What is Black History Month?
Black History Month is a yearly celebration of African American achievements and a time to recognize their central role in U.S. history.
A significant way the African American population has improved America is through entrepreneurship. Black business owners are a vital part of the American economy and support of African-American entrepreneurship results in growth and community opportunities.
While minority entrepreneurs may still face significant barriers, expanding education and access to resources helps black business owners grow their business and thrive economically.
Black business owner statistics
Unfortunately, black business owners still face struggles when it comes to establishing and running a successful business.
Minority business owner Tanisha Colon-Bibb wrote in the Huffington Post that she didn’t believe black people could thrive in business. She changed her name from Tanisha to one she thought sounded more conventional. After soul searching, she realized she wasn’t being authentic and changed it back.
The good news is that minority-owned businesses are increasing. There are over 2 million black-owned businesses in the U.S. Additionally, the U.S. Census Bureau’s numbers showed an increase in the number of minority-owned businesses with paid employees. According to the Minority Business Development Agency, “By 2044, the Nation’s prosperity will rely even more on minorities, the fastest growing segment of the population."
The numbers are promising. When consumers support minority businesses, the overall economy is strengthened.
What makes a business owner successful?
Even if your services are in demand and your products are flying off the shelves, it’s important to have a handle on the health of your business.
Here are areas to keep track of:
Start-up financing to launch a business and funding for working capital and debt refinance is a challenge to every entrepreneur. The #1 reason small businesses fail is related to cash flow problems. The right loan at the right time can shore up cash flow and put your business in a much stronger position to succeed.
Minority business loans can come from a variety of sources, including the U.S. Small Business Administration, online lenders or banks, and non-profit organizations. Securing financing can be a difficult for minority business owners, who may have lower credit scores and fewer assets to secure small-business loans than other business owners, according to the federal Minority Business Development Agency.
There are many ways a business can acquire funding when just starting out of after being established. Here are options:
- Friends and family - One accessible option is to borrow funds from family and friends. Because of your close relationships, you won’t have to demonstrate your trustworthiness and your ability to see your promises through. Keep in mind that entering into this kind of financial partnership can put personal relationships at risk and may also adversely affect your ability to access other kinds of loans.
- Business grants - Business grants are another way to finance a business. Read 4 Insider Tips about Small Business Grants on the SmartBiz blog for how to find and apply for grants. The Business Grants for African Americans website can help you find a good fit.
- Crowdfunding - Crowdfunding through sites like Kickstarter and Indiegogo, relies on many smaller investments and it’s up to individuals to decide how much to contribute based on your pitch. If your campaign is successful, you’ll receive the funds you need and build a loyal customer base.
While there are some attractive benefits of crowdfunding for your business, be wary of the disadvantages. Find out why it can be a risky choice here: Reasons to Avoid Small Business Crowdfunding.
- Business Credit Cards - Using business credit card can be a flexible option if used responsibly. Because they are a revolving line of credit, you can continue borrowing without depleting your available funds. With your credit card, you can also take out a cash advance, a type of short-term loan that allows you to withdraw cash which you then repay with interest. Learn how you can benefit from a business credit card here: 6 Benefits of Using a Business Credit Card.
- Bank Term Loans - Term loans are a common source of funds that entrepreneurs use to develop their small businesses. The idea’s simple enough: you borrow capital and then repay with interest on a regular basis. SmartBiz Loans offers fixed-rate term loans with stable monthly payments that are funded swiftly. Learn more here: Bank Term Loans.
- SBA Loans - An SBA loan is a type of long-term loan secured, in part, by the US Small Business Administration. The agency makes a guarantee to the bank that it will cover a percentage of your desired loan amount if you can’t make your payments. This is a win-win for small business owners and lenders: you benefit from low rates and long terms, while lenders have the advantage of additional support from the government.
For in-depth information, review details about SBA loans on the SmartBiz® website: SBA Loans – the Gold Standard in Small Business Lending. SmartBiz Loans® is proud of our SBA loans track record for minorities. From 2017 to 2019, SmartBiz increased the dollar amount loaned by banks in the SmartBiz network to African American Women owned businesses by 45%, and nearly 2.5x from 2016 to 2019.
Tax laws are nondiscriminatory so small business owners do not get special incentives just because they are minorities. But owners can take advantage of numerous tax breaks for starting and running a business. Review 5 Tax Tips for Minority-Owned Businesses for ideas. Be sure to check with a tax professional for specifics and legal requirements.
Before you pay taxes, look into the structure of your small business and how that will have an effect on your tax obligations. From withholdings to quarterly estimated taxes to deductions, small business taxes can be confusing. If this isn’t your area of expertise, working with a bookkeeper or accountant familiar with small businesses can relieve stress and help you avoid penalties. For information read: Small Business Taxes: Self-File or Use a Professional?
Ronald N. Langston, director of the Commerce Department's Minority Business Development Agency (MBDA), says, "...minority businesses are growing at a faster rate than U.S. businesses overall."
One way to keep track of your growth is to measure your business revenue. In accounting, revenue is the income that a business has from its normal business activities, usually from the sale of goods and services to customers. Our article, Small Business Revenue: Determine Where You Stand, has tried and true ways you can increase your business revenue if you’re falling short.
You want your target audience to be aware of your products and services but that takes some effort. Do you have your marketing and social media strategy outlined? If not, it’s time to create a comprehensive marketing plan. Our blog article can help you get started: Example of a Marketing Plan for Small Business. Your plan acts as a roadmap and can reveal resources and funding needed to launch successful marketing programs. The SmartBiz Small Business Blog has many articles about low-cost, effective marketing strategies. Here are a few to review:
- Marketing Calendar: When to Promote Your Business – Make sure you have important shopping days like Small Business Saturday and Black Friday but don’t ignore other opportunities to promote your business.
- 8 Direct Marketing Strategies to Benefit From – Direct mail, social media, emails, and online marketing are explained along with strategies you can use to reach consumers.
- 5 Companies with Good Marketing Strategies – Get inspired and tailor your own marketing programs with ideas from successful businesses.
For more strategies, check out this article from the Black Enterprise website: 9 Marketing Tips for Black-owned Small Businesses to Accelerate Business Growth.
African American small business owners face the same challenges that any other small businesses face. Finding the right employees and managing overhead can be difficult. If it’s time to bring on an employee or add to your team in place, know that hiring the right people can make or break your company so you want to do it right.
The co-founder of Skillbridge sums up hiring this way: "Great people versus okay people is the difference between success and mediocrity."
First, determine what kind of employee you need. Our article, Do You Need an Employee or Independent Contractor? can help you choose the right type of employee based on your unique business. 7 Things a Business Owner Needs to Know About Hiring is filled with information to help as you staff up like placing the perfect help wanted ad, running a background check, interviewing tips, and more. Before you hire, check with your bookkeeper or accountant to make sure you’ve filed the appropriate paperwork and are fulfilling employee tax obligations.
Managing well and keeping them satisfied in the office is key to running a successful operation. Here are articles to help you build a strong company culture and a happy work force:
- 4 Tips for Making Work More Enjoyable for Employees – Learn simple strategies like putting a rewards program in place, providing a healthy and aesthetically pleasing environment, and facilitating friendships on your staff.
- 12 Proven Employee Retention Ideas – Tuition reimbursement, asking for feedback, encouraging creativity, and running a respectable workplace are just a few ideas.
- 10 Ways to Lose Your Small Business Employees – Here are things to avoid when managing your team like playing favorites, underpaying, and stretching resources too thin.
Your employees need to have skills in place to do their job effectively. If you see someone is lacking in a specific area, there are lots of ways to enhance performance. Here are areas to review: 9 Key Areas of Improvement for Employees.
Consider these options that can be affordable and keep your employees engaged:
- Long-term assignments and projects
- Guidance from a small business expert
- One-on-one coaching with a seasoned employee
- Local networking meetups, groups, and peer training sessions
Cross-training is simply giving workers the information and skills needed to handle tasks and projects across all departments. This is a great strategy, especially if an employee is out of the office for vacation, an illness, or maternity leave. Others can jump in and take on important duties. Foster an atmosphere of team work so employees can help train each other.
All tasks within a company to keep it running and earning money is referred to collectively as business operations. Entrepreneurs are driven and creative but may not have all the skills needed to run a business effectively. The Minority Business Development Agency within the U.S. Department of Commerce has many resources to help improve business operations. The organization is staffed with experienced professionals, ready to help strengthen, develop and grow minority owned businesses.
Become certified as a Minority-Owned Business
Business owner Andrew Magnus took the steps necessary to become certified as a minority owned business. He says, “I only knew one minority business owner. He asked me why I was working for someone else and told me that I could make my own paycheck. That always stuck in my mind. A big part of my push was to create a greater minority presence in a multi-billion dollar industry.” Once certified, Magnus targeted companies and institutions with a diversity spend initiative. AllBusiness has a list of benefits including having a sense of community, landing contracts that seemed unlikely, and setting yourself apart from other businesses. Read the rest here: 7 Benefits to Becoming Certified as a Minority-Owned Business.
African American businesses grew by more than 400% in 2018 as compared to 2017. Although they may face funding difficulties, the outlook is impressive. You can be part of the success minority businesses will achieve in the years to come.
SmartBiz Loans is proud of the funding we provide to minority businesses. Read about some of the successful minority owned businesses we’ve helped to grow and save on the SmartBiz Small Business Blog:
Hear from a SmartBiz customer who received two SBA loans to grow his fitness business: