Are Black-Owned Businesses Built to Last?

Have you ever looked up at a business sign and noticed the year it was established? Those dates always impress me—1887, 1902, 1995—even a business founded in 2000 is now celebrating 25 years. Staying in business that long is no small feat. But building a business that not only thrives but also continues without its founder that's even more challenging.

Running a small business is a journey filled with passion, risk, and perseverance. Yet, one of the most overlooked struggles of entrepreneurship is planning for retirement. While traditional employees often have access to employer-sponsored 401(k) plans with matching, small business owners must take full responsibility for their own retirement savings, a challenge that is even more daunting for Black entrepreneurs who face systemic barriers to wealth-building.

For the reasons we discussed over the last few weeks in our blog, Black-owned businesses aren't always visible, their products and services aren't always priced right, and we as consumers aren't trained to do business with Black-owned businesses the way we are to support businesses run by others.

Who is a Small Business Owner?

When we say small business it has a range, but Black-owned businesses are frequently on the low end of the range. A small business owner is typically defined as someone who operates a privately owned company with fewer than 500 employees. However, most small businesses are much smaller, often consisting of 1-10 employees. These businesses range from restaurants and boutiques to consulting firms and healthcare offices, all playing a crucial role in local economies.

What is the Average Revenue of a Small Business?

The revenue of a small business varies widely based on industry, location, and operational structure. However, according to the Small Business Administration (SBA), the average small business generates about $44,000 to $500,000 per year. That's a broad range, but it highlights an important point—many small businesses operate on thin margins, making it difficult to set aside money for long-term savings.

When you separate the data out, you can see how difficult saving for retirement can be for Black business owners. For Black-owned businesses, the financial picture is even more challenging. Studies show that the average revenue for Black-owned businesses is around $58,000 per year, significantly lower than that of white-owned businesses, which average over $650,000 annually. This disparity stems from multiple factors, including limited access to capital, historical wealth gaps, and systemic economic barriers.

Last week, we started a crucial conversation about the power of buying Black, urging 3% of Black Americans to shift $100 a month of their spending towards Black-owned businesses. It wasn't just a call to action; it was an invitation to participate in an economic movement. This initial ask for support is just the beginning. A vital question still lingers: What happens next? How do we ensure these businesses, fueled by our collective efforts, not only survive but thrive for generations to come?

Supporting a Black-owned business with a one-time purchase is commendable, a step in the right direction. However, true economic power lies in ensuring these businesses have the foundation to stand the test of time. That means being brand loyal. Right now, the sobering reality is that many Black business owners lack the safety nets that provide long-term security: retirement plans, viable exit strategies, and the kind of generational wealth that allows them to step back, pass the torch, or even sell their business at a profit.

This isn't just a business problem; it's a community problem that demands a comprehensive solution.

The Cost of Doing Business While Black

If you own a business you know that owning a small business often feels like a relentless uphill battle. There's not a lot of glory and glamor in it, especially behind the scenes. For Black business owners, the climb is even steeper.

Even those Black-owned businesses that stay in the game for years often find themselves treading water for most of those years. Many don't generate enough revenue to adequately save for retirement, with the immediate concerns of keeping the lights on overshadowing long-term financial planning.

Many of these business owners used their retirement savings to start their business with the idea of being successful and paying themselves back. However, this often feels like a distant dream when the daily struggle is simply staying afloat. They can't provide retirement savings for themselves or their employees, often creating another problem for the community.

Some of the hurdles to being in a positions to save for retirement and offer retirement plans to employees are:

Inconsistent Revenue Streams: Small business owners often experience fluctuating income, especially those businesses that are seasonal. This inconsistency makes it difficult to contribute regularly to a retirement plan, creating uncertainty and hindering long-term savings efforts.

Focusing on Creativity: Many small businesses are started from a hobby or skill the owner possessed. But running a business has many moving parts, and often business owners focus on what they do well and let the other parts of the business suffer. This is why they don't always make enough money, because they aren't looking deep enough at the numbers and the operations.

Lack of Employer-Sponsored Benefits: Many small businesses, particularly those in their early stages, lack the financial capacity to offer traditional retirement benefits like 401(k) plans with employer matching. Without these structured savings programs, business owners must take the initiative to set up their own plans, a task that often gets pushed down the priority list while they focus on the daily demands of running a business.

Prioritizing Business Growth Over Personal Savings: Entrepreneurs are driven by a desire to grow their businesses, often reinvesting profits back into their ventures rather than setting money aside for retirement. While this strategy can lead to business expansion, it can also result in underfunded retirement accounts or, in some cases, no savings at all. The mindset of "If I grow the business now, I'll have more later" can be a risky gamble, especially given the inherent uncertainties of entrepreneurship.

Limited Access to Capital: Using other people's money in the early days of business allows you to excel faster. Access to funding remains one of the most significant obstacles for Black business owners. Many rely on personal savings, very small loans, credit cards, or bootstrapping to launch and sustain their businesses, leaving little room for personal financial planning, including retirement savings. This lack of access perpetuates a cycle of financial vulnerability, making it difficult to build long-term wealth.

Higher Debt Burdens: Due to historical and systemic economic disparities, Black business owners are more likely to take on high-interest loans or rely on personal credit cards to fund their businesses. The weight of debt can overshadow even the most ambitious entrepreneurial aspirations, hindering financial progress and stability.

From Supporting to Sustaining

With all this highlighted, it is easy to see why Black-owned businesses are often just lifestyle businesses, giving the owner just enough to keep paying bills and living a lifestyle just above the poverty line. We don't need a target partnership or a McDonald's contract to grow. Black businesses can thrive with consistent loyal customers who tell their friends.

A McDonald's contract would be nice, but let's go back to the conversation we started last week. If we are truly committed to buying Black, we must also be committed to sustaining Black businesses. Because if these businesses cannot stand the test of time, our dollars aren't circulating; they're disappearing, their potential impact diminished.

To sustain Black businesses, we need to spend consistently, not just occasionally. A one-time purchase is appreciated, but it doesn't build longevity. A loyal, long-term customer base is what provides the foundation for sustained success. Black businesses have been predominantly one-generation enterprises. We must work to change this pattern with better retirement and succession planning strategies that ensure businesses can transition successfully to the next generation.

The Path Forward

While the challenges are undeniable, solutions exist and it's our collective responsibility to implement them. Small business owners, especially Black entrepreneurs, must begin to view retirement savings not as an optional goal but as an essential business expense, as critical to their long-term well-being as any other operational cost. We can get into some of the retirement options available to business owners in future blogs, but awareness is the first stage and that's the stage we are in right now.

For now, let's focus on buying Black more often and consider these ideas as you create the habit of buying Black:

• When you are shopping for everyday essentials, for gifts, or getting your car repaired, think about what Black-owned business you could support.
• Don't just shop once, become brand loyal. Not every Black-owned business has the capacity to give the best customer service, so please offer some grace, but you also have choices when spending your money, so if you don't like one Black-owned place, try another.
• Another option is if you spend time volunteering, consider volunteering a few hours a month at a Black-owned business. It is a gift that may not have immediate reward, but when you see that business is still open years later, you will know you contributed to it.
• Lastly, be sure to tell your friends, family, and your social media followers about the new (or old) Black-owned business in your neighborhood. The more visibility a business has, the more likely they will have enough revenue to stay in business and save for retirement.

Last week, we introduced the Chicago Black Business Directory, a tool designed to make buying Black easier and more accessible. We emphasized the power of circulating dollars within our community, creating a ripple effect of economic power. But economic power isn't solely about supporting businesses today; it's about ensuring that those businesses and their owners thrive for generations to come.

What's Next as The Challenge Continues

If we truly want Black businesses to create wealth, not just revenue, we have work to do. So, this week, I challenge you to take the next step:

1. Find out if your favorite Black-owned business has a retirement plan. If they don't, ask them about their long-term vision. Start the conversation. Let them know that their financial well-being matters to you and to the community.
2. Support a Black business more than once this month. If you committed to the 3% shift last week, keep it going. (*For more info see 3% shift below) Regular, consistent support is what builds stability and fosters long-term growth.
3. Think about investment, not just spending. How can we move from simply "buying Black" to actively building Black wealth? Consider supporting crowdfunding campaigns, investing in Black-owned startups, or providing donations to businesses you know are struggling to keep the doors open. Even if it's virtual doors.

Buying Black is a powerful starting point, but it's just the beginning. Sustaining Black businesses is the ultimate goal. Let's work together to create a legacy for generations to come. You in?

If you are a Black Business owner you need to be part of the ThriveWell Collective. This is the hub for those dedicated to retiring happy, healthy, and wealthy. You can start with our free ThriveWell group. We will tell you how you can upgrade later.  

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*3% Shift Explained: An excerpt from last week's blog.

Small steps lead to generational shifts.

Imagine if black households committed to shifting just $100 per month to Black-owned businesses. That’s $1,200 per year, and if we just take a small number of households, let’s say multiplied by 500,000 households—that’s $600,000,000. Wow! That impact would be enormous. And once we do it for one year, we can do it again and again, creating a true wealth transfer.

They talk about wealth transfer on social media as if it’s some Robin Hood scheme, taking from the rich to give to the poor. But what if we never gave our money away in the first place? What if we committed to being part of the 3% who make a lasting economic shift?

It sounds easy because it is. You could transfer (or keep) wealth in your community and in your household by just shifting $100 a month. There are about 15,000,000 million Black families in the United States, so 500,000 isn’t even 10%, it’s less than 5%. It’s .03333…

Can you commit to being part of the 3%? Then here’s what I propose you (we) do next… Read entire blog