How to Start a Business as Black American? (Simple Guide)

Jon Morgan
Published by Jon Morgan | Co-Founder & Chief Editor
Last updated: June 21, 2024
FACT CHECKED by Lou Viveros, Growth & Transition Advisor
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We meticulously research and verify the information presented in our articles. By consulting reliable sources and ensuring factual accuracy, we are committed to providing readers with well-informed, trustworthy content.

Minority-owned businesses have historically been underrepresented and underdeveloped. They are, however, expanding quickly. The proportion of minority-owned companies has doubled during the past decade.

As an experienced LLC expert with deep insights into the business sphere, I will share my knowledge gained through extensive research on this subject.

In this article, you will discover valuable insights, practical advice, and the empowerment needed to navigate the entrepreneurial world, make informed decisions, and achieve success, ultimately unlocking your business potential.

Quick Summary

  • To start a business as a Black American, define clear business goals, secure funding, and leverage community support for growth.
  • Meeting qualification criteria, such as minority ownership and U.S. citizenship, is essential for certifying a business as black-owned.
  • The Minority Business Development Agency invests an average of $5.4 billion annually to support minority-owned businesses.
  • It is crucial to recognize and overcome the unique challenges faced by black entrepreneurs in establishing and growing their businesses​​.


How to Start a Business as a Black American

Step 1: Define Clear Goals and Vision

Black American starting a business

Embarking on your entrepreneurial journey with Venture Smarter begins by setting clear, achievable goals for your black-owned business.

Envision how you want your business to operate in the next six months and translate that vision into a well-structured plan.

Take the time to:

  • Envision Operations: Delve into day-to-day operations, roles of employees, and differentiation strategies from competitors.
  • Gain Insights: Asking critical questions about your business's operations provides valuable insights and guides your direction.

Step 2: Meet Qualification Criteria

Ensure your business qualifies as a minority-owned enterprise by meeting specific criteria:

Criteria include:

  • Location: Your business must be based in the United States.
  • Operations: The majority of operations are held by Black, Hispanic, Native American, Asian, or other minority group members, with 25% representation.
  • Minority Ownership: A minimum of 51% of the business should be minority-owned.
  • Citizenship: U.S. citizenship is required.

Step 3: Focus on Core Direction

Shaking hands as a sign of agreement

After meeting the necessary qualifications, as Venture Smarter, we advise shifting your focus to the core direction of your business. Plan and strategize for growth using available programs and certifications:

Resources to aid growth include:

  • Programs and Certifications: Leverage available resources for business expansion and development.
  • Supportive Networks: Tap into networks offering guidance and assistance for your business journey.
  • Continuous Improvement: Seek ongoing improvement to sustain growth and success.

Following these steps lays a strong foundation for your black-owned business, ensuring it thrives and achieves its fullest potential in the competitive business landscape.

"Success in entrepreneurship often comes from embracing your unique identity and leveraging it as a competitive advantage"

- Sarah Johnson, Business Strategist at Smith & Johnson Marketing LLC

Understanding the SBA 8(a) Certification

Reading a document inside an office

Once you have met the qualifications, the next crucial step is securing the SBA 8(a) certification.

The Small Business Administration (SBA) operates this government-owned program to support socially and economically disadvantaged individuals [1].

Obtaining the SBA 8(a) certification is highly significant, as it opens up a plethora of business opportunities for you.

To be eligible for this certification, you must meet specific requirements:

  • Small business: Your business must be classified as a small business according to the SBA size standards.
  • Demonstrating good character: The leader or owner of the business must demonstrate good character and integrity in their business practices.
  • Proving success potential: Your black-owned business needs to exhibit the potential for success and growth.

Once you have submitted your application, it will undergo review, and you can expect to hear back from the SBA within a few days.

Upon acceptance, you will gain access to valuable networking opportunities with private corporations, government entities, and federal agencies.

This certification can serve as a catalyst to propel your business to new heights.

Utilizing Grants to Boost Your Black-Owned Business

Black American smiling after utilizing grants

Grants provide a swift and effective means of obtaining funding for your black-owned business.

With nearly half of all Black families having less than $6,000 in wealth, it's critical for Black-owned businesses to leverage grants to bridge the startup capital gap [2].

Organizations like the Minority Business Development Agency (MBDA) and the Disadvantaged Business Enterprise (DBE) offer valuable grant opportunities.

This support makes it easier for companies to secure backing and access various opportunities for growth and advancement.

Minority Business Development Agency

Business development agency office

The Minority Business Development Agency (MBDA) was established to primarily focus on advancing black-owned businesses.

The agency makes significant economic investments year after year, with an impressive average of $5.4 billion annually.

These substantial funds are channeled into financial investments and contracts to support and empower minority-owned LLC businesses.

Through this initiative, the MBDA has successfully facilitated revenue growth, with many companies reaching the milestone of $1 million in revenue [3].

Additionally, their efforts have generated more job opportunities for African Americans, fostering economic growth and prosperity within the community.

Black-owned businesses should also be aware of the potential of federal contracting, as highlighted by the $14.6 billion in procurement allocated to minority business enterprises in 1994 [4].

Disadvantaged Business Enterprise Program

The Disadvantaged Business Enterprise (DBE) Program was established to support women- and minority-owned businesses and foster their economic development.

Founded by the Department of Transportation (DOT), this program incentivizes companies engaged in projects focused on public transportation improvements [5].

To be eligible for the DBE Program, you must demonstrate that your business is minority-owned and that its gross receipts do not exceed $26.29 million.

Once you have provided the required credentials and met the program's criteria, you will be accepted.

This acceptance gives you access to a network of valuable connections and resources, facilitating your business's growth and success.

Advantages of Launching a Black-Owned Business

Presentation on a laptop for business partner

1. Political Support

A substantial number of U.S. cities are led by African-American mayors, showcasing significant minority leadership and political backing.

Cities such as Houston, Washington, D.C., and Atlanta have emerged as successful hubs for black businesses and chambers of commerce, providing an encouraging environment for entrepreneurial endeavors.

2. Networking Opportunities

Starting a black-owned business opens doors to valuable networking opportunities within the community.

Collaborating with other black-owned businesses can lead to mutual success, creating a supportive ecosystem that fosters growth and prosperity.

3. Access to Government Contracts

Government entities often allocate a percentage of their funding specifically to support black and women-owned businesses.

As a business advisor, I've seen firsthand how obtaining proper certification can transform a company.

By becoming certified, your business becomes not only eligible for government contracts but also experiences significant prospects and growth enhancement, echoing the successes of businesses I've guided through this process.

Related Articles:

FAQs

Why Is It Harder for Black-Owned Businesses?

It may be harder to create Black-owned businesses because they are hindered by lower personal wealth, which can be attributed to various factors, including barriers to bank loans and other institutional capital sources. However, a significant contributing factor is the stark inequalities that exist among different racial groups in America, affecting the amount of wealth held by each group.

What Are the Most Common Black Businesses?

The most common black businesses are in the health care and social assistance sector. They hold the largest number and proportion of majority Black- or African American-owned businesses.

References:

  1. https://www.sba.gov/federal-contracting/contracting-assistance-programs/8a-business-development-program
  2. https://direct.mit.edu/books/book/2508/Race-and-Entrepreneurial-SuccessBlack-Asian-and
  3. https://www.mbda.gov/about/history
  4. https://www.jstor.org/stable/976893?origin=crossref
  5. https://www.transportation.gov/civil-rights/disadvantaged-business-enterprise

About The Author

Co-Founder & Chief Editor
Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
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Growth & Transition Advisor
LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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