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Historically, BIPOC entrepreneurs have been underrepresented and underserved. This being said, however, minority-owned businesses are growing rapidly—in fact, according to Census Bureau data, the number of minority-owned businesses has doubled in the last decade. So, if you’re an entrepreneur of color looking to turn your dream into a reality, you might be wondering how to begin the process.
In this guide, we’ll explain everything you need to know about how to start a minority-owned business, including how to actually get certified as a minority-owned business and how that certification can be beneficial to your operations. Plus, we’ll also explore some of the top resources for minority entrepreneurs that can help you along as you start and grow your business.
Regardless of your background, learning how to start a business can be an intimidating process. Plus, if you’ve seen or heard some of the — like, despite their substantial growth, they still make less revenue than businesses owned by white people — you might be hesitant to get started.
Luckily, figuring out how to start a minority-owned business isn’t all that different from starting any business, as you’ll see in our break down below. Additionally, as we mentioned above, minority-owned businesses have the opportunity to get certified as a minority-owned business, which opens up specific opportunities that can help your business launch and grow.
With all of this in mind, let’s get started.
Some entrepreneurs become entrepreneurs because they’ve come up with the perfect business idea. Others know they want to run their own business or be their own boss, but they need to brainstorm to find the best small business idea for them. If you fall into the first group, you can skip to our second step. But, if you need to do a bit of searching for your business idea, you can start by asking yourself these four questions:
As you might imagine, coming up with the right business idea isn’t always a quick and easy process. Nevertheless, it also might be worth considering ideas that particularly lend themselves to you, and to your future minority-owned business. For example, you might explore your local community and see if you have an opportunity to set up a minority-owned business that can work with and benefit those in your area.
Similarly, you might also consider franchise opportunities as a way to start your minority-owned business. Many of the best franchises, like the UPS Store, among others, have specific initiatives for minority entrepreneurs looking to start their own businesses.
Once you have your business idea solidified, the second step in learning how to start a minority-owned business is to begin ironing out the details and writing them all down. Writing a business plan is not only a valuable exercise for planning your business, but a comprehensive business plan is also crucial for many startup business processes, like accessing financing.
Ultimately, your business plan will vary based on what kind of business you’re starting and what you’re using the plan for. In this way, it may be helpful to draft a few different versions of your business plan based on what end they need to fulfill — like building up your team, pitching to investors or applying for a loan.
Overall, however, a business plan should always include certain pieces of crucial information. Here are the fundamentals you’ll want to include in your business plan:
Of course, as you go through this process, you’ll want to include any relevant information to your minority-owned status — like certification (which we’ll discuss in detail below), for example — that might be helpful for potential investors, lenders or employees to know and understand. For instance, if you’re working with a local community organization to set up your minority-owned business, who this organization is, what they do and how they’re supporting your business can be important information for many of the sections listed above.
The next step you’ll need to tackle in regard to figuring out how to set up a minority-owned business is making sure you’ve checked off all of the legal requirements for new businesses. Although some of these requirements will be unique to your location and industry, overall, you’ll want to think about:
Thus far, the steps we’ve discussed for learning how to start a minority-owned business aren’t all that different from starting any type of business. With this next step, however, the process will change a bit. Once you’ve obtained the required general business licenses and permits, you’ll want to consider getting a minority-owned business certification.
Although this certification isn’t required for you to start your business, it can be extremely helpful as you get set up, as well as provide opportunities for your business down the road. A minority-owned certification business can help you qualify for some government benefits, gain access to minority business grants, apply for and receive government contracts and help you become a supplier for large companies.
There are several government agencies at the local, state or federal level that offer this certification. Here are a few options you might consider:
Getting a minority-owned business certification
On top of these three options, you might also consult your to see if they have additional avenues available for you to get a minority-owned business certification.
Once you’ve taken the steps to get certified as a minority-owned business, the next thing you’ll want to do is find business financing. There are a variety of ways you can fund your business — from traditional debt-based financing, to equity financing, to more creative methods, like crowdfunding or working with friends and family.
Within these different financing avenues, you might first and foremost consider the options that are specifically available to your minority-owned business. Although there isn’t a particular lender you can go to that exclusively offers minority business loans, there are federal, state, local and private loan programs tailored to address some of the challenges that minority small business owners often face. Here are some options you might consider:
Ultimately, it will be up to you to decide what type of financing is best for your minority-owned business. Once you’ve applied for and received the financing you need, however, you’ll be on your way to successfully running and managing your business.
At this point, we’ve gone through the five essential steps you need to know to start a minority-owned business. If, however, you’re wondering more specifically about how to start a minority woman-owned business, you can consult the following:
Ultimately, learning how to start a woman-owned minority business isn’t all that different from starting any other kind of business. Overall, you would be able to follow the steps we’ve outlined:
With step four, however, there are other certifications you might want to consider. In addition to getting certified as a minority-owned business—which typically means your business is owned by an individual who is at least 25% Asian-Indian, Asian-Pacific, Black, Hispanic or Native American—you can get certified as a woman-owned business as well.
Like the minority-owned business certification options we discussed above, getting certified as a woman-owned minority business can give you access to unique employment, training, development, funding and other business opportunities.
There are a variety of resources available for minority entrepreneurs who are looking to get their businesses up and running. If you need help during your startup process, you might consult some of these business resources:
Throughout this guide on how to set up a minority-owned business, we’ve touched on some of the statistics that exist surrounding the growth (and challenges) of minority businesses in the U.S. For greater insight on these topics and how they might apply to your business, you can take a look at the small business statistics below.
According to the SBA, there are in the United States. This means that minority-owned businesses comprise just 29% of all businesses in the U.S.
Additionally, the SBA has found that contribute $1.38 trillion in revenue and 7.2 million jobs on a yearly basis. This being said, the SBA adds that all minority businesses have sales and employment disparity ratios under 100%. Essentially, this means that minority-owned businesses make up a larger percentage of businesses than they do of sales and employment in the U.S.
According to the MDBA, only 11% of have paid employees. If you compare this number to 22% for non-minority businesses that have paid employees, you can understand the further disparity that this statistic reveals.
The MDBA also found that over five years, the combined gross revenues of minority-owned businesses grew 35%. This growth in revenues can mostly be attributed to a growth in the total of minority-owned businesses in operation.
The MDBA also found that, over those same five years, the average revenue per minority-owned business dropped by 2%. So, although the number of minority-owned businesses grew — and, as a result, the total sales — the average amount of sales made by each one of these minority-owned businesses dropped.
According to numbers from the , a net 2 million minority-owned businesses open through the five years of the recession. Meanwhile, a net 1 million non-minority-owned businesses closed over the same five years.
According to the results of a reported by the SBA, 30% of BIPOC felt discouraged from seeking a loan. In comparison, only 16% of white people felt discouraged from seeking a loan.
For the most part, learning how to start a minority-owned business, or a woman-owned minority business, is largely the same as starting any business. However, it’s important to consider the different certifications you can get for your minority-owned business and how these may be able to offer you new and unique opportunities.
Plus, despite some of the disparities that still exist for minority entrepreneurs, there are a variety of resources available for those looking to access education, networking and business financing. Along these lines, you’ll want to be sure to check out your local options. Many community-based organizations offer grants, alliances and clubs that help foster success in minority-owned small businesses.
This article originally appeared on JustBusiness, a subsidiary of NerdWallet.