Monthly Archives: January 2021

“Negro banks, as a rule, have failed because the people, taught that their own pioneers in business cannot function in this sphere, withdrew their deposits.” – Carter G. Woodson

African American businesses face a lot of hurdles in their ability to get started, grow, and survive. They come from everything from a lack of access to capital, predatory behavior by other communities, and a plethora of other variables that make being an African American entrepreneur not something for weak of heart. However, one of the most formidable adversaries to African American entrepreneurs is the African American community’s perception and attitude towards the very businesses trying to spur economic development in and for the community. 

The HBCU Money staff put together a list of five things they would like to see the community’s behavior and attitude towards African American businesses improve.

5. Can I get the “hookup”?

The goal of a business is to pay for its expenses, pay its workers, and hopefully after all is said and done leave enough money for its owners to have a living. Yet, family, friends, and sometimes strangers seem to think for the African American small business owner or entrepreneur we are the exception to that rule. The “hookup” has been the downfall of many African American businesses. Instead, this is a great opportunity to say how can I hook this business up with more word of mouth advertising so that they can grow and bring jobs and wealth to our community? 

4. Black businesses have bad customer service.

Has an African American store ever followed you around the store? Accused you of stealing before you walk in? Redlined your whole community? The list could go on and on. Yet, you rarely hear us as loud and vocal about customer service from other communities as you do the trope about African American businesses’ customer service. Is there bad customer service? Yes. Is there good customer service? Yes. Like all other communities we run the gambit, but the bad ones whilst a minority tend to get the lion’s share of the perception. Do African American businesses take customer service seriously enough? That is a different question all together, but what is definitely not true is that African American customer service is far worse than the predatory behavior we experience in other community’s businesses. Perspective.

3. Black businesses charge too much.

African American businesses are often accused of charging too much for their product or service. There are a number of factors to this misconception. More times than not African American businesses are in line with the market pricing. However, when they do tend to be higher than the industry, it is because their business is heavily reliant upon an African American consumer or they lack the ability to scale. Being heavily reliant on an African American consumer base is fundamentally economically challenging. We are the group with the lowest median income and wealth, which means we have the least disposable income to be consumers in the mainstream sense. Whereas a consumer in another community maybe able to purchase a product every week, we maybe only able to purchase it every month. For an African American business this forces them to try to capture more sale at once because of how rare the sales will be. We also rarely have the resources to scale our businesses which allows for driving down costs, but again this in large part is because of factors like African American small businesses having less access to capital, businesses too highly focused on African American consumers who have little disposable income, and a concentration in businesses that are often very difficult by their very nature to scale (i.e. restaurants, barber/beauty shops, clothing lines). 

2. Products are inferior.

Outside of food, hair, and entertainment there seems to be a pervasive belief that African American businesses tend to offer subpar products and services. To Dr. Woodson’s aforementioned point, it is often in areas where our own community believes we are incapable of competing and doing well in the space that this is so acute. African American businesses tend to try to produce a product that is superior in many cases because they are fighting this perception. However, it should be noted that there is often a disconnect of what should be quality and should not be. Also, if a consumer is buying a knockoff or counterfeit product which is popular in the community, then the expectation needs to be aligned as such. Unfortunately, that is not always the case. 

1. Need to do more for the community.

Before African American businesses can often become profitable they are being asked to give away their products and/or services to the community. A common misconception often that because you own a business, then you must be making money. It can take an average of two to three years for most conventional businesses to become profitable and even that is a tricky statement. Being profitable simply means that your business revenue is greater than your business expense. So for instance, if your businesses expenses are $2,000 and your business earned $2,001, then you are profitable. However, nobody would assume that that businesses is making enough money for its owner to live on let alone even take a salary. In most instances, especially for African American businesses those early years are spent plowing every dollar of revenue back into the business because usually there was little in the way of startup capital provided. It is usually many years before a business can actually support its owner(s) financially. Does this mean African American business owners should do nothing for their community? Absolutely not. In reality many do even when they can not afford to do so, but we are saying that our community needs to be slower to criticize just how much a business should be doing before they have even had a chance to get our their proverbial feet.

At the end of the day, our businesses are trying to compete against sometimes what feels like insurmountable odds. Those odds do not need to be exacerbated by our own community. Holding African American small businesses and companies accountable is one thing, but continuously treating them in a nihilistic manner is a recipe for economic disaster. Economic development strategy has a myriad of components to it and our behavior and attitudes toward our own institutions goes a long way in our ability to become economically empowered.