yourself, and to purchase the equipment and materials you need to start making your art on a larger scale. Black artists, designers, and other creatives start their businesses on lower funding in part because of these socioeconomic barriers, and this has an adverse effect on how they can grow their companies.
What Can Be Done to Combat These Challenges?
The unique challenges faced by black business owners won’t be settled in a day or two. And, although finances play a significant role in business, simply increasing the funds allocated for black businesses isn’t going to solve the entire problem either.
A more holistic approach is needed. And to get there, it’s essential that we understand all the factors that contribute to successful entrepreneurship. A study released by the Congressional Black Caucus Foundation [PDF download], conducted by the Center for Policy Analysis and Research, looked at the state of black entrepreneurship in America. This study highlighted three factors that have a significant impact on the success of a business – human, financial, and social capital.
Human capital refers to the people-associated characteristics that help us scale our businesses, such as education and experience. Financial capital speaks to the money and resources we need to start and keep our companies operational. Social capital refers to the relationships and networks that play a significant role in our business’s growth.
All these need to be addressed for the terrain to be leveled for black entrepreneurs. This could mean an increase in internships and apprentices for people of color to equip them with the necessary knowledge and skills required to run successful businesses. There’s also a need to diversify the venture capitalist space so that black entrepreneurs can start building meaningful connections with people who can help fund them.
On a more immediate level, if you’re a black maker wanting to turn your art into a full-time gig, you can look for funding opportunities that specifically focus on minority businesses. Reaching out to your local chamber of commerce can also help to guide you as a new entrepreneur or small business owner.
The Spirit of Black Entrepreneurship Persists
Despite these challenges, we’ve seen a significant increase in the number of black entrepreneurs over the past few years, in particular, black female entrepreneurs [PDF download]. Black women have become so invested in starting their own businesses that they’ve surpassed the number of black male entrepreneurs, making them the only ethnic group that has more female business owners than their male counterparts.
The enthusiasm and drive for building your own business within the black community, regardless of the above-mentioned socioeconomic barriers, makes you wonder what would happen if it was met with the same enthusiasm and support from outside the black community.
What would happen if African-American entrepreneurs had access to a comparable amount of funding, resources, and mentorship as other races? Hopefully, as we continue these conversations and address the challenges head-on, we’ll have an answer to this. And maybe, when black entrepreneurs finally get to access the materials they need for their businesses, they too will start creating their own masterpieces.