Why Do So Many Black-Owned Businesses Fail?

Starting a business is a daunting task, and the statistics show that many businesses fail in the first year. For African-Americans, the statistics may be even grimmer, with eight out of ten Black-owned businesses going bankrupt in the first 18 months. The rate of African American companies that fail today is at an all-time high. We all know that 80% of companies collapse and burn in the first year.

Not to mention, when starting a business, the last thing you want to hear is why or how it might fail, but by addressing the reasons for failure in advance, you'll be much less likely to fall victim to them. Data shows that black entrepreneurs are much less likely to secure business capital than their white counterparts, and when they do, that capital comes in much smaller amounts and with much higher interest rates. However, an organization like that needed more investment and more money to grow and prosper. Breaking this cycle to give black entrepreneurs the same chance of success requires intentional efforts on the part of the public and private sectors.

Increase federal, state and local government investment in marginalized, disadvantaged and destroyed black business districts. Generations of redlining and other legalized discrimination and segregation place the government at the front of the line when it comes to the responsibility of rectifying the equity gap of black companies. Marks developed the program with former U, S. Comptroller of the currency Gene Ludwig, President of the Ludwig Institute for Shared Economic Prosperity.

He says these types of programs are key to attracting major banks to invest in local black businesses. Once again, when black companies prosper, it benefits everyone, including their lenders and investors. Putting more money into the hands of black lenders and financiers. Once again, those who better understand the needs, financial and otherwise, of black business owners should be in a better position to assess and help them, and that includes investors.

This study began in February and will take several years to complete, but one of the people involved said they are already reviewing information provided by black business owners and experts. The police murder of George Floyd and the focus on racial justice it sparked across the country has created an increase in black funders looking to invest in black businesses, Bradley says, so the opportunity to seek out black funders is greater than ever. They are funded by the Alabama Power Foundation to investigate what systemic issues are hindering the success of black companies in Alabama. The ability to reach a large target audience and potential customers around the world are reasons why black-owned companies should market more online.

In my personal opinion, these are some of the biggest mistakes African American startups make, but keep in mind that these reasons can fit into any minority-owned small business: Blige singing in chicken ads for McDonald's, RUN DMC rapping in Adidas commercials, the face of any black athlete in a Nike commercial. It's helpful to take the time to understand the markets and areas you'll reach if you expand the reach of your business. Black-owned businesses tend to fail with a team of 20 Alphas who don't think they're too good or too wise to take on a beta role. The study found that black participants were treated worse than their white counterparts and offered different information, but banks did not cross a line that would put them in violation of fair lending laws.

The Network Journal is a quarterly printed and online business magazine for black professionals and small business owners. And lawmakers should require studies to determine the amount of federal and state grant funding for other black business districts that were victims of racially motivated destruction. Black entrepreneurs launch thousands of new businesses every year, but they are failing at very high rates. If you want your business to have a chance at success, you should know and avoid the 8 common reasons why black-owned businesses go bankrupt.

That should serve as the basis for federal and state money earmarked for black business grants in the area. According to a survey by the Black Chamber of Commerce, about 75 percent of black-owned small businesses experienced an increase in customers in the two months after Floyd's death.

Tessa Monday
Tessa Monday

Freelance internet maven. Hardcore burrito aficionado. Professional internet trailblazer. Wannabe zombie fanatic. Professional travel expert. Friendly travel enthusiast.