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The COVID-19 pandemic resulted in a tremendous loss for millions of people. Job loss. Loss of life. Loss of community. Its full effects still have yet to unfold. However, for some, total loss and devastation can be an impetus for starting something new. “Necessity is the mother of innovation,” and that was proven during this pandemic. Salesforce reports that 4.4 million new businesses were started during 2020 – that’s 51 percent higher than the average number of new businesses opened yearly between 2010 and 2019. The research showed approximately a quarter of individuals who started businesses did so because they were furloughed or laid off. For some, the pandemic created an opening for an idea they’d been mulling over for a while.
The 2020 Annual Business Survey from the U.S. Census showed an estimated 134,567 Black-owned businesses for the year, with $133.7 billion in annual receipts, 1.3 million employees and $40.5 billion in annual payroll. Black entrepreneurs took the well-earned spotlight in new businesses in 2020. However, the reasoning and struggles behind the lives of Black entrepreneurs have been unique. Linkedin conducted a survey with YouGov to get a better look at why Black entrepreneurs are leaving the 9-to-5 world and the struggles they face.
Wanting Freedom Of Time And Money
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A desire for more freedom and flexibility – both in time and earning potential – were top-listed reasons Black entrepreneurs started their own businesses. They felt that their corporate jobs did not offer these. In fact, one in five Black entrepreneurs left their job because they felt their employer wasn’t invested in their growth as a professional. Fifty-four percent left because they wanted more financial independence and stability and one in three started their own venture because they required more money to take care of their families. A desire to build generational wealth was also a commonly named reason for starting one’s own business.
Feeling Undervalued And Stuck
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The survey asked what it would take to have these professionals consider staying at their old jobs. Better financial incentives and more opportunities for growth came up often. Fifty percent of the surveyed individuals wanted more pay and 37 percent wanted more time off or flexibility. Thirty-two percent wanted better benefits packages and 29 percent wanted more professional development opportunities. Many Black entrepreneurs (35 percent) stated that the reason they started their own business was to be role models for others. In addition to kick-starting their own career momentum, they seek to inspire other Black professionals who feel stuck at work to do the same. Paying it forward is a big motivator in many ways, with one in five Black entrepreneurs stating that they started their business during the pandemic because they wanted to contribute to their community.
How Established Companies Are (And Aren’t) Helping
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The research found that some companies have taken initiatives to support entrepreneurs who are working on their staff. The top five ways they’ve done so has been through mentorship programs, exposure, partnership, funding and networking. However, 41 percent of Black entrepreneurs working at established companies feel that some of these initiatives were performative responses to the BLM movement, and for that reason, have not taken advantage of the programs offered.
The Biggest Obstacles Faced
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The research also looked into the top factors holding Black entrepreneurs back in their pursuit. The issues boiled down to finances, racism and a lack of networks. Some of the financial issues discussed included difficulty accessing capital, personal debt and the need to pay for others’ lives besides their own. When it comes to the struggle to access capital, racism plays into it, says many professionals. While the research showed that 43 percent of Black entrepreneurs believe that access to funding is the key to success, only one in four have received such funding. Meanwhile, 37 percent believe they will not receive funding unless they have a white individual on their team. Racism is at the root of the networking struggles as well, with 30 percent of Black professionals not joining a networking group for fear they’d be excluded due to their skin color.
When Traditional Funding Fails
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Thirty-five percent of the Black entrepreneurs surveyed reported that they have been discriminated against when applying for capital. Many have had to turn to alternative and non-traditional ways of saving seed money for their business. These include personal savings, personal loans, borrowing from personal contacts, taking money out of retirement funds and seeking investors. Personal savings far exceeded the other methods, with 64 percent of Black entrepreneurs relying on their hard-earned savings to fund their dream. In fact, one of the top-listed reasons Black entrepreneurs stay at their 9-to-5 job is to save up enough money to start their business.
The Value Of Networking
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While many of the individuals surveyed expressed hesitation towards joining networking groups, those who have joined such groups reported positive results. Seventy-five percent of those who have joined networking groups feel more supported in their pursuits and 69 percent stated that they are learning the skills they need to grow their business through these groups. A sense of connection to their community, access to funding and potential partnerships were other top-listed benefits of joining networking groups. The survey found that one in three Black entrepreneurs find their network through online resources like Linkedin.
