It’s well-established that if you’re starting a new business, the odds will be stacked against you. And entrepreneurs of color face an additional amount of such odds when trying to realize business success. However, these obstacles are nothing compared to the resilience some people show in the face of such adversities. With the right strategies, determination, and support, entrepreneurs of color can easily overcome most hardships and realize their business dreams.
The following article will address some common challenges for PoC entrepreneurs and some tips to overcome issues like adequate funding. Let’s get started!
Seek the help of mentors and advisors
Nothing guarantees business growth like the advice and guidance of a mentor. By seeking out experienced individuals and professionals within the niche, one can access valuable knowledge and learn from personal experiences. No start-up can be a sole endeavor. And given the systematic and institutional discrimination, PoC entrepreneurs especially need advice, support, and encouragement to navigate business adversities. Since mentors have tackled similar challenges, one can find solutions for their problems using their expertise.
What’s more, mentors can offer small businesses constructive feedback and help build connections with relevant business people.
Ensure a scalable business model
Before you go on a journey of requesting loans and acquiring venture capital for your start-up, you need to ensure you have a scalable business model. Why? Because most investors won’t invest funds in non-scalable businesses. Thus, develop a model that shows the future potential for generating maximum profits with minimum costs. For that reason, it’s a good idea to employ billing software for keeping track of sales.
Additionally, utilize the latest tech, automation, and software as much as possible. For instance, those passionate about giving back can use online financial services that work to bank black Americans and other entrepreneurs of color. One more tip is to only tango with tax authorities when it’s absolutely compulsory.
Focusing on these factors will lead to a more scalable business model and bring in more investors.
Manage cash flow effectively
Most start-ups, especially PoC-owned ones, lack the necessary seed money and backup funding that other businesses have. However, what they do have is the ability to control expenses. And for that, a solid and detailed financial plan is crucial from the get-go.
PoC entrepreneurs must have at least the primary financial documents in place, including the balance sheet, cash flow statement, and income statement. A rule of thumb in business is that consistent cash flow is king. Most small businesses see their eventual demise because they fail to manage their cash flows properly. In this regard, making a cash flow forecast can identify how much money is coming in and going out of the business. Besides giving an idea about current cash activity, forecasts also provide critical financial information about the future.
Other efficient cash flow management methods include accepting advance deposits for payments, sending out timely invoices, being ahead on bill payments, and keeping a tab on late customer payments.
There’s more to capital than traditional money
Did you know that an average US start-up can accumulate up to $5 million as its starting operating capital? In stark contrast, average female and PoC-owned start-ups only raise $30,000. And the method to this madness is that PoC business owners lack generational wealth. They also have restricted access to investors that may provide sufficient funds to get their business up and running. That’s why an out-of-the-box approach is needed. Consider these:
Bank loans: The safest and most reliable funding source is taking out small loans. To get started, entrepreneurs can apply for soft loans or ask for government-subsidized bank loans.
Family and friends: Borrowing from close friends, acquaintances, and family can be the cheapest option to get funds for your business and circulate wealth within your community. Keep in mind, though, that involving these people in your start-up isn’t risk-free. Besides risking their financial situation, you’re also betting your personal relationships on the line.
Bootstrapping: By far, the most low-cost method for acquiring business funds is leveraging one’s savings. What’s more, you can bring other personal resources and skills to the table to save on hiring employees. That way, you’ll have to agree to no one’s terms and have easy access to funds and resources.
Find support through networking
Though essential, it’s tough to find the proper support and build a strong network. A whopping 48% of women-owned start-ups concur that insufficient support and mentorship negatively impacted their business growth. Tragically, the majority of affluent businesses are still run by white and male owners. And so, it’s particularly troublesome for women and PoC entrepreneurs to break into the industry and forge connections in influential business networks.
That said, attending PoC-led networking events and joining online forums/groups targeted explicitly to female and PoC entrepreneurs is a good starting point. And as you string up a small network of supporters, you can go ahead and ask them what your business needs explicitly. You’ll be pleasantly surprised to find out how many people are willing and capable of doing so.
The bottom line
When it comes to running successful businesses, people of color tend to face unique challenges despite their numerous contributions to the field. This article went over some helpful tips on combating such challenges, funding problems in particular. These include seeking mentors and advisors, networking, and understanding cash flow. The right business acumen and a little guidance can make a huge difference in allowing struggling PoC entrepreneurs to achieve their dreams.