Starting a new business can be a challenging and intimidating process for anyone, and minority-owned operations have historically been underrepresented. Plus, these ventures can sometimes find it difficult to secure funding or may not be aware of the different programs that can be taken advantage of.
We’re on hand to guide you through the steps you need to take to start your own minority-owned business and where to find additional support.
Minority-Owned Business Statistics
- There are now 8 million minority-owned businesses in the US – Things have definitely been moving in the right direction in recent years, with minority-owned businesses now comprising around 29% of all businesses in the US
- Only 11% of minority-owned businesses have employees – The vast majority of minority-owned businesses are single-person operations with no paid employees. While this figure is growing each year, it’s still quite a disparity
- Sales have grown 35%, but profits have dropped by 2% – Over the last five years, minority-owned businesses have seen a significant boost to sales but a decrease in profits. This could be due to more organizations competing for a share of the sales
- 59% of minority-owned businesses are in the service sector – The retail and service industries are the backbone of the US economy and are where the majority of minority-owned businesses are based
- About 30% of minority business owners feel discouraged from seeking a loan – This is compared with around 16% of caucasian entrepreneurs and is still one of the biggest stumbling blocks for growth. This is, however, slowly changing as more programs are being introduced each year to encourage borrowing uptake
Steps to Starting a Minority-Owned Business
Step One – Decide Your Brand and Write a Plan
Much like any venture, minority business owners will need to start by deciding their niche. First, identify your strengths, skills, expertise, and the product or service you’re going to sell.
Identify your target market, how much capital you’ll need to get set up, and write a comprehensive marketing strategy. Plus, make sure to set yourself clear and achievable milestones to track your success.
Finally, document all of this information into a business plan. Not only will this help you stay on track, but it’ll also be a key document when applying for funding. Businesses with a clear strategy are far more likely to succeed.
Step Two – Find Funding
Almost every new venture will need some capital to get off the ground, and it’s been historically difficult for minority-owned businesses to find funding. Luckily, there are a growing number of lenders that’ll provide small business loans as well as government programs that could help you out.
In addition, you could apply for Community Advantage Loans, which are designed to help you get funding of up to $250,000 if you live in an underserved community. What’s more, a federally funded SBA 8 (a) loan could make an ideal alternative and is offered to any business that’s at least 51% minority-owned.
Don’t be disheartened if you find yourself rejected initially. There are now hundreds of alternate lenders you can turn to online that specialize in helping minority-owned businesses or those rejected by traditional lenders.
Step Three – Become Certified as a Minority-Owned Business
Becoming a minority-certified business can open up a range of benefits at local, state, and even federal levels. For example, being a member of the National Minority Supplier Development Council (NMSDC) can connect you to more than 1,400 corporations like Apple, Google, Accenture, Microsoft, and General Motors, helping you land more lucrative contracts.
It’s worth checking out what certifications are available at the local level, too, as each state has different benefits on offer for minority-owned businesses. Certification can add additional legitimacy to your venture as well as help in loan applications.
You’ll need to submit an application, provide relevant business documentation, and undergo a site visit from the certification board to apply.
Step Four – Build Your Network
Never underestimate the power of networking. Not only is it a great way to build up a list of potential clients, but you can also use it as an opportunity to find other minority business owners as mentors.
As well as general networking opportunities, such as joining your local chamber of commerce or finding groups on sites like LinkedIn, many local areas will have specialist minority-owned business groups too. You can join these to share ideas, pick up tips, and potentially expand your customer base.
Make sure to incorporate networking into your overall marketing strategy, stay active on social media and build as many relationships as you can.
Step Five – Take Advantage of Additional Programs
There are many more resources to help minority business owners than you might think, each offering all kinds of different benefits. For example, the Black Business Association, the Hispanic Business Enterprise Program, and the Pan Asian American Chamber of Commerce Education Foundation all offer resources to help you with networking, setting up a new venture, and training programs tailored to your specific needs.
These organizations can even act as a springboard to government and corporate contracts and are a great way to do additional networking. Plus, there are plenty of non-profits operating across the country that can help you handle taxes, deal with certification issues, and provide general advice.
The barriers to entry for minority-owned businesses are decreasing each year. Entrepreneurs can now access a wealth of support both online and from various organizations designed to meet their specific needs. You’ll still need to deal with many of the same challenges and pitfalls as any other new venture, and making sure you’re well prepared and have a detailed business plan will go a long way to mitigating the risks.
Always check out your local options for support first. You’d be surprised at just how much help and information is available at state and local levels, and building up a comprehensive list of contacts in your area will go a long way to securing your long-term future.