Entrepreneurship is the American way. According to most starting and owning a business, you believe in an idea that leads to empowerment, liberation, and success. However, that takes guts and determination. Some have even compared starting a business to how our founding fathers began the nation. It is only because of their hard work and sacrifice that America is a place where any person can fulfill the “American Dream.”
The Entrepreneurial Spirit of America:
The United States is an entrepreneurial community. And if you are an entrepreneur in the US, you are following in the footsteps of pioneers and innovators. However, if you are a black business owner, you have a legacy of facing headwinds such as systemic, institutional racism. Research suggests that systemic challenges hold black-owned businesses back and inhibit their growth. They cannot realize their potential due to limited assets, limited access to funding, and restricted access to the market. But with the right business ecosystem, black markets can also thrive. New businesses are critical to creating jobs and wealth redistribution in the community.
There are other benefits to helping black-owned companies. Healthy black businesses can close the black-white wealth gap that has widened due to the COVID-19 crises. Black store owners are most affected by the pandemic because they were already hanging by a thread. Indeed, approximately 58% of such businesses were in financial distress pre-pandemic. Worryingly, the pandemic shut down 41 percent of black-owned firms over three months in 2020.
Therefore, there is a pressing need to increase the net worth of such institutions. The easiest way to do so is through conscious financial management. And by that, we mean that market leaders must take innovative decisions to reduce wealth inequities. They may reinvest community capital in black communities. For example, the Greenwood recirculation of wealth in black community assistance program gives grants to people of color.
Therefore, businesses must have financial wellness so that they can absorb unforeseen economic shocks. But it depends on financial literacy. And financial management is one of its fundamental concepts. Therefore, we must discuss financial management before going any further.
What Is Financial Management?
It refers to all activities that help companies get capital for growth. It may also include the decision to allocate resources efficiently and monitor results with accounting reports. Therefore, companies must have well-written financial management policies. It must outline the assets, profits, and debts of the business.
Excellent management requires two things; persistence and balance. It is easy to give up when things get tough, but lady only fortune smiles on those who persevere despite all odds. Moreover, owners must have a balanced approach to both financial and operational growth.
The most vital thing to keep in mind is that there is no right way to help a company grow. As businesses live in a world of uncertainty, they make decisions without having the full picture.
Get Working Capital The Unconventional Way:
Getting funding for black-owned businesses is an uphill battle. On average, black entrepreneurs have to start with $84,000 less than their white counterparts. Consequently, they report higher levels of revenue related to debt.
Black loan applicants have to fulfill more stringent requirements than white entrepreneurs. It takes banks longer to get them additional bank financing. Therefore, most cash-strapped entrepreneurs opt for alternative means of accessing capital. Business owners have to get creative when looking for funding. There are many Minority Business Development Centres that help minority business owners make their businesses a success.
Keep An Eye On The Cash Flow:
Most businesses fail due to problems with their cash flow. So what is this all-important metric of success for entrepreneurship? It is how we measure the cash input and how much you spend on your business. A negative cash flow is when you cannot meet your financial obligations. So, if you do not have any cash in hand, then your business will stop operating. Therefore it is vital to keep your cash flow in mind when making any decisions. Unfortunately, most minority business owners are not well versed in financial literacy. Therefore it is vital to teaching them the basics of cash flow management. Bookkeeping is necessary for firms to understand all their financial transactions. It can point out areas that can save money. William Towns, Managing Director of 4S Bay Partners, LLC, considers the cash stream vital to a company. Therefore he recommends that firms have to utilize tax cuts and opportunity zones for a positive cash flow.
Reducing Costs And Getting Help:
Improving profit margins and increasing cash flow is useless unless business owners try to limit their expenses. How can they do so? The first step would be by analyzing the costs. Business owners better review all expense categories on their income statements. Not only can this identify opportunities to cut costs, but it can also give owners an idea of their progress.
Furthermore, African American business owners often do not have access to industry leaders. They have to work and guess about how to make their businesses a success. Business networks can help companies improve supplier base and get better debt and equity finance. Therefore business networks can support black entrepreneurs and help them promote their firms. Networks can also make funding more accessible by getting minority business owners in touch with venture capitalists and angel investors. Mentors can also teach minority owners about financial literacy. Established African American entrepreneurs can give potential business owners the chance to trail them. Therefore, they can learn about credit scores, debt management, and loans.
A Word About Female And Minority-Owned Businesses:
Minority women face many obstacles in entrepreneurship. As most females have lower income levels, they cannot make internal investments. Even their options of external borrowing are limited. Furthermore, most females have lower credit scores and lower education levels. Suppose male black business owners face twice as many obstacles in their businesses. In that case, female black business owners have four times as many issues. However, women having rigorous financial literacy can be a game-changer for them.
Widespread protests on race relations the past year brought issues of inequity and disparity in sharp focus. These discrepancies matter since they shape the present and the future of the community. Therefore the state must invest in the business ecosystems. They can help Black business owners get access to better resources and opportunities. Through such a step, the US can finally stay goodbye to racial inequality and inequity.