Are Black Women Entrepreneurs Going for Broke by Choosing Low-Margin Business Models?

Access to capital investment for women of color— especially Black women—business owners and entrepreneurs has long been a hot-button issue. Both the New Voices Foundation and New Voices Fund were founded in large part to address this issue specifically. However, last year’s boon in funding [and mentoring] for this demographic has not slowed the unrelenting cacophony of voices from media to entrepreneurs and activists echoing the sentiment that “Black women businesses are over-mentored and underfunded.” We have to wonder if there might be more to this issue than solely the historical lack of access to capital. There are some really compelling questions and theories emerging.

In its April 2021 article, “Black Women Are More Likely to Start A Business than White Men,” Harvard Business Review suggested as much, “One explanation may be the types of businesses started: Our analysis shows that 61% of Black women entrepreneurs start businesses in either retail/wholesale or the health, education, government or social services sectors, compared to the 47% of white women and 32% of white men entrepreneurs. To the extent that these are small, informal businesses with low margins in crowded, competitive contexts, they are more difficult to sustain over the long term.” Could this be true? Could overcrowded industries and low-profit margins be strangling Black women-owned businesses just as much as or more than lack of access to funding? If so, how do we remedy this issue? What are we doing to address how Black women choose the industries or type of business that they go into?

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