How to Start and Run a Successful Black Business Today
Fred McKinney | 3/3/2010, 3:10 a.m.
With so many people out of work during this economic recession, there is an upsurge in entrepreneurial activity as people try to establish a livelihood. This occurs even as the formation of new business is at a cyclical low.
In 2008 there were 627,200 small businesses formed. This was down from the over 670,000 business starts in 2006. As the recession took hold in 2009, the numbers of businesses formed will likely show dramatic declines and the number of business closures will significantly increase. Yet despite these dismal statistics, entrepreneurs are out there preparing to launch new businesses.
Americans are aware that owning a business is one of the key ways to build wealth for themselves and their families. According to the Minority Business Development Agency (MBDA) of the U.S. Department of Commerce, blacks, Asians and Hispanics have formed businesses in recent years at rates four times the national average.
The overwhelming majority of minority businesses in the country are small. Over 80 percent of the 18.4 million minority businesses in 1997 had annual revenues under $10 million. In Massachusetts, there were a reported 39,000 minority firms or 7.3 percent of all firms in the state, according to the 1997 MBDA study. Unfortunately, we are dealing with data that is certainly outdated. But it is the best that we have.
These numbers tell a mixed story. On the one hand, the number of minorities starting businesses is growing. But on the other hand, these businesses are so small that they become vulnerable to the slightest change in business conditions. As an economist and someone who specializes in minority business development, I have several recommendations for any entrepreneur who is considering starting a business.
But before we get to these recommendations, it is important to note that some might be asking why would anyone consider starting a business in these depressing conditions? The answer is that while the economy is certainly not as healthy as it should be, the reality is we have most likely seen the worst of the “Great Recession.”
An economic recovery is inevitable. Timing is everything in life, love and business. If the economy is poised for recovery, now is a good time to begin planning for business. This recession has lasted twice as long as the average recession since 1945. It is likely that when the recovery does take hold and public confidence returns, the expansion will be strong and sustained as consumers and businesses make up for expenditures they postponed during the recession.
So what advice would I provide a budding entrepreneur? The first thing to note is that even if you do all of what I suggest, there is no guarantee that your venture will be successful. Business is risky, challenging and competitive. If consumers like what you offer at prices that are profitable given your costs, you will survive. If consumers do not like what you offer you will fail. It really is that simple.
The first recommendation I make to any entrepreneur is to do your homework. This means that if you are going to start a business you need to understand what companies and products/services are now on the market that will compete with your offering.