Why Some Black-Owned Businesses Fail

And how to avoid these mistakes

In May 2017, I was privileged to be in attendance at Black Enterprise’s Entrepreneurs Summit in Houston, which was three days of amazing discussions and networking. The first session I attended featured Houston Mayor Sylvester Turner; NBA legend and successful entrepreneur Clyde Drexler; and was led by BE CEO Earl “Butch” Graves Jr. The discussion was mainly about Houston’s journey to recover from economic disparity, but toward the end it turned to the plight of black-owned businesses in general.

(Image: iStock/monkeybusinessimages)

 

Graves reacted quite strongly to the audience filled with established and aspiring entrepreneurs who were raising questions to the panel about how to gain access to local and corporate government bid contracts, etc. He said black businesses are typically too small to win these contracts and added that a business with $100,000 in annual revenues is in no position to handle a $500K–$1M contract. Graves suggested a strategy that black business owners often fail to consider in order to scale their business: PARTNERSHIPS. He advised letting go of the “CEO” title and finding other black-owned businesses to merge with to scale up strategically to position your company for growth and opportunity. Keep this in mind.

Black-Owned Business Owners are Sometimes their Own Worst Enemy

 

Graves, who was particularly insightful in this session, also stated that black people need to stop shunning ALL black-owned businesses because of one bad experience. Unfortunately, some black businesses are making it difficult for black consumers to patronize them because they often feel like they have given more than enough “chances” at their own expense. Here’s an example.

(BE CEO Earl Graves Jr. with Houston Mayor Sylvester Turner and NBA Hall of Famer Clyde Drexler. Image: File)

 

Recently, I hired a black-owned moving company that I had connected with at my chamber of commerce. The owner of the company, who I will call “Andre,” came by, assessed my stuff and gave me a flat price, which by the way is not how professional movers should quote pricing. In the State of New Jersey, there are strict regulations on movers—the pricing should be by the hour otherwise movers could price gauge during the move for any reason they choose.

Against my better judgment, I didn’t call him out on this because I wanted to support a black-owned business. However, when I received his estimate from someone who “helps him out” it was only one line with the price and it was generated without any company branding, no business address, and most disturbing—no state movers’ license number listed. Dry cleaners provide more detailed invoices than this mover. I sent an email addressing the one line estimate and asked him to include his moving license. Fast forward three weeks, Andre calls me and says, “How much did I quote for your job again? “I wanted to see how disorganized he was and I said, “I don’t know, don’t you have notes?” He gave me a new quote on the spot that was $250 LESS than his invoice price—that is one problem.

I then asked about his moving license number. It turns out Andre doesn’t have one. In New Jersey movers are required to be licensed by the state. He gave me a weak excuse that he didn’t know he needed one (note it’s a long-standing rule and he has been moving for many years) and that he sought to get one, but needed to be bonded. I shared a previous client, also a mover, served as the president of the NJ movers professional association and schooled me on the pitfalls of hiring an unlicensed mover, which includes no legal recourse if something terrible happens to your property caused by the movers, among other things.

After hearing that, Andre respectfully said, “How about I don’t do this move.” I replied, “That is fine. I have secured quotes from two fully-licensed and insured movers.” It gets worse – Andre then says, “I have to be honest I don’t really want to be in the moving business anymore, it’s hard work and I am getting tired of it and that is why I haven’t gotten a license.” As a professional small business adviser I gave him this advice, “Andre, life is too short, only do what you love.”

Partnering to Run a Legitimate and Professional Business

 

What can YOU learn from Andre the mover? For one, if Andre was unable to get bonded, partnering with another mover with a license and bonding was a viable option for him, especially one looking to expand to Andre’s market. He should also take notes when he goes out on estimates to avoid losing profits on forgotten quotes. Besides those things he should stop moving people if he doesn’t like it anymore because a lack of enthusiasm for what you do is a roadblock to success.

Five Ways Anyone Can Lead a Professional & Successful Business 

 

According to the Bureau of Labor Statistics data, in general, about 20% of small businesses fail in their first year, and 50% of small businesses fail in their fifth year. Some black-owned business owners fail because they get in their own way, while many others flourish under strong, informed leaders. It’s a big world out there and there are people, including other successful entrepreneurs (black or otherwise), who can help you get where you want to go. Here are five ways to lead a professional business with a bright, successful future through partnering:

  1. Legalize Your Business: Running a legitimate business is a competitive advantage. A business of any kind should adhere to local laws and regulations. Conduct due diligence on what is required for you to be in business legitimately. Seek the help of a business attorney and speak with insurers for your industry.
  2. Find an Established Partner: If you are unable to obtain proper licensing, insurances, etc., seek out a strategic partner or consider merging with another established business with the setup you need.
  3. Network: Join industry professional associations and/or attend networking events offered by chambers of commerce and business associations for referrals and to meet potential partners across other industries.
  4. Identify Mentors: I am fortunate to have had many mentors in my life and draw upon their wisdom in some way or another every day. Tapping into someone who has “been in your shoes” is a smart move. If you don’t know anyone, free resources such as America’s Small Business Development Centers and SCORE are available in most U.S. states for established and startup business, both of which are funded through the U.S. Small Business Administration.
  5. Educate Yourself:  Enrich your mind by listening to FREE business podcasts in your car or audiobooks from your local library. If you have a smartphone (and I hope you do) these invaluable resources are at your fingertips 24 hours a day. Consider topics you are interested in that can help grow your business.

If you choose go it alone it will be a detriment to your business and reputation in the long run. The easiest thing you can do in any line of business is to ask for help. Don’t be afraid to ask for what you need to move your business forward—you just might get it.

 

 

 
  • Fredrick Lee

    Good lessons for many businesses and those owned by women and people of color. You will be surprised how many of these businesses get government contracts and screw it up will shoddy paperwork. Business need to ensure they have everything on point before going for big deals. It will save you and the clients a lot of trouble.

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  • maish1

    Great advice!!! Great stuff!!!
    Forwarding to my online accounts.
    Thanks.