When it comes to Black female business owners, there is good news and bad news. Let’s start with the good news – According to The 2018 State of Women-owned Businesses Report commissioned by American Express, the number of Black women-owned businesses grew by a stunning 164% between 2007 and 2018, nearly three times the rate of non-minority women-owned businesses. The Federal Reserve confirms that with 2.4 million African-American women-owned business in 2018, Black women are the only racial or ethnic group with more business ownership than their male counterparts.
That would be cause for celebration, if it weren’t for the bad news. Despite the rise of businesses owned by Black women, annual sales by those businesses, are close to five times smaller than for all women-owned businesses. According to the Federal Reserve Bank of Kansas City, the average annual sales for businesses owned by Black women was $27,752 in 2012, compared to $143,731 for all women and $170,587 for White women. In fact, for women of color, average revenue dropped from $84,000 in 2007 to $66,400 in 2018, while for non-minority businesses, revenue rose from $181,000 to $212,300.
On the surface it may seem there is a rise in self-empowerment or entrepreneurism propelling Black women into business-ownership, but you only have to scratch the surface to realize the ugly truth lying beneath;
• The Federal Reserve report cites that more often than not, the impetus for Black women leaping into entrepreneurship is the poor treatment and perceived depreciation of their contributions in the workplace.
• The American Express report, notes that women of color start businesses at a higher rate out of necessity and the need to survive due to higher unemployment rates, long-term unemployment and a much greater gender and racial pay gap.
• Black women-owned businesses tend to stay very small at the micro-level due to capital constraints and the difficulty faced trying to access credit. The lower income and lower wealth makes it hard to get funding to grow
As a Fund Development coach for small nonprofits, I see all too frequently, Black women entrepreneurs tapping into personal savings, and retirement accounts to fund growth efforts only to exhaust those resources before any meaningful growth or development is ever realized. So what can Black women business-owners do to circumvent such dire statistics? First and foremost, is imperative that they seek out and invest in business coaches and mentors to help them ramp up their business knowledge. This needs to be a business strategy priority – a ‘must have’ not a ‘nice to have.’
When we want to get physically fit, we hire a trainer. When we want to learn a musical instrument, we hire an instructor. Every professional sports team has a coach skilled at developing athletes to achieve their fullest potential. It is surprising then, that many people will gamble on their careers, risk financial ruin, and embark blindly on a business venture without any professional coaching or advice whatsoever.
Every major city has SCORE programs — the nonprofit resource partner with the U.S. Small Business Administration (SBA) offering free business mentoring to small businesses. While it is often cited that the lack of SCORE’s “culturally relevant” mentors can be a hinderance, this is where leveraging our professional, social and educational networks comes into play. Being African-American, I am surprised by how often I am approached by non-minorities asking me to mentor them! Bottom line is, if you want to avoid the pitfalls, maximize your potential and position yourself for the greatest success, invest in a business coach/mentor.
Pamela J. Oakes, Managing Director of The Profitable Nonprofit, is a funding consultant helping small and emerging nonprofits achieve funding sustainability. Pamela previously worked with the Bill & Melinda Gates Foundation.