Denise Larell has always been a good student and an excellent hair stylist. She started doing her hair when she was 16 by braiding her extra cash. “I was in survival mode,” says Larrell, who grew up in a financially deprived area of Baltimore. “I needed a source of income to support myself and her siblings,” she recalls.
Ten years later, Larrel is no longer in survival mode. Thanks to her natural talent and hard work, she attended cosmetology school, took her course online in entrepreneurship, and she went back to school to earn her high school diploma. Dennis Larrel Hair StudioShe charges up to $800 to do stunning hair extensions, holds seminars in the Southeastern United States, and also has time to mentor other aspiring entrepreneurs. “I love being able to get up and go wherever I want,” Larelle says. Just returned home from her Mexico vacation, she adds, “I want to use her income to help her see the world and learn more.”
Larell is one of many black women who have chosen to forge their own financial path in recent years by starting microbusinesses. A microbusiness is loosely defined as an entity with less than 10 employees and some sort of web presence. Created by Americans of all stripes, millions Of these businesses, no major demographic group is embracing trends more than black women.
Black women have started 17.7% of all microbusinesses created in the US since the beginning of 2020, according to the latest research by GoDaddy’s Venture Forward Initiative, collected in February. That’s well above her 6.6% share of the U.S. population and 46% higher than pre-pandemic.
Determined to fight the odds
Of course, not all black women face the major obstacles that Larrel has overcome. But as a demographic category, it stands out in a statistically meaningful way. They are much less likely to be able to devote themselves to microbusinesses full-time: in a recent survey, 60% of black female founders said they had a full-time job outside of microbusinesses. 36% of other group founders.
But despite these headwinds, 92% of black female founders were more optimistic about the next three months compared to 72% of other founders surveyed. They are more likely to run microbusinesses to generate income to supplement their full-time jobs (48% for black women and 40% for other women), but use it as their primary source of income. They are much more likely to want to source. (83% of black women versus her 67% of all other women).
And while 71% of black female small business owners are sole proprietorships, a higher percentage want to build a large business compared to 58% of all other demographics.
In fact, 93% plan to grow their business in the next year, compared to 76% of other founders.
The increasing rate of business formation by black women bodes well for the communities in which they live. Her three-year research by Venture Forward shows that communities with higher small business densities have lower unemployment rates and higher median household income levels. Karen Mossberger, a professor at Arizona State University and research partner at Venture Forward, said, “This data not only shows the potential for a more inclusive and equitable recovery, but also in terms of attracting people with new ideas and innovation. It’s promising,” he said.
“Black women have long faced a double pay gap because women are paid less than men and black employees are paid less than other racial groups,” says Mossberger. “Starting a microbusiness is a way for people to take their future into their own hands and see what they can do for themselves.”
find a way forward
Although the latest survey results were collected before another rate hike or other macroeconomic dark cloud emerged, one trend is clear. Black women have been hit very hard by the economic fallout from the pandemic.No major demographic groups were affected more unemployed since the pandemic started.
Still, Venture Forward’s survey and other studies suggest that the rise in black women-founded businesses is more than just a matter of economic necessity.According to one 2021 Survey by CatalystAn advocacy group for women in business.The top three reasons cited were burnout (51% of respondents), desire for another career with greater purpose (47%), and better pay. and benefits (47%).
Data from Venture Forward suggests that black women can expect less financial support as they pursue their own path. Black women have far less access to capital. Only 2% of respondents had taken out a bank loan, compared to 6% of respondents overall, and 78% of black women funded their startups from personal savings, while other black women It was 67% of her. Not surprisingly, they tend to do more with less money. Nearly three-quarters of her black female founders spent less than $5,000 to get the business up and running, compared to 58% of other founders .
Photo: Kat Hernandez, Founder, Juanita’s Plants
Kat Hernandez embodies the experience of many low-income black women. As the daughter of immigrants from the Dominican Republic, growing up in Brooklyn, she didn’t realize the importance of her credit score. Her parents didn’t have the opportunity to get a mortgage or a bank loan, partly because she only spoke Spanish.it was after she founded Juanita’s plant She applied for a bank loan and was very disappointed that she didn’t even get a credit card approval. I took out the loan, but only after the fact did I realize how it interfered with my ability to build a business. says.
Grow your business even when access to capital is scarce
Rules regarding the Paycheck Protection Program also worked against her. Because it was designed for companies that have employees, not those that employees are trying to keep and survive that were created during the pandemic. “Yeah, I think it was hard,” she says Hernandez. Her only outside funding is her $2,000 loan from her grandfather, which funds a photo shoot for her website. Many factors determine the success of a business, but lack of access to capital is the reason only 12% of black women-owned microbusinesses make $4,000 a month compared to 27% of other groups. That’s one of the reasons why we’re making more money.
But Hernandez doesn’t regret joining two demographics that have had a huge impact on the growth of the microbusiness economy. A woman of color and people under her 30s. Combining her earnings from Juanita’s Plants with her podcast production, she’s more likely to take on her financial fortune than if she had been working full-time for someone else. “People like me are at a huge disadvantage when it comes to fundraising, but I’m going to do my job regardless of adversity.”
The same goes for hairstylist Larelle. She has also built her own business without her outside funding or loans. In fact, she started producing wigs for clients during the pandemic and has successfully hosted a series of live webinars. so you can profit from your knowledge, not your time. “I don’t want to trade time for money,” she says.
Longer term, I want to open a salon chain where other stylists can rent chairs and establish themselves, just like I did when I was in my late teens. “I am living proof that you can do anything you set your mind to,” she says. If asked to do so, it can be done.”
Learn more about Venture Forward with GoDaddy here.