If you are a Black-owned business, you may have experienced some challenges during the pandemic, and perhaps, found ways to navigate through them. Black-owned businesses have had to deal with numerous challenges when it comes to starting and growing their businesses.
Whatever business you may be running as a Black-business owner, you sure can relate to some of the challenges that your business may have gone through in the last couple of years. However, knowing how to navigate through these challenges can help you set your business on the right path.
Black-owned business growth requires way more than access to a business growth blueprint. It requires that you are given equal access to funding programs that can help you access the funds that you need to grow your business.
No doubt, the pandemic was particularly hard on Black-owned businesses as the majority of these businesses are largely concentrated in the retail, restaurants, essential services, and other businesses in that category which makes social distancing challenging. As a result, several Black-owned businesses took a hit.
In addition:
- 58% of Black businesses were at risk of financial distress before the pandemic, compared to 27% of white-owned businesses.
- Between February and April 2020, the number of Black business owners in the US dropped by 41% compared to 17% for white business owners, per Reuters.
- In the 1st round of Paycheck Protection Program (PPP) funding, Black-owned businesses were 5x more likely than white-owned businesses to receive nothing.
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But in 2023, Black-owned businesses are on the rise
An analysis of Census data by Robert Fairlie, a research associate at the University of California, Santa Cruz, found that the number of Black business owners was 28% higher in Q3 2023 than pre-pandemic, per US News. Now the question is, why?
Black-owned businesses were already growing pre-pandemic, increasing 8% between 2018 and 2019.
And while the pandemic stalled many companies, it also led to new business growth overall as people pivoted into new revenue streams.
This definitely helped to create other revenues for Black-owned businesses. It also helped them to begin to explore other business areas to help them maximize their business profit and funding opportunities in other viable business ventures.
Other Contributing Factors…
The racial happenings and reckonings of 2020 also opened up more talk and insights to greater scrutiny of disparities facing Black business owners, which includes:
- Net worth: As of 2019, white families had a median net worth 7.8x that of Black families, meaning they’re less able to rely on family financial support.
- Access to capital: Only 3% of venture capital goes to Black founders.
- Disparity to business funding: Black-business owners generally had lesser opportunities to access funding to help them grow their businesses.
As a result, many consumers rallied to support Black businesses, initiatives were launched to help Black entrepreneurs, and later PPP rounds were more equitable for minority-owned ventures.
“My guess is that the revised PPP program helped… but also more racial inequality awareness by customers and larger businesses seeking suppliers,” Fairlie told US News.
To keep things in perspective…
Though it may be quite challenging. A McKinsey report noted that only 4% of Black startups are successful, and most start with ~$72k less capital than white startups.
But investments in an equitable business ecosystem that closes the wealth gap could add $1T–$1.5T in annual GDP.
For more: Check out this Brookings report to see interactive charts that show how racial parity would change major US metro areas.
