Introduction to Wealth-building

It has been said that there are really only a few paths to building financial wealth in America. They include investments, business ownership, receiving an inheritance (i.e., generational wealth), and hitting the lottery. Of course, these can be broken down further. Investments, for example, can be made through the stock market, directly with individual businesses, in intellectual property that paves the way for residual income, and in tangible assets such as equipment, real estate, land, precious metals, art, etc. Business ownership can also assume many forms, including launching a new business, obtaining equity in existing businesses, participating in cooperatives and ESOPs (i.e., employee stock ownership plans), pursuing mergers and acquisitions, forming partnerships, and buying into franchises. Inheritances often involve the transfer of real estate, personal property, cash payouts, and other interests to beneficiaries from trusts, wills, and insurance policies when the people who established them die or when beneficiaries are eligible to receive those inheritances. Of course, hitting the lottery is pretty self-explanatory.

A Launch Point

When I was tasked with discussing the state of Black Rochester regarding economic empowerment and upward mobility, my greatest challenge was determining how best to contribute something substantive to the collective effort without attempting to “boil the ocean.” Given my academic training and professional writing style, I knew I would have to strike a balance between meaningful storytelling and scholastic density for readers seeking to be sufficiently entertained while wrestling with something in which they can “sink their teeth.” Finally, I would strive to comport optimism and pessimism to avoid leaning too far in either direction.

I centered my contribution on Black business ownership to discuss several prevailing conditions and circumstances that constrain sustainable growth and expansion. I will also share some keys to success from the perspective of a full-time, serial entrepreneur from the city of Rochester with extensive experience in training and coaching small business owners. Business ownership carries the promise of freedom to choose one’s path in life, the opportunity to do good and do well, the prospect of leaving your mark on the world, and enjoying a rewarding lifestyle in the process.

What is my role in the Rochester community? At the time of this writing, I am the founding president and chief executive officer for Third Eye Network, a national multicultural marketing and management consulting firm that began as a commercial photography partnership formed in the summer of 2003. I helped grow the company while enrolled in college and graduate school before shutting it down in 2012 for nearly a decade. Today, I employ nine and a half people, and my agency oversees the strategic and daily affairs of the Rochester Economic Development Corporation as its third-party administrator—and I bear the title of Interim CEO to simplify this arrangement for the public.

Black Business Realities

New businesses come and go in Rochester. This is especially true for Black-owned and operated businesses. I have always felt there were “levels to this” (i.e., the business game) as the saying goes. Some people from the Black community will start a side hustle to earn supplemental income. Many of them tend to be informal. So, while they may establish an assumed name — also known as a d/b/a — or limited liability companies under which to operate, they may not have many of those things in place you would expect from formally operating ventures. These may include permits, business licenses, insurance, or essential back-office operating and communications resources.

Those who become more focused on building their ventures tend to do a better job of raising awareness about their companies and may even begin to gain a following along with a growing clientele. Most Black-owned businesses are run by solopreneurs, whose companies are known more formally as non-employer firms. They tend to freelance in the “gig” economy, where numerous solopreneurs rely on cash-based transactions and leveraging subcontractors when jobs — or gigs — require more work than an individual may have the capacity for or be capable of performing. While transactions are more commonly occurring via personal payment platforms such as PayPal, CashApp, Venmo, and Zelle today, many of these activities are difficult to track, as evidenced by the lack of data on Black business ownership in Rochester. Knowledge of “who owns what,” “who does what,” and “who’s still around” is merely tacit knowledge despite the presence of online resources such as Black-Owned Business Rochester (www.bobrochester.com) and Black-owned in Rochester (www.blackownedinrochester.com). 

These observations are reinforced by the report entitled, “Tapestry of Black Business Ownership in America: Untapped Opportunities for Success,” published by the Association for Enterprise Opportunity in 2017. Their report was one of the most recent attempts to quantify the total number of Black-owned businesses in the US — just over 2.5 million. What was intriguing to me was that their report estimated that 96% of Black-owned businesses were non-employer firms, while the remaining 4% employed at least one person. Non-employer firms across the U.S. made less than $50,000 per year on average, even after five years of operation. This suggests many of them are side hustles or solopreneurs who struggle to attain meaningful sales growth allowing them to scale their operations. Employer firms earn between $776,000 and just over $1.6 million on average each year after five years of operation. The report sheds light on a gender gap, where sales revenues generated by businesses owned by Black women tend to substantially lag behind revenues generated by businesses owned by Black men.

Main street businesses are companies with physical operations within a community’s commercial corridors. When I think of Black-owned businesses that employ at least one person, I think of some of the more successful main street businesses on the east and west sides of town. This includes those located on and around East and West Main Street, along with those major streets that branch off of them. From East Main, you can reach Goodman, Webster, and Culver directly, but if you take Chestnut or Goodman, you will branch out to Hudson, Portland, North, Central Park, Upper Falls, Joseph, Bay, Clifford, and the Avenues. From West Main, you can reach Plymouth, Jefferson, Genesee, Chili, and Thurston directly, but if you take Ford or Broad, you will branch out to Tremont, Lyell, Lake, Dewey, Emerson, and Driving Park. For various reasons, however, most of the businesses along these corridors struggle to make it on the radar of the community at large. Some of those reasons include Rochester’s fragmentation, extreme poverty, transportation and time constraints, and perceptions of safety. For business owners, promotional resources and know-how are often lacking. Main street businesses are often family-owned businesses, some of which informally employ people (e.g., “under the table”).

Business owners who are professional contractors seem to be most capable of scaling their operations in Rochester. They tend to hire subcontractors, but many also formally maintain employees and have requisite documentation and back-office infrastructure. Formality is often prompted by buyers who provide such requirements as conditions for procurement opportunities with their agencies. Some contractors work with local entrepreneur support organizations (ESOs) that assist business owners with starting, retaining, growing, and expanding their businesses. Businesses often seek support from ESOs in their quest for capital, procurement-related certifications, accessing resources from business centers and coworking facilities, and other specialized technical assistance.

Most Black-owned businesses are unable to stand the test of time. Some of our longstanding notables in the Black community include:

• Cannon Industries; 
• DM Williams Funeral Home; 
• Flash Hair Designs; 
• Guys & Dolls Hair Salon; 
• Latimore Funeral Home;
• New 2 U Homes;
• Panther Graphics; 
• PI’s Lounge;
• Rochester Specialty Contractors (formally Flower City Monitor Services);
• S & T Lounge;
• Sharp Edgez Barber Institute;
• Sheen & Shine;
• Side Bar
• The French Quarter Café;
• True Form Manufacturing;
• U.S. Ceiling Corp.;
• Wade & Me Barbershop; and
• WDKX 103.9 FM.

There is no single reason for the longevity of these ventures, as they do not cluster around a specific industry, part of town, or share a specific type of clientele. While others may have been around for a few decades, countless others have come and gone.

More importantly, many companies lasted for many years but failed to name successors to keep them going when their founders retired or transitioned to the ancestral realm. Our community has lost so many staples for this reason, such as Mood Makers Books, Unkl Moe’s, Faruk Kaiyum Jewelry Gallery, James Brown’s Place, and the Baobab Cultural Center. I included the center because while it was a nonprofit organization, it served as a hub for artepreneurs (i.e., art-based businesses) who retailed their ware and services from the center. For each of the ones listed, Rochester has experienced countless fly-by-night companies.

Common Business Challenges

Running a business is not for the faint of heart. It takes a certain kind of person to excel in business given all of the obstacles to success, regardless of the owner’s racial and ethnic background. I once read in one of my undergraduate textbooks that to be an entrepreneur is to be a “calculated risk-taker,” where 50% of all businesses fail within the first five years and more than 65% fail by their 10th year. Nearly 75% fail within 15 years and 80% never reach the 20-year mark. Poor management, financial and marketing issues, and inadequate planning are the most prominent reasons for high business failure rates.

My training and experience have taught me that small business success is often constrained by personal challenges and persistent structural barriers causing systemic effects. While filing the paperwork for establishing a limited liability company has become as common and accessible as a work permit and driver’s license, business owners can be personally hindered by a lack of:

• Formal business knowledge or know-how;
• Prior relevant professional career experience;
• Sufficient capital to invest in early due diligence;
• Product-market fit with a clear value proposition;
• Formal business models with stable processes;
• Focus and discipline needed to amass sufficient clientele; and
• Trust and the possibility of scaling up or scaling deep.

Black Business Challenges

Centuries of systemic marginalization and racial trauma to our collective epigenetic memory hinder the ability to form and scale business operations through trusting business partnerships. This is particularly true for Rochester’s Black community. We wrestle with internalized racial oppression in ways rivaled by very few communities. From the perspective of building wealth in business, part of the issue is that we struggle to pool our resources to collaborate long enough to accomplish more together than we can individually. Perhaps everyone wants to shine (i.e., be the center of attention). Nevertheless, ongoing social and political challenges derived from a legacy of hate, white supremacy, and oppression have deeply rooted socio-economic consequences that continue to thwart Black business success today.

The inability to focus on growing and sustaining successful Black-owned businesses is impacted by what has come to be referred to as “the Black tax.” This phenomenon refers to a lack of time to ponder, save, and invest as many of Rochester’s Black business owners — and would-be business owners — are pulled in too many directions (e.g., taking on such issues as social justice, education, mental health, and political action, etc.) and are often tasked with the responsibility of supporting their extended families and the broader Black community. Those of us who are more educated or perceived to be prosperous are generally expected to do more and give more to those in need and are tapped for charitable giving in support of causes and events (i.e., by philanthropy, fraternal, and civic organizations and the alumni associations of our alma maters), tithes and offerings (i.e., by our faith-based organizations), bailing out friends and family in a jam, or simply guilted into giving for being “successful.” The conundrum is that most of the successful Black Rochesterians are only one or two events away from being destabilized or in a similar financial position as the masses of Black community members. The Black tax thus tempers sustainable Black wealth creation, particularly as it relates to financial wealth.

Structural Inequities Abound

The structural barriers to entrepreneur-led economic development and wealth creation are even more concerning. The regulatory and capital environments are among the more prominent examples. The regulatory environment is the primary domain of the public sector where business development activities are set forth and overseen by all levels of government. They encompass policies and requirements such as legally forming, launching, and operating businesses. Primary activities include registering, licensing, permitting, zoning, insuring, bidding, hiring, and accounting for compliance purposes. Unfortunately, it includes several contradictory requirements. The systems used within a single municipality are not always integrated or congruous. In most cases, they don’t interact with the systems and processes used by the county, state, or federal government. Additionally, policies and requirements imposed on businesses often change with each administration or as the political landscape shifts. Navigating the regulatory environment and its dynamics can be a bit of a circus for Black business owners, especially those lacking experience and the administrative capacity to juggle profitably running their businesses while working to remain compliant.

On the capital front, Black business owners contend with several roadblocks that render available capital inaccessible. For starters, it is vital to emphasize that “capital” is not a monolithic phenomenon. There are a variety of types of capital that Black businesses need to be aware of and be able to access. To reduce it to loans and grants would be shortsighted since insurance (e.g., worker’s compensation, professional liability, disability, paid family leave, cyber liability, bonding), rebates, discounts, and various forms of credit (e.g., credit cards, lines of credit, invoice and equipment financing, inventory advances) are also types of capital products. When business owners seek assistance with accessing capital, this breadth of awareness and depth of knowledge is not always possessed by ESOs, especially where the staff responsible for administering their programs and offerings have never successfully run businesses themselves. Second, not all types of capital are available in sufficient amounts across the business lifespan. Businesses are typically unable to obtain bank financing in the first two years of operation as most banks require business owners to have a one- to two-year performance history before they are eligible to apply for their funding.

So, seed stage to early-stage businesses obtain financing from their founders, friends, families, and angel investors. Among the challenges, most Black founders lack adequate savings, their friends and family networks are often reluctant to significantly invest financial resources into their dreams, and angel investors in Rochester generally focus on innovation-led and technology-enabled business ventures. The public sector offers a few relevant products such as KIVA loans — a zero percent interest crowd-funded financial product up to $15,000 that relies on founders’ social capital — and 50/50 matching grants up to $5,000 and $8,000 backed by federal Community Development Block Grants. And Monroe County recently launched a microfinancing product backed by American Rescue Plan Act—i.e., ARPA—funds up to $50,000. The nonprofit sector occasionally runs pitch competitions that can reward new and early-stage businesses with micro-financing ranging from $1,000 to $25,000.

In addition to being few, these products are not aligned in any meaningful way, causing business owners to spend a lot of time and energy compiling disparate documentation or pitching their vision to their friends, family, and the community — at times with little returns on their investments. Some business owners even make it their business to pursue every community program and resource focused on small business development. This behavior is problematic because meeting their requirements becomes a setback for Black business owners who could be better off focusing on sales to position themselves for traditional bank financing in the future. In other words, pursuing support resources from the public and social (i.e., nonprofit) sectors without a strategy and aligned business development objectives can distract Black business owners from focusing on building their businesses.

A major emphasis has been placed on small business certifications and supplier diversity programs that exist at the municipal, state, and federal levels, offering a variety of promises to those who pursue them. Becoming Minority and Women-owned Business Enterprise (i.e., MWBE) certified, for example, has been riddled with challenges for Black business owners. Until recent years, state certification took years to obtain. County certification, however, is now accessible after six months of operations. It is accepted by the City of Rochester and growing body of employers across Monroe County. While the certification was designed to facilitate access to procurement opportunities for historically marginalized and currently disadvantaged businesses, those who lack certification tend to be discriminated against by buyers seeking credit for purchasing goods and services from certified MWBEs.

Upon attaining certification status, Black business owners struggle to navigate complex online procurement systems and successfully respond to requests for proposals (i.e., RFPs). At times, they struggle to secure contracts because they fail to meet various buyer requirements such as a suitable history of performing the requested scope of work, lack of the appropriate business insurance or coverage limits, an inability to scale their offerings to meet buyer needs, or challenges with competitively pricing goods and services with sufficient profit margins.

For founders who may have been involved with the social, civil, and criminal justice systems, their ability to achieve success in business may be impacted by known challenges such as child support, benefits cliff effects, and the inability to obtain certain kinds of licenses, permits, and security clearances. Depending on how widespread awareness of their personal situations might be, they may also be saddled with stigma preventing them from being able to build their businesses. These challenges disproportionately impact Black business owners and those commonly in their employ. While I am merely opening the door to the topic for consideration, it may certainly be expounded upon in a separate writing.

The Shining Light

Despite some of the structural barriers discussed, I am excited to share there is a growing legacy of newer businesses that make up the next generation of entrepreneurial champions. I think of LáLew Public Relations, ROC Royal Entertainment, GoodKnews Photography, B Healthy, Bobo’s Chicken Shack, The Tax Experience, and my own agency — Third Eye Network — to name a few. Upon reflecting on some of the ways each of us have shown up in recent years, I have derived the following keys to success for Black business owners in Rochester:

• The power of purpose;
• The power of focus;
• The power of branding;
• The power of reinvestment;
• The power of strategy;
• The power of networks; and
• The power of pivoting.

Serious Black founders pursue entrepreneurship with a strong sense of purpose that often frames their “why” factor and vision for going into business. When speaking with my peers and me, you will hear themes about wanting to be in a position to make a difference, to hire people, and to do work we are passionate about. It is never solely about making money for most Black business owners. I always wanted to be able to build the kind of company that truly diverse communities would desire to work for and observe their own reflections in the culture and character of our agency.

Focus is essential to perfect core business operations that can achieve scale diversity over time. Business owners must learn the rhythms or cycles of their businesses to identify when expansion opportunities are worth pursuing. Because entrepreneurship is about taking calculated risks, it is imperative to remain focused to bring one’s vision to life. Keep in mind that one’s vision and focus will evolve with the environment and growing knowledge base.

In my formative years, I was told that small businesses are too small to brand themselves. I have come to believe that statement as only partially true. Most people think branding is about having enough money and other resources to project the images that businesses seek to establish in the hearts and minds of their publics. However, I learned that brands are about the promises businesses keep to their critical stakeholders. Having a lot of money to invest in a traditional branding program is a matter of scaling the program. However, the internet and other technologies have significantly changed our reality. Good reputations, the mark of established brands, are the positive consequences of consistently meeting stakeholder needs and are badges of trust and quality. Consistency comes from establishing and improving processes over time.

As business owners realize success, it is important to reinvest some of their profits back into the growth of their businesses. My peers and I have each demonstrated this principle in various ways. B Healthy reinvests in the community and their venture by selling whole foods and teaching the community the importance and impact of being healthy. The Tax Experience and my agency have reinvested into our talent pools by hiring and developing staff. GoodKnews Photography invests in the essential tools and resources necessary to perform its work and makes its facilities available for use by other local artepreneurs.

While LáLew Public Relations functions as a side business for its owner, it was strategically launched and grown in recent years. I remember when the founder and I spoke before she formed her venture. Today, I am proud to see how she’s established the firm as an MWBE with client accounts receiving national recognition. I have been impressed by ROC Royal Entertainment, which has entrenched itself into the social and cultural fabric of our local community through events, public sector contracts, community programs, and establishing its founder as a known entertainment and media personality. There are other examples of successful entertainment and media boutiques. This form of strategic growth and expansion has recently been referred to as “scaling deep.”

Businesses do not exist in a vacuum; they are a part of larger systems. Black business owners need reliable suppliers and vendors as much as they need funders and customers. They also need strategic partners and collaborators, such as teams of back-office service providers that includes bankers, advisors (i.e., accountants, coaches, wealth advisors), insurance agents, and lawyers to help ensure their success. Smart Black business owners have explored collaborating on contracts, establishing shared resources like audio-visual studios, and other forms of economic cooperation here in Rochester. I think of the B.L.O.O.M. ROC, a consortium of predominantly Black-owned legacy cannabis-based businesses who have joined forces to train others and advocate for their place in the legalization and commercialization of “cannabiz” in Rochester and across New York State. They recently held an awards gala to raise funds for their cause. They have also developed several key frameworks and programs to prepare informal legacy cannabis-based businesses for state licensure and formalizing business operations.

When the COVID-19 pandemic shook the world, Black business owners had to get creative to survive and thrive. Despite the trauma caused by the global crisis, our nation and community saw spikes in the number of new businesses established by the Black community. The pandemic pushed Black business owners to ponder, save, invest, and do business while mainstream systems and organizations were destabilized as they struggled to adapt. Historically, the Black community has always had to make a way out of no way, so while the pandemic was also devastating for the Black community, many of us were able to successfully launch new ventures and take advantage of the otherwise terrible circumstances in new and unprecedented ways.

Final Thoughts

Due diligence is vital to success in business. It should be performed throughout the business lifecycle, not just at the beginning. I hope this article inspires readers to assess the landscape in which they operate their current ventures—including their ventures—or before starting new ones given the current landscape. The Black community should create new businesses or expand existing businesses into areas that remain underserved but are also viable areas to pursue. One of my graduate professors once told my class that the goal of a good education is to get good at something hard to do so you can go out and make a lot of money doing it. That would allow you to give some of it back to help others. I believe a “good education” is not always formal. We are always learning if we are open to life’s many lessons. We must do our homework on where we can stand to build wealth through business and entrepreneurship and mitigate our business risk by reinvesting some of our success into the other wealth-building avenues I initially shared above over time.

As a parting thought, financial wealth comes from the ownership of assets. As business owners, we must work to own our buildings and the means of production (e.g., commercial, industrial, and mixed-use facilities, equipment, supply chains, etc.), our intellectual property (i.e., copyrights, trademarks, patents, etc.), licenses and other credentials that restrict competition while allowing us to sell (e.g., liquor licenses, procurement certifications, etc.), and direct relationships with our partners and clients (e.g., direct access to suppliers, buyers, customers, etc.) rather than working through third parties in and beyond Rochester. Economic development is about bringing and retaining resources from outside of a community into a community, thereby improving the quality of life by raising the standard of living. Because of the common and culturally specific challenges and barriers outlined in this essay, most of us cannot rely on sales and support from a single neighborhood or community to obtain our slice of the American Dream.

 

Di en nu ankh ujda seneb

(May we be granted life, prosperity, and health.)