How to start a minority-owned business in 5 steps
Regardless of your setting, learning how to start a business can be an intimidate process. Plus, if you ’ ve seen or heard some of the statistics about minority-owned businesses — like, despite their solid emergence, they placid make less gross than businesses owned by white people — you might be hesitant to get started.
fortunately, figuring out how to start a minority-owned business international relations and security network ’ thyroxine all that different from starting any business, as you ’ ll witness in our crack down below. additionally, as we mentioned above, minority-owned businesses have the opportunity to get certified as a minority-owned business, which opens up specific opportunities that can help your business launch and grow. With all of this in mind, let ’ s contract started.
1. Choose your business idea.
Some entrepreneurs become entrepreneurs because they ’ ve come up with the perfective business theme. Others know they want to run their own clientele or be their own foreman, but they need to brainstorm to find the best modest business estimate for them. If you fall into the first group, you can skip to our second step. But, if you need to do a snatch of searching for your business estimate, you can start by asking yourself these four questions :
- Where do you have experience ?
- What resources do you have access to ?
- What interests you ?
- What trouble can you solve ?
As you might imagine, coming up with the correctly clientele idea international relations and security network ’ deoxythymidine monophosphate constantly a quick and easy serve. however, it besides might be worth considering ideas that particularly lend themselves to you, and to your future minority-owned occupation. For exercise, you might explore your local residential district and see if you have an opportunity to set up a minority-owned clientele that can work with and benefit those in your area. similarly, you might besides consider franchise opportunities as a way to start your minority-owned business. Many of the best franchises, like the UPS Store, among others, have particular initiatives for minority entrepreneurs looking to start their own businesses.
2. Write your business plan.
once you have your business theme solidified, the second base step in learning how to start a minority-owned business is to begin ironing out the details and writing them all depressed. Writing a business plan is not merely a valuable exercise for planning your business, but a comprehensive examination business plan is besides all-important for many inauguration commercial enterprise processes, like accessing financing. ultimately, your business plan will vary based on what kind of business you ’ re starting and what you ’ re using the plan for. In this way, it may be helpful to draft a few different versions of your occupation plan based on what end they need to fulfill — like building up your team, pitching to investors or applying for a loan. overall, however, a business plan should always include certain pieces of crucial information. here are the fundamentals you ’ ll want to include in your business plan :
- executive summary : This section will summarize your business ’ randomness unique rate proposition .
- company overview : here, you ’ ll describe your business ’ mho history, leadership team, and locations .
- marketplace analysis : This section will illustrate your intended industry and how your occupation would stand out from competitors .
- clientele constitution : In this part, you will need to include details on your commercial enterprise ’ second legal social organization and key executives .
- product and services : here, you ’ ll be able to discuss your commercial enterprise ’ s intersection or service and how you plan to price it .
- market and sales plan : This section will describe your customer skill and memory plans .
- fiscal plan and projections : You ’ ll want to create a gross prognosis and other fiscal projections for at least the following three years .
- Appendix : Any extra information your other business design sections don ’ t cover—like your resume—will go in this segment .
Of naturally, as you go through this process, you ’ ll want to include any relevant information to your minority-owned condition — like certificate ( which we ’ ll discourse in detail downstairs ), for exercise — that might be helpful for likely investors, lenders or employees to know and understand. For example, if you ’ rhenium working with a local community constitution to set up your minority-owned business, who this organization is, what they do and how they ’ rhenium supporting your business can be significant information for many of the sections listed above.
3. Register your business.
The adjacent footfall you ’ ll want to tackle in respect to figuring out how to set up a minority-owned commercial enterprise is making indisputable you ’ ve checked off all of the legal requirements for new businesses. Although some of these requirements will be singular to your location and industry, overall, you ’ ll want to think about :
- Registering your occupation name : not all businesses will require a DBA, or “ doing clientele as, ” registration, but if you do, you ’ ll want to make certain you register with the proper agencies .
- Choosing a legal structure for your occupation : The business entity type you choose will dictate how your commercial enterprise is organized, adenine well as how you pay taxes. Although there are pros and cons to each of the different entity types, you ’ ll want to think cautiously and decide which option works best for your business. Along these lines, you might besides find it helpful to consult with an lawyer for advice .
- Registering for federal, country and local taxes : not all businesses will require an IRS employer recognition number ( EIN ), but registering for one can be helpful in separating your occupation and personal finances. In addition, your state and local agencies will have specific requirements that you ’ ll need to abide by when it comes to registering for and paying taxes .
- Getting any necessity business licenses or permits : once again, depending on the location of your business ( ampere well as your entity type ) you may have to legally register with the state and put on for certain business licenses and permits. Certain types of businesses will besides be more likely to require specific licenses and permits, such as food overhaul businesses, childcare centers and health care businesses .
4. Get certified as a minority-owned business.
therefore far, the steps we ’ ve discussed for learning how to start a minority-owned business aren ’ t all that different from starting any type of business. With this following step, however, the process will change a bite. Once you ’ ve obtained the needed general business licenses and permits, you ’ ll want to consider getting a minority-owned business certification. Although this documentation isn ’ thymine required for you to start your business, it can be extremely helpful as you get set up, vitamin a well as provide opportunities for your business down the road. A minority-owned authentication business can help you qualify for some politics benefits, gain access to minority occupation grants, apply for and receive government contracts and aid you become a supplier for big companies. There are several politics agencies at the local, department of state or union grade that offer this certificate. here are a few options you might consider : Getting a minority-owned business documentation
- NMSDC ( National Minority Supplier Development Council ) : This administration has a national office, affiliate regional councils around the nation and offers trail and lend programs for little businesses. If your commercial enterprise wants to connect with private-sector buyers, you ’ ll want to look into completing the NMSDC application process to become a minority-owned license business, in this case, called an “ MBE. ” To qualify, your clientele should be at least 51 % owned and operated by an entrepreneur from a minority background .
- Small Business Administration ’ s 8 ( a ) business Development Program : The SBA ’ s 8 ( a ) program is designed to help minority-owned businesses compete well for union politics contracts. To comply with this program, federal government agencies need to set aside a part of their contracts for 8 ( a ) applicants. This being said, to be eligible for this platform, the SBA must certify your ship’s company as a minority-owned business — in this sheath, meaning your commercial enterprise is at least 51 % owned by an individual who is either socially or economically disadvantaged .
- Department of Transportation ( DOT ) Disadvantaged Business Certification Program : This program requires that departments that receive fund from the DOT set aside at least 10 % of their budget for contacts to minority-owned businesses. These individual programs, called Disadvantaged Business Enterprise or DBE programs, vary based on your state, so you ’ ll indigence to consult your submit ’ sulfur DOT web site for more information. Based on your state ’ south requirements, however, you can apply for minority-owned business certificate and be listed as DBE in the correspond department of state directory .
On exceed of these three options, you might besides consult your local department of state or city business agency to see if they have extra avenues available for you to get a minority-owned commercial enterprise authentication.
5. Find financing for your business.
once you ’ ve taken the steps to get certified as a minority-owned business, the next matter you ’ ll wish to do is find occupation finance. There are a variety of ways you can fund your business — from traditional debt-based financing, to fairness financing, to more creative methods, like crowdfunding or working with friends and syndicate. Within these unlike finance avenues, you might first gear and first consider the options that are specifically available to your minority-owned clientele. Although there international relations and security network ’ metric ton a particular lender you can go to that entirely offers minority business loans, there are federal, state of matter, local and private loan programs tailored to address some of the challenges that minority little commercial enterprise owners often face. hera are some options you might consider :
- Small Business Administration Community Advantage Loans : The SBA Community Advantage loan course of study works specifically to meet the fiscal needs of small businesses in underserved markets. The program encourages local anesthetic, community lenders such as nonprofit organizations to make loans of up to $ 250,000 by guaranteeing up to 85 % of the lend amount. The program is designed to service humble occupation owners who might not qualify for traditional finance .
- Microloans : International microloan organization Accion has a U.S. microlending plan targeting low- to moderate-income clientele owners who have difficulty accessing capital through traditional channels. Although they ’ ra not minority-specific, Accion ’ s U.S. member organizations offer microloans in all 50 states .
- Online Alternative Lenders : unfortunately, minority entrepreneurs frequently have worry accessing financing due to credit inequality. If you ’ re in this put, you might look to an on-line, alternate lender to find finance. These lenders much place less vehemence on credit and more on occupation revenues .
- Union Bank : If you ’ re running a minority-owned clientele in California, Georgia, Illinois, New York, Oregon, Texas or Washington, then Union Bank ’ s small business lend program could be a arrant match for your finance needs. a long as your annual revenues don ’ triiodothyronine exceed $ 20 million and you ’ ve been in occupation for at least two years, then you could be eligible for a minority clientele loanword through this program. They ’ rhenium will to lend up to $ 2.5 million to businesses with an owner of at least 51 % that qualifies as a minority ( as defined by their standards, which they detail on their web site ).
- business Center for New Americans : Another exceed choice for minority-owned businesses in need of fund, the Business Center for New Americans provides microloans of $ 500 to $ 50,000 with repayment terms of six months to three years. Loans of $ 500 to $ 9,999 will have fixed rates of 8.25 % and loans of $ 10,000 to $ 50,000 will have fixed rates of 10 % .
- Business Consortium Fund : Minority-owned businesses searching for working capital loans or lines of citation might consider the Business Consortium Fund. They offer funding of $ 75,000 to $ 500,000 with refund terms of up to seven years. To be eligible, you ’ ll motivation to be an NMSDC certified minority-owned business .
- unchained Ventures : First-generation immigrant entrepreneurs looking for venture capital should look into unchained Ventures. This venture das kapital firm invests specifically in immigrant-owned businesses with the potential to earn high returns .
ultimately, it will be up to you to decide what type of financing is best for your minority-owned occupation. once you ’ ve applied for and received the financing you need, however, you ’ ll be on your way to successfully running and managing your business.
How to start a minority woman-owned business
At this target, we ’ ve gone through the five substantive steps you need to know to start a minority-owned business. If, however, you ’ re wondering more specifically about how to start a minority woman-owned business, you can consult the be : ultimately, learning how to start a woman-owned minority occupation international relations and security network ’ thymine all that different from starting any other kind of business. Overall, you would be able to follow the steps we ’ ve outlined :
- Choose a occupation estimate .
- Write a business plan .
- Register your business .
- Get certified as a minority-owned commercial enterprise .
- Find financing .
With step four, however, there are other certifications you might want to consider. In addition to getting certified as a minority-owned business—which typically means your business is owned by an individual who is at least 25 % Asian-Indian, Asian-Pacific, Black, Hispanic or Native American—you can get certified as a woman-owned business arsenic well.
Certifications for minority woman-owned businesses
Like the minority-owned clientele certificate options we discussed above, getting certified as a woman-owned minority occupation can give you access to unique use, train, development, fund and early business opportunities .
- SBA Women-Owned Small Business ( WOSB ) Program certificate : This SBA program certified women-owned businesses to allow them to compete for set aside government contracts, ampere well as access resources tailed to running a women-owned business. In this way, the WOSB certificate is similar to the SBA 8 ( a ) broadcast documentation. additionally, under this course of study, you can besides become certify as an EDWOSB or economically deprived women-owned minor business, if you meet the eligibility criteria .
- Women ’ s Business Enterprise National Council ( WBENC ) certificate : Like the NMSDC certificate for minority-owned businesses, the WBENC documentation helps women-owned businesses gain opportunities from WBENC corporate members and government agencies. To qualify for this authentication, your business must be 51 % owned, controlled, operated and managed by a woman or women .
Resources for starting and managing your minority-owned business
There are a kind of resources available for minority entrepreneurs who are looking to get their businesses up and running. If you need help during your inauguration process, you might consult some of these business resources :
- U.S. Small Business Administration ( SBA ) : As we ’ ve already discussed throughout this steer, the SBA is the perfective starting space for any commercial enterprise, with resources for writing a clientele plan, educational tools, and information on government shrink, SBA loans and grants — some of which are specifically tailored to minority businesses .
- National Minority Business Council : An organization developed specifically for minority occupation owners called the National Minority Business Council offers programs like their entrepreneurial Bootcamp and their executive Management Program to provide education and emergence opportunities to minority business owners .
- Minority Business Development Agency : An agency within the U.S. Department of Commerce, the Minority Business Development Agency, helps connect minority-owned businesses with the “ capital, contracts and markets ” they need to succeed. You can find an MBDA clientele center near you to gain access to their services .
- Black Founders : If you ’ re a Black entrepreneur working in the technical school industry, then you ’ ll want to check out Black Founders. They offer programs that connect Black technical school entrepreneurs to educational resources, networking opportunities, and fund sources .
- Change Catalyst : Another arrangement that provides support to minority entrepreneurs is Change Catalyst. Of particular matter to to minority business owners looking to get their occupation up and running is their inauguration Fellows Program. Through this program, Change Catalyst works with entrepreneurs from underrepresented demographics and ushers their businesses toward success through education and financing .
- U.S. Minority Chamber of Commerce : Did you know there was a U.S. Chamber of Commerce specifically for minority entrepreneurs ? The United States Minority Chamber of Commerce offers programs like their Advanced Entrepreneurship Training Center and their global Entrepreneurs Virtual Centers. additionally, in most cities, there are national and local U.S. Chamber of Commerce chapters for Black, Asian and Hispanic entrepreneurs. These are advocacy groups that champion favorable legislation for entrepreneurs, but they besides offer growth resources and networking opportunities .
- score : A resource partner of the SBA, SCORE can help entrepreneurs at any degree of business possession. This minor business association is composed of a unpaid network of over 10,000 business mentors in 300 chapters countrywide. These individuals can serve as advisors, coaches, or mentors in your industry and can provide invaluable help when you ’ re first starting out .
- U.S. Department of the Interior Native American Business Development : The U.S. Department of the Interior Office of Indian Affairs has a native american Business Development program. This program offers technical aid to native american entrepreneurs in starting businesses and accessing government and individual procurement opportunities .
- DigitalUndivided : The startup incubator DigitalUndivided is devoted to guiding Black and Latina women founders through the inauguration grapevine to success. They ’ ve built over 52 companies and raised over $ 25 million in investments for those companies .
Minority-owned business statistics
Throughout this scout on how to set up a minority-owned business, we ’ ve touched on some of the statistics that exist surrounding the growth ( and challenges ) of minority businesses in the U.S. For greater insight on these topics and how they might apply to your business, you can take a spirit at the modest business statistics below.
1. There are 8 million minority-owned businesses in the U.S.
According to the SBA, there are 8 million minority-owned businesses in the United States. This means that minority-owned businesses comprise just 29 % of all businesses in the U.S.
2. Minority-owned businesses contribute $1.38 trillion in revenue and 7.2 million jobs to the economy.
additionally, the SBA has found that minority-owned businesses contribute $ 1.38 trillion in gross and 7.2 million jobs on a annually basis. This being said, the SBA adds that all minority businesses have sales and employment disparity ratios under 100 %. basically, this means that minority-owned businesses make up a larger share of businesses than they do of sales and employment in the U.S.
3. Only 11% of minority-owned businesses have paid employees.
According to the MDBA, entirely 11 % of minority-owned businesses have paid employees. If you compare this count to 22 % for non-minority businesses that have paid employees, you can understand the farther disparity that this statistic reveals.
4. The combined total revenues of minority-owned businesses grew 35% over 5 years.
The MDBA besides found that over five years, the combined crying revenues of minority-owned businesses grew 35 %. This growth in revenues can by and large be attributed to a growth in the total of minority-owned businesses in operation.
5. Over those same five years, the average revenue per minority-owned business decreased by 2%.
The MDBA besides found that, over those same five years, the average gross per minority-owned business dropped by 2 %. so, although the number of minority-owned businesses grew — and, as a result, the total sales — the average measure of sales made by each one of these minority-owned businesses dropped.
6. During the Great Recession, a net 2 million minority-owned businesses opened.
According to numbers from the SBA, a final 2 million minority-owned businesses open through the five years of the receding. meanwhile, a web 1 million non-minority-owned businesses closed over the lapp five years.
7. In a Census survey, 30% of BIPOC reported that they felt discouraged from seeking a loan.
According to the results of a Census sketch reported by the SBA, 30 % of BIPOC felt discouraged from seeking a loan. In comparison, merely 16 % of whiten people felt discouraged from seeking a lend.
The bottom line
For the most part, learning how to start a minority-owned business, or a woman-owned minority business, is largely the same as starting any clientele. however, it ’ randomness important to consider the unlike certifications you can get for your minority-owned business and how these may be able to offer you new and singular opportunities. Plus, despite some of the disparities that inactive exist for minority entrepreneurs, there are a variety of resources available for those looking to access education, network and business finance. Along these lines, you ’ ll want to be certain to check out your local options. many community-based organizations offer grants, alliances and clubs that help foster achiever in minority-owned small businesses. This article primitively appeared on JustBusiness, a auxiliary of NerdWallet .