Whether you want to call it a recession or a slow recovery is irrelevant. As long as the unemployment rate remains at its current levels, corporations and consumers will be reluctant to spend. For entrepreneurs looking to do business with large corporations in this environment, it’s critical that they understand the need to increase their financial literacy—for example, knowing when and how to use equity, versus debt. James H. Lowry, a senior counselor at Boston Consulting Group, a global management consulting firm, also offers the following seven pieces of advice.—Alan Hughes
Research your clients. Ultimately, you want to find out who the most progressive multinational corporations are, says Lowry, who is also a co-author of Minority Business Success: Refocusing on the American Dream. According to Lowry, you want to answer the following questions: Is the diversity program supported by the CEO and chief purchasing officer? How long has it been in existence? What percentage of the corporation’s total spend is with minorities and in what industries?
Keep technologically up-to-date. Many entrepreneurs, particularly when revenues are down and the company is facing cash flow issues, see the cost of upgrading, but not the benefit. Often this can have disastrous results in the long-term as these ventures and their products lose their relevance. “If you don’t make the investment, you pay the price in five or 10 years.”
Consider strategic partnerships. Many African American entrepreneurs are often reluctant to sell equity in their businesses—preferring to own 100% of something small and retain all the control, than give away some of that control and retain a minority interest in a much larger company. “Here we are in America, we have companies from different countries merging left and right. This is the world we live in and we’re not merging with anyone.”
Retain top talent and develop a solid succession plan. It’s not unheard of for a successful small business to fail to outlive its founder. To prevent this, the founder has to bring in quality management and groom the next generation to take over after he or she retires. “You have to surround yourself with talent that’s equal or better than yourself,” Lowry recommends. People are important in any business. “Surround yourselves with people that if when you leave, they can produce in a very efficient way.”
Get financials in order and be prepared to leverage capital. To grow a company to scale, odds are it’s going to require venture capital, something black businesses often struggle to attract despite the fact that there’s currently about $1 trillion dollars in venture capital. “Entrepreneurs say ‘give me the money.’ Well, they’re not going to give you the money,” Lowry says. “They’re going to invest the money for a return on that investment. And if you have those six things in place, it looks like a pretty good investment.”