Women have drastically changed the business landscape over the past five years. American Express State of Women-Owned Business states that women-owned businesses have grown at double the overall population rate.
However, no demographic of entrepreneurs has grown faster than African-American women. Black female entrepreneurs have started companies at over four times the overall population rate.
Although black women are the largest demographic of women starting businesses, many are bootstrapping and struggling for profit. Only 3% of black women-owned companies mature and survive longer than five years. As a result, many black women entrepreneurs have found greater success through buying and scaling existing companies.
Buying a Company
Buying an existing business can be a great way for black women entrepreneurs eager to start and launch their careers. When entrepreneurs buy a business, they own an already established company, potentially generating income. The sales price of a business is based on the profit that the company is expected to create in the future.
“Instead of starting a company from scratch, purchasing an existing business is more affordable and less risky,” says James Giacopelli, CEO of Giac Capital. “Financially, you only consider actual profit and loss records instead of rough estimates. You get a clear history of previous sales to refer to. With a purchased business, you can also acquire valuable copyrights and patents. Finally, you can lead a declining business in the right direction with your creative ideas.”
Several factors can impact the sales price of a business. For example, a company generating high-profit levels is generally worth more than a business barely breaking even. Likewise, a larger, more established business is typically worth more than a smaller, newer one.
“Acquiring a business with a low sales price is advantageous for black women seeking to make their mark in the business world,” says Makisha Boothe, owner of Sistahbiz Global Network. “While the company you purchase will not gross high income immediately, you can avoid the hurdles of building a business from the ground up. In addition, do not underestimate the resources, time, and cost you can save by inheriting an already profitable revenue model, turnkey systems, a predictable sales funnel, and more.”
Buying an Affordable Company
Krystal Covington is the founder of Women of Denver, the largest privately held women’s organization in Colorado. As the leader of this large networking community, Covington met several business brokers that taught her the value of buying a business rather than starting from scratch.
In 2022, she purchased Bella Virtu Organics, which provides clean organic products for toxic-free women and families. At the time, the company was bringing in very little profit. This allowed Covington to purchase the business for a lower price.
When Covington acquired the company, she aimed to grow it into something new to give her family more passive and generational wealth. Today, Bella Virtu Organics has tripled its profit by increasing units per order utilizing email marketing and search engine optimization tactics. As someone already experienced in marketing, I thought these were tactics easy to deploy and optimize to increase sales volume.
“If I could go back and tell myself as a struggling entrepreneur one thing, it would be to acquire a business,” says Covington. “Bella Virtu Organics had strong roots, but there was still lots to build and create. As a result, it does not look the same as it did when I purchased it. However, already having a foundation in place made the building process much easier than I imagined.”
Potential Barriers for African-American Women
Access to funding can be a significant barrier for African-American women looking to buy a business. However, many options and resources can make this process more feasible.
One option that can be helpful for anyone who is considering buying a business is seller financing. In this case, the company’s seller agrees to accept payments over time rather than requiring the full purchase price upfront. This can make it easier for the buyer to afford the business upfront.
Another option is to look for funding through the Small Business Administration (SBA). The SBA offers a variety of loan programs that can help small business owners obtain the financing they need to start or grow their businesses.
Grants can also be a useful funding source for black women looking to buy a business. Various organizations offer grants specifically for black female-led business owners, such as The Tory Burch Foundation, The Fearless Fund, and The Amber Grant. In addition, according to the Accion Opportunity Fund, some nonprofit organizations and businesses maintain lists of high-dollar grants and other resources for black female entrepreneurs.