At Good Intent, we believe that how we spend our money has an extraordinary ability to impact our world for the better. And we’ve been reminded in the last few weeks that so many others share these beliefs. We have seen countless campaigns to support Black-owned businesses, and lists of Black-owned brands are flooding our social media feeds. While many of us are encouraged by this evolving urgency to spend our dollars more intentionally, we know that sustaining these habits will require us to spend some time sitting with WHY it’s so important.
Consumer power is, well… powerful.
Consumer spending makes up 70% of the U.S. economy.1 It’s no wonder that the founder of top consumer-spending platform, Amazon, is often ranked as the #1 richest person on Earth. Now consider what our world would look like if every consumer dollar was spent meticulously...
Our spending habits are powerful, sure. But what do they have the power to do?
Here are some concrete ways that spending your dollars at Black-owned businesses will shape our collective future for the better.
Close the wealth gap
The net worth of the average Black household is roughly 1/10 that of the average white household ($17,150 compared with $170,000).4 It may be tempting to blame this disparity on wage inequality, but not so fast. Income is a function of the labor market, and while it certainly plays a roll in the accumulation of wealth over time, there is more at work here. Wealth refers to transferable assets like real estate, financial investments, and business ownership, that can be passed from one generation to another. While income inequality is undoubtedly present and worth addressing, closing the wealth gap requires an examination of assets and the unequal access to assets (such as housing and business ownership) that has persisted for hundreds of years. This is what makes Black business ownership particularly important: it is a path for creating sustained, multi-generational wealth.
In other words, making a point to support Black-owned businesses today can help close the racial wealth gap now, and 200 years from now.
Promote entrepreneurial equity
The most common way that Americans acquire new businesses is by starting one themselves.3 And for both Black-owned and white-owned businesses, the most common source of start-up capital is personal and/or family savings.3 It’s easy to see, then, how the racial wealth gap is giving Black entrepreneurs a distinct disadvantage.
The second most common source of startup capital - business loans from financial institutions3 - offers little respite for Black entrepreneurs. More than half of the requests from Black-owned businesses for loans are rejected. The rejection rate for Black business owners is twice that of white business owners.5 This sting has been especially hard felt by some Black business owners in the wake of our current health crises. Many of the banks administering the Federal relief package for small businesses have instituted restrictions whereby they will service existing customers before considering new loan requests.6 This means that many of the Black-owned businesses that applied for loans and were rejected will have a particularly difficult time obtaining their share of the government’s aid package.
Most of us do not have the individual ability to even the scales of bank lending or redistribute wealth. But we can indirectly influence Black-owned businesses’ likelihood of overcoming these obstacles. Among the most common reasons that businesses fail is a lack of cash flow. So supporting Black-owned businesses with our consumer spending habits will help alleviate the need for additional loans or dipping into personal savings. Promoting the success of Black-owned businesses will also help tackle some of the biases preventing Black entrepreneurs from obtaining equal access to business loans.
Increase the number of Black-owned LARGE businesses
When examining business ownership in the U.S., it’s important to distinguish between businesses with employees and businesses without employees. There is a notable disparity in how Black and white business ownership is delineated in these two categories. Within the pool of U.S. business owners, Black men are only ¼ as likely as white men to own a business with employees, and Black women are only ⅕ as likely as white women. Why is this such an important distinction? Whether a business has employees is a strong indicator of that business’s revenue. According to 2012 Census data, 58% of businesses with employees have sales exceeding $249,999, while only 3% of businesses without employees fall into that category.2
How do we do our part to help Black-owned businesses scale into these categories? By supporting them with our dollars, of course. Opting to spend our money at Black-owned businesses will contribute to business growth, and will increase the number of Black-owned businesses with employees and the number of high-revenue Black-owned businesses.
Boost our economy through job creation and increased national income
The disparities that make it disproportionately difficult for Black entrepreneurs to pursue business ownership are depriving our country of new businesses, innovation, jobs, and income. A report from the Center for Global Policy Solutions estimates that past and present racial disparities in the U.S. preclude the existence of over 1 million minority-owned (of that, 500 thousand Black-owned) businesses, 9 million jobs, and $300 billion in national income.2
Communicate your expectations to all companies
Black people occupy only 3.2% of senior leadership roles in large U.S. companies and .8% of CEO positions for Fortune 500 companies.7 If we can meaningfully shift our consumer spending to more Black-owned businesses, we will send a powerful message to white-led corporations that diversity in leadership is non-negotiable.
Our spending habits have the power to change the world. But let’s be real. Not everyone has an excess of disposable income that can easily be redirected. Worry not! There are ways you can meaningfully support Black-owned businesses without spending money.
- If you have something nice to say about a Black-owned business, leave them a Google review/Yelp review!
- Follow them on social media and share their content (aka free advertising) - they appreciate it more than you know!
We're honored to call some badass Black entrepreneurs our friends, and we hope that if you're in the market for any of these goods or services, you'll take a minute to check out their businesses!
- April Blooms - boutique and online shop for women's clothing, accessories, home goods, and gifts
- Everyone Has a Story - nonprofit organization dedicated to promoting compassion and mental wellness
- Harriet Capital - diversified real estate firm
- Head Trip Salon - hair salon on Pasadena, CA
- HGC Apparel - clothing brand
- Hicks Plumbing Technologies - plumbing service offered in the Los Angeles area
- La La Ling - furnishings, apparel, and accessories for babies and children
- Maya's Healthy Day - resource for wellness tips and plant-based recipes
- Mello Monroe - graphics, design courses, websites
- Michael Ferrera - Custom suits and styling
- Noble Views Photography - behind the scenes, portrait, and lifestyle photography
- Talk Tailor - personal and group coaching
- Treehouse - co-living community in Los Angeles
- We Shall Overcome Foundation - support for underserved communities
Sources: 1 | Marketplace.org, What’s gonna happen to the consumer economy? https://www.marketplace.org/2020/04/06/whats-gonna-happen-to-the-consumer-economy/, 2 | Center for Global Policy Solutions, The color of entrepreneurship, http://globalpolicysolutions.org/wp-content/uploads/2016/04/Color-of-Entrepreneurship-report-final.pdf, 3 | Duke University, Entering entrepreneurship, https://socialequity.duke.edu/wp-content/uploads/2019/10/Entering-Entrepreneurship.pdf, 4 | Brookings, Examining the Black-white wealth gap, https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/, 5 | The Guardian, Black-owned firms are twice as likely to be rejected for loans. Is this discrimination?, https://www.theguardian.com/business/2020/jan/16/black-owned-firms-are-twice-as-likely-to-be-rejected-for-loans-is-this-discrimination, 6 | The New York Times, Black-owned businesses could face hurdles in Federal Aid program, https://www.nytimes.com/2020/04/10/business/minority-business-coronavirus-loans.html, 7 | CBS News, Why so many black business professionals are missing from the C-suite, https://www.cbsnews.com/news/black-professionals-hold-only-3-percent-of-executive-jobs-1-percent-of-ceo-jobs-at-fortune-500-firms-new-report-says/