Often we hear that most small businesses fail because of a lack of capital. We hear the tails of woe, and some are quite true, of entrepreneurs who did not make it because they simply did not have enough money to fund their business. They failed because they could not get a loan from the bank. They failed because of cash flow problems.
While all of those reasons are legitimate and valid, in many cases small businesses fail because of improper planning and marketing, as well as a lack of adequate research. Too many business owners are unwilling to invest some of their limited resources in the very things that will make them successful. Further, sad to say, too many of us are unwilling to hire other Black professionals to advise us on things such as accounting, legal, marketing, and other very necessary functions to any successful business.
That’s too bad, but I suppose that is why less than 2% of the African Americans are entrepreneurs. According to the last economic census in 2007, Blacks owned 1.9 million nonfarm U.S. businesses. These Black-owned firms accounted for 7.1 % of all nonfarm businesses in the United States, employed 921,032 persons (0.8 % of total employment) and generated $137.5 billion in receipts (0.5 % of all receipts).
In 2007, there were 106,824 Black-owned employer firms; these firms employed 921,032 persons and had a total payroll of $23.9 billion, generated $98.9 billion in receipts, but accounted for just 5.6 % of the total number of Black-owned firms and 71.9 % of Black-owned firms’ gross receipts. Average receipts for Black-owned employer firms in 2007 were $925,427.
In contrast, 1.8 million Black-owned firms had no paid employees. These nonemployer firms generated $38.6 billion in receipts and accounted for 94.4 % of the total number of Black-owned firms and 28.1 % of gross receipts. Average receipts for these Black-owned nonemployer firms in 2007 were $21,263.
This scenario, coupled with the rate of failure among Black owned businesses, strongly suggests a need for better management of those businesses. Just as importantly, the data indicate a tremendous need for growth and job creation among Black businesses.
The value of proper marketing and advertising cannot be overstated when it comes to the success of a business, especially a small business. For some reason we seem to shy away from spending money on advertising, marketing, and research. In many cases we even fail to allocate money for these services in our initial budgets. That’s a prescription for failure — or, at a minimum, a business that will not likely reach its full potential
The handwriting is on the wall for the workers of this country. Downsizing, rightsizing, re-engineering, or whatever you want to call it, are the orders of the day. Business ownership and mutual support are keys to the success of Black people in this country. We must be willing to support one another’s businesses, and we must be smart when starting new businesses.
Place high priority on getting the proper assistance with your business plan. Hire a Black professional to guide you through the maze of research, management, and marketing needs. Yes, we know how to do those things too.
Advertise your business in the proper medium, and please use Black owned media to do so, as well as other means of getting the word out about your business. In other words, do something that will benefit some other Black business person. Marketing — don’t be afraid of it, and please don’t deny the opportunity for a Black marketing professional to write your marketing plan and to execute a portion of that plan, if the need arises.
Research! Research! Research! before you jump into business. Just because you are a great cook does not mean you can run a restaurant. Spend some of your money researching your market to determine the need for your product or service, as well as what your competition is doing.
You know the saying: “Everybody wants to go to heaven, but nobody wants to die.” This is a case of many people wanting to be entrepreneurs, but few are willing to do what it takes to be successful.
Let’s create and maintain strong and thriving Black businesses. Let’s use one another’s strengths and expertise to make our businesses grow. Let’s work together, cooperatively, to make a better future for our children, teaching them how to make jobs rather than take jobs. We can only do that through business development — and we can only develop viable businesses by learning more about entrepreneurship.
Recognize and understand the rules of the entrepreneurial game, and learn to play them well. Money follows good planning and good management — no matter what color you are.
By; James E. Clingman