Business tips and advice for Black entrepreneurs

Key elements to starting a business

Starting a business requires a lot of upfront thought and planning, and what you’ll need can vary depending on the type of business you’re in. Addressing these key areas early on can contribute to the strength and stability of your business model.

Concept testing and business plan: How will you test your business idea? What are the factors to consider when creating a business plan?

Funding: How will you fund your business? Will you take a loan from a bank or explore other sources of funding such as crowdsourcing, self-funding, fintechs or other alternatives?

Legal obligations: What are the various legal processes you should follow?

People: Who will influence or be involved in developing your business model? Will you have partners? How do you plan to find employees – through recommendations from people you know or by assessing interested applicants with relevant skills? How will your business impact your family, positively or negatively?

Self-discipline and organization: How will you prioritize your work-life balance? What habits can you establish early on that will enable this?

Marketing and sales strategy: What are your business goals? How will you achieve them? Which advertising methods will be effective for your business?

Financial systems and planning: How will you manage your finances? What financial services and support will you need?

Gaining a thorough understanding of these key elements is essential for starting a business successfully.

Six key steps for managing cash flow as a Black entrepreneur

Cash flow is one of the biggest financial planning issues for Black-owned businesses. Consider the following best practices to help you manage it successfully:

1. Keep cash on hand: Just like in your personal finances, your business should always have a reserve or emergency fund to cover slow periods or unexpected expenses. If possible, have enough cash available to cover three to six months of expenses to help you manage important costs like payroll or inventory.

2. Keep control over your invoices: Record and track invoices sent, payments received and delinquent payments to ensure you’re not leaving money on the table or negatively impacting your cash flow. While it can be hard to follow up on unpaid invoices or pressure clients to pay, doing so is critical to managing your cash flow. Review your clients and establish payment plans to ensure consistent payments.

3. Don’t overdo inventory: When possible, keep only enough inventory on hand to meet your customers’ needs. With many manufacturers and suppliers offering discounts for bulk purchases, it can be tempting to order excess inventory in exchange for savings. But idle or expired inventory comes with costs, and those must be weighed against the savings. When borrowing to cover the cost of equipment or inventory, be mindful of the payments, interest and terms of the loan to ensure you can manage them.

4. Be careful with credit: Limit how much you borrow and how much credit you extend to your customers. If you allow customers to buy now and pay later, you need to have a credit approval process in place to make sure they qualify and can pay on time.

5. Keep costs under control: Consider what you’re spending and whether it improves the health of the business.

6. Leverage advanced systems and services: Use advanced systems and services to save both time and money. Some options include:

• Automated payment system for the day-to-day running of your business (and could provide a streamlined and efficient way to manage finances).
• Payroll management system to manage payroll for your employees.
• Fraud protection services to protect yourself and your business from fraud.
• Banking services, including checking accounts, credit lines and/or loans.

If you’re having trouble identifying the right technology for your small business, here’s a helpful guide.

Establish a strong support system

Starting a business involves many learning moments and often unplanned or unpredictable setbacks. Review your current situation and goals and line up resources to help you turn your vision into a solid business plan. Having an established group of partners and a network of business contacts can help provide assistance and guidance when you need it. Check out our team of Business Access Advisors who can help you build connections and acquire the resources needed to sustain and grow your business.