This year marks the 100 th anniversary of the Tulsa Race Massacres. Over two days, a white mob in the city's Black district of Greenwood killed an estimated 300 Black Americans and left nearly 10,000 destitute and homeless. The Greenwood area was known as Black Wall Street, an epicenter of Black business and culture.
According to Hannibal Johnson, the area was built "For Black people, by Black People" author of Black Wall Street: From Riot to Renaissance in Tulsa's Historic Greenwood District . Before racist riots destroyed the prosperity of Black Wall Street, Greenwood's thriving Black economy demonstrated the power of entrepreneurship in creating wealth for entrepreneurs and the community around them.
We're still contending with a racial wealth gap created through centuries of racism and discrimination, but black entrepreneurship may be the way we can help close the gap.
Why entrepreneurship is the key
The racial wealth gap is a chasm. According to the Survey of Consumer Finances , in 2019 (the most recent survey conducted), the median net worth of Black households was $24,000 as opposed to $189,000 for white households. This shortfall in financial wealth creates a cascade of inequalities in education, homeownership, and simply saving for emergencies. And while it will take multiple solutions to solve these enormous problems, entrepreneurship can provide the best opportunity to build sustainable, long-term wealth.
Why? A Congressional Black Caucus Foundation (CBCF) study found that the median net worth for Black business owners was 12 times higher than for Black non-business owners. In addition, while whites have 13 times the wealth of Black Americans, when comparing the median wealth of Black and white business owners, the median wealth gap decreases to three times. While three to one is still significant, it's not as daunting as 13 to one.
Owning a business is good for Black entrepreneurs, but it also helps the communities around them. According to the study , Black-owned companies have created over 1 million jobs and generated over $165 billion in revenue.
Although these statistics provide some hope, Black entrepreneurs still face substantial hurdles in succeeding in business. Black entrepreneurs are more likely than those of any other race to fund their business with personal credit cards, while white entrepreneurs rely most on business loans. Additionally, black business owners are nearly three times as likely to say the lack of capital hurt their profits.
We saw this play out in real-time during the Covid Pandemic when black-owned businesses declined more than 40%, significantly more than any other ethnic group. Black-owned companies also had more trouble getting access to government relief. This hurdle is on top of all the other obstacles Black entrepreneurs face . Blacks make up only 3.5% of America's business owners, though they account for 13% of the U.S. population . In contrast, whites make up 60% of the U.S. population but own 81% of its businesses.
At the beginning of the month, The Biden-Harris Administration took new steps to narrow the racial wealth gap by focusing on two key wealth-creators : homeownership and small business ownership. Specifically for small businesses, the Administration will:
- Use the federal government's purchasing power to grow federal contracting with small, disadvantaged businesses by 50 percent. These contracts will translate into an additional $100 billion over five years and help more Americans realize their entrepreneurial dreams.
- Invest $31 billion in small business programs. These programs will increase access to capital for small businesses. In addition, they will provide mentoring, networking, and other forms of technical assistance to socially and economically disadvantaged companies seeking to access federal contracts and participate in federal research and development investments.
On Tuesday, the Administration backed up that stance by giving $1.25B in awards to more than 800 Community Development Financial Institutions (CDFIs), which provide essential financing to Black, Latinx, Native, rural, and other communities not well-served by mainstream financial institutions. By contrast, previous investments in CDFIs
Federal support of CDFIs can provide increased capital for entrepreneurs historically left out of the picture . These entrepreneurs' success benefits everyone.
Focus on what you can control
While global change and government intervention are necessary, I always like to focus on what we can control as individuals on a personal level. Entrepreneurship can provide a great living and give you flexibility, freedom, and fulfillment that you never thought possible. However, you've likely heard the daunting statistic that some 50% of businesses fail within the first five years. If you're thinking of becoming an entrepreneur, you must set up the proper foundation.
I have my clients focus on five essential elements.
- Passion: Passion is about tapping into your inner motivation and using that energy to take action. In short, it will feel satisfying and fulfilling to do what you're doing. This step is essential when you consider that staying in business requires many little actions performed consistently.
- Vision : After you've clarified your passion or why you want to create this business, you move next to your vision. Here you'll be specific about how your business will embody and reflect your passion. This process is a bit different from the typical vision statement commonly thought of as concise, inspiring words that make good taglines. This kind of visioning usually creates an emotional reaction, which allows you to see, sense, and most importantly, feel what achieving this vision would be like. That's the motivation you will need to take action.
- Values: Next, to refine and implement your passion and vision, it's crucial to create a set of values that you can use as a lens to navigate the various obstacles and opportunities that come your way. We talk about how you can choose your business values and how to use them practically in day-to-day operations.
- Strategy : Once you have identified your why, know your vision, and established your values, it's time to start developing a strategy. This step is your roadmap for how you achieve the vision you've put together. You'll have to explore several strategies around your product and service, pricing, marketing, operational efficiency, and finances.
- Tactics: Finally, you have to deal with the minutiae. In other words, what steps and actions will you take within your strategy to accomplish what you need. That will include looking at elements like your ideal client, your ideal day/week/year, business structure, cash flow, tax planning, and succession planning, among many other things.
While no one can guarantee you can succeed as an entrepreneur, having the proper foundation gives you the best opportunity to thrive. Additionally, it's best not to do this alone; social capital is just as important as financial capital. You will need the support of a team, perhaps including a financial advisor or coach, bookkeeper, accountant, other entrepreneurs, etc. Remember, you don't need to be good at everything. Focus on your strengths and delegate the things you find challenging.
The racial wealth gap is daunting. But if we can all focus on our strengths and help provide opportunities for those around us, we can close the gap and create opportunities for success for all of us.
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