Black women are not just stepping into business ownership; with nearly 2.7 million businesses nationwide, they are actively shaping the entrepreneurial landscape. As more and more of us forgo the corporate ladder to forge entrepreneurial paths, a notable shift has occurred; Black women now comprise the fastest-growing demographic of entrepreneurs in the US. But, beneath the impressive growth lies a harsh reality.
While Black entrepreneurs are opening businesses at higher rates, their ventures face a greater risk of failure than their white counterparts. According to a report in the Journal of Economics, Race, and Policy, eight out of 10 Black-owned businesses shut down within the initial 18 months of operation. It’s a sharp contrast to white business owners, who, according to the report, have a higher percentage of continued success and financial stability over a similar timeframe.
What’s more, for Black women, facing heightened structural obstacles in securing capital, external challenges like inflation, labor shortages, and fluctuating supply chains — ubiquitous across all businesses — can become insurmountable barriers to survival in the competitive business landscape.
The data, while grim, is not to dissuade Black women’s entrepreneurial ambitions. On the contrary, acknowledging these challenges empowers us to create strategies to mitigate them proactively. To this end, ESSENCE enlisted renowned financial educator and New York Times bestselling author Tiffany “The Budgetnista” Aliche, celebrity interior designer Kai Williamson to lend insights and expertise on what to consider before quitting your job for entrepreneurship.
Know Your “Why”: Navigating Entrepreneurship with Purpose
For Black women grappling with demoralizing workplace conditions, the prospect of self-employment can be alluring. For many, entrepreneurship seems a liberating alternative to the constraints of corporate America, where systemic gender bias translates into lower salaries, a lack of advocacy, and halted career progress for Black women navigating the dual discrimination of race and gender.
As more and more Black women exit systems where our inclusion is superficially celebrated but not genuinely embraced, it becomes crucial to distinguish whether the pursuit of ownership is an escape from a miserable job or a genuine pursuit of ambitions. Understanding the difference is vital.
Your “why” will ultimately shape the resilience and determination essential for your entrepreneurial journey. And success, at least in my experience, hinges not only on what you’re leaving behind but on the stability of what is propelling you forward.
Laying the Groundwork: Investing Time, Finances, and Preparation
Once you’ve decided to embark on entrepreneurship, meticulous preparation is essential. And according to money expert Tiffany Aliche, one of the most crucial investments you can make is time.
“In the initial phases, when contemplating a career change or starting a business, allocate at least six months to a year for strategic planning,” she said. This strategic phase offers the additional advantage of a consistent income. Aliche suggests allocating earnings in period to funding your entrepreneurial education: “Use your job to pay for additional education about the business you want to enter into. This might look like investing in classes and courses and books.”
Furthermore, she says, laying solid financial groundwork before leaping into entrepreneurship is vital. “You’ll want to use that six months to one year or more to lower your monthly expenses because nothing kills entrepreneurship like brokeness. And lowering your monthly expenses will allow you to have more runway in the business,” Aliche said. In her bestseller, The One Week Budget: Learn to Create Your Money Management System in 7 Days or Less! she outlines actionable steps for minimizing monthly spending.
Aliche says having a thoughtful and financially prudent approach involving time investment, financial preparation, and strategic planning is crucial before stepping away from your job and into your business.
Strategic Vision: Planning and Expanding Wisely
Embarking on the entrepreneurial journey demands caution and strategic thinking. Kai Williamson, the visionary behind Atlanta’s Studio 7 Design Group, learned this lesson firsthand when venturing into commercial design. “It was an instance where my passion conflicted with my practical business knowledge,” she recalls.
With her firm boasting high-profile clients, including Kevin Hart, Big Tigga, and TI, expanding into commercial design seemed a natural progression until it didn’t. “Commercial design demanded licenses and knowledge I hadn’t yet acquired. I had to reassess the best approach to enter this market,” Williamson told ESSENCE.
Recognizing her limitations, she opted for a strategic pivot. “Instead of spending time trying to learn all commercial codes, I hired a seasoned interior designer whose expertise complemented mine,” she explains.
The result? Success in expanding into commercial design, securing contracts across Atlanta, Los Angeles, and DC, including renowned locations like The Gathering Spot. Williamson’s entrepreneurial journey imparts a vital lesson for aspiring business owners: Evaluate your strengths, identify your knowledge gaps, and take the initiative to devise effective solutions.
Navigating Dreams and Business Realities: Avoiding “the Passion Trap”
The allure of ownership paints a picture of self-actualization, autonomy, and meaningful work. However, while enticing, the journey towards purpose carries its own complexities. Businesses can’t survive on passion alone.
The misconception lies in relying solely on fervor. Entrepreneurship extends beyond personal interests; it necessitates a keen understanding of profitability and operational challenges. Therein lies the “passion trap,” a danger zone marked by an overreliance on passion and an underestimation of business operations’ practical, financial, and systemic challenges. Avoiding this trap is paramount for Black women who often dive heart-first into entrepreneurship.
By and large, Black women-owned businesses gravitate toward social entrepreneurship ventures that address social and environmental issues. The trend is both inspiring and challenging — inspiring in its demonstration of how Black women consistently show up for their communities and challenging because that altruism often comes at a personal cost.
According to a J.P. Morgan report, 61% of Black female entrepreneurs start companies in health, education, government, retail, or social service sectors. By contrast, only 47% of White women and 32% of White men entrepreneurs venture into enterprises within these sectors, and for valid reasons. Service-oriented enterprises present a unique set of obstacles and are more challenging to sustain over time. For one, with high competition and low margins, revenue streams often rely heavily on grant funding and charitable contributions, which can be precarious. Further, service-oriented business models that hinge on government contracts are often subject to bureaucratic delays in payment, lengthy procurement procedures, and intricate compliance requirements, which can paralyze the day-to-day operations of a newly formed business.
The need to be clear-eyed and bottom-line-focused is essential for entrepreneurs across all industries. Still, those in nonprofit fields or social service sectors must be especially mindful to avoid the passion trap. This doesn’t mean neglecting passion or abandoning meaningful and socially impactful business endeavors — it merely calls for a measured balance between passion and pragmatism.
Transitioning from employment to entrepreneurship is a journey filled with opportunities and risks. However, the likelihood of mitigating these risks is enhanced by embracing a strategic plan, making thoughtful initial investments, and striking a delicate balance between passion and practicality.