The Value of Mentoring Black-Owned Businesses - ACTN Strategies


The Value of Mentoring Black-Owned Businesses

Entrepreneurship and business ownership promote economic growth and create community wealth, both for small business owners and their employees. Yet, according to a 2019 McKinsey survey of consumer finances, only five percent of Black Americans hold some business equity, compared to 15 percent of white Americans. Moreover, the average Black American’s business equity is worth only about half of the average American’s.

Black-owned businesses need mentors who have faced the same challenges—and overcome them—to share their knowledge and experience to close these gaps.


Obstacles to Growth for Black and Minority-Owned Businesses

In 2019, the Congressional Black Caucus Foundation examined the state of Black entrepreneurship in America and identified three unique obstacles faced by Black- and minority-owned businesses.

Access to Human Capital

According to the Congressional Black Caucus Foundation, studies have shown that the education level of a business owner—perhaps the most comprehensive measure we have for human capital—is a significant indicator of business success. According to the US Census Bureau, in 2019 only 26% of Blacks ages 25 and older had attained a bachelor’s degree, compared to the national average of 36%.

Access to Financial Capital

Financial capital—often referred to as startup capital—is the money needed to start a business. According to the Congressional Black Caucus Foundation, more Black entrepreneurs rely on personal credit cards as a source of startup capital than any other ethnic group. Financing a small business with a credit card is both riskier and more expensive. With a higher debt to income ratio than a typical small business loan, early profits are more likely to be negatively impacted by the startup costs.

Access to Social Capital

Social capital refers to the networks and relationships that an individual develops. According to the Foundation, Black small business owners are at a disadvantage because they have less access to professional social capital networks—which are instrumental in business development and expansion—than other small business owners.


Mentorship is One Way to Fill these Gaps

Mentorship from experienced business leaders can help small businesses overcome these obstacles. Experienced mentors can help small business owners avoid pitfalls and mistakes that can cost a new business dearly. A mentor who has successfully procured startup capital, for example, can help an entrepreneur navigate the process.

Mentorship also expands networks and can provide small businesses with the social capital they need to gain access to the professionals and expertise needed to successfully launch and grow a business.

Seeing someone who looks like you succeed is a powerful motivator. Mentors serve as role models and can pave the way for the next generation of successful Black-owned businesses.