Starting “Stuck”: Why Black Businesses Suffer 

Kiara Nelson
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Are you a business owner or have you ever tried to start a business? Whether

the answer is yes or no, it is common knowledge that it is hard to be a successful

business owner. To add onto the countless struggles that entrepreneurs in America

already face, consider how much harder it is when that aspiring sole proprietor is

Black. In “The Sociology of Entrepreneurship”, Thornton defines entrepreneurship

as “the creation of new organizations which occurs as a context-dependent, social

and economic process”; therefore, when evaluating the struggles that impact black

businesses, we must evaluate the aforementioned social and economic obstacles

that are specific to Black people. Some of these obstacles include but are not

limited to: improper planning, racial disparities and high standards by the

community, as well as stifling pride among Black business owners; this results in

more failing Black businesses in the United States than any other race. While many

companies have their fair share of issues initially, black businesses tend to suffer

the most and have the most complex problems to deal with while trying to maintain

a successful business.

A common American euphemism says that if a person fails to plan then he

or she plans to fail; this resonates all too well with how Black businesses start and

finish. The first obstacle that acts as a major roadblock in black businesses
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succeeding is: The business owner fails to plan or his or her planning is

insufficient. Black business owners are not knowledgeable about the business that

they are attempting to create; with lack of knowledge, a business owner cannot

plan for the necessary resources, finances for the business, nor the market that he

or she is planning to enter. Thornton (1999) uncovers that entrepreneurs’ chances

of success are determined by the structure of their networks. She goes on to claim

“individual entrepreneurs with… an absence of contact redundancy and

substitution increases their chances of successfully identifying and optimizing

entrepreneurial opportunities because… they are well positioned to manipulate a

structure that is more likely to produce higher levels of information.” In layman’s

terms, individuals that are in constant communication with different groups of

successful people are more likely to be successful in business owning because they

are in a better place to maneuver their network. This is a problem for Black

business owners because their social networks lack the privilege of being diverse in

culture, ethnicity, career flexibility, and connections. With this being said, if a

black business is better planned out due to the network of its owner, it will be more

successful. According to “Entrepreneurship and the Gig Economy” a webinar from

the Wells Fargo 2018 Beyond College Webinar Series, before starting a business,
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entrepreneurs need to assess their readiness, develop their concept, define their

marketing approach, develop a pricing plan, create a comprehensive business plan,

and construct a winning pitch. These steps along with having access to capital and

skilled mentors and advisors will ensure the success of a business. Unfortunately,

the reality is that this has not been equally accessible to the Black community

throughout history. Without these essential mentors and advisors, Black

entrepreneurs do not have guidance to create intricate business plans with

benchmark and end goals for their businesses.

Along with systemic obstacles that create difficulties in planning for black

businesses, there are overt racial barriers that inhibit their growth. According to the

Association for Enterprise Opportunity’s (AEO) study entitled “Untapped

Opportunities for Success”, for Black business owners that did qualify for credit, at

$25,000 the median loan amount for the Black business owners in their survey was

less than half of the loan amounts extended to their White counterparts at $58,000.

Even though the creativity and ingenuity of Black minds is there, when they do

attempt to create their businesses, they are seen as a higher risk by financial

institutions and lent less money as a result. Black mothers and fathers nationwide

have taught their children for generations that in order to be successful in life, they
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had to work twice as hard and be twice as good at everything they did. For the

same product or service, if it is being offered by a Black business owner, it has to

be better. If racial disparity was not already enough, now the Black entrepreneur

must meet a higher standard than his White peer. In the following image, it is

evident that Black firms in the US are less likely to profit or at least break even

after a fiscal year of business, but ​luckily​ for Black business owners, they are

leading in businesses that experienced losses as recorded by the 2014 Annual

Survey of Entrepreneurs at the Aspen Institute. Why is this the case? Here is the

answer: Consumers are more critical of Black business owners than White and

Hispanic business owners. The proof is in the pudding (chart).

The outer context about why black businesses do not stay afloat as well as

White businesses has been discussed, but let us delve deeper into the individual:
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the entrepreneurs themselves. Fairlie and Robb (2007) analyze the background of

inherited businesses on White and Black entrepreneurs in “Why Are Black-Owned

Businesses Less Successful Than White-Owned Businesses? The Role Of

Families, Inheritances, And Business Human Capital”; their remedy to improve

negative business outcomes being passed down through several generations of

Black families is to “establish programs that directly address deficiencies in family

business experience, possibly through an expansion of apprenticeship-type

entrepreneurial training programs.” They claim that the problem is not the ​number

of Black businesses that are inherited, but the ​nature ​in which they are inherited in.

My claim is that black businesses are run with little knowledge of the business or

how businesses run. This lack of expertise causes stress to the business owner, and

he or she does not reach out for help. Some do not know that they need help, others

do not know how to access bankers, lawyers, and accountants, but the majority are

too prideful to seek this help. Lastly, this unhealthily high level of self-esteem

within the Black community that has trickled over into business attitudes and has

fostered a culture of overworking to the point of burnout. “Untapped Opportunities

for Success” further intertwines the relationship between systemic barriers and

entrepreneurial stressors when it mentions that “73 percent of Black business

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owners say that the current business-financing environment is restricting their

ability to hire new employees.” Are Black entrepreneurs too prideful to seek and

hire help, or do they simply just lack the resources? Regardless of the answer, the

result is the same: Black business owners are so overwhelmed with running their

business that it fails because they ran a one-(wo)man show.

The interconnectedness of all of the factors that contribute to stifling growth

and ultimately the failure of black businesses is uncanny! A lot of the success of

black businesses begins before the businesses have even begun. It is in the network

and the preparation and the planning! For the last of the hackneyed phrases, a

person’s attitude can determine his or her altitude. If a business owner is

determined to succeed, is knowledgeable about the risks, and is humble enough to

seek help when necessary, he or she has a greater chance to succeed; in contrast, if

the business owner is inhibited by systemic racism, his or her planning can only get

him or her so far. Sometimes the financial and human capital, great credit, and

detailed business model are not enough to guarantee the success of black

businesses. But when each aspect of business planning is considered thoroughly,

the research suggests that there is a greater possibility for black businesses to

succeed​.
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Works Cited

Fairlie, Robert, and Alicia Robb. ​Why Are Black-Owned Businesses Less Successful Than
White-Owned Businesses? The Role Of Families, Inheritances, and Business Human
Capital.​ Ph.D. University of California, Santa Cruz, 2018.
“The Racial Gap in Business Ownership Explained in Four Charts.” The Aspen Institute,
27 July 2017.
The Tapestry of Black Business Ownership in America: Untapped Opportunities for
Success​. Association for Enterprise Opportunity, 2017.
Thornton, Patricia. (1999). ​The Sociology of Entrepreneurship. Annual Review of
Sociology.​ Annu. Rev. Sociol. 25. 19-46.
Wells Fargo. (Producer). (2018). “Entrepreneurship and the Gig Economy.”