Financial tips for women business owners of color
Women of color are collectively claiming their seat at the table when it comes to business ownership. There are now more than 2 million Black women-owned businesses in the US, employing more than half a million people, making Black women the fastest-growing group of entrepreneurs in the country.1,2 The number of Black women business owners increased by 33% from 2022 to 2023, while that of Hispanic and Asian women entrepreneurs also doubled.3 And their businesses are doing well. In 2022, women-owned business earnings grew by 27%, compared to 22% for male-owned businesses.4
If you’re among this growing group of entrepreneurs, making these five key financial moves will help you set your business up for success.
Prepare backup funding plans
Getting a new business off the ground can be difficult. Though many women-owned businesses have taken off, not all women entrepreneurs are flourishing. In fact, 53% of women business owners say they have unmet financing needs.5 And research shows that women are 40% less likely to report having positive financial wellness.6
Obtaining funding is the difficult, but an essential step in building a business. Once you’ve determined your start-up costs, think of all the ways you might obtain funding, whether it’s tapping your personal savings or applying for grants and loans. Whatever route your funding takes, it’s best to have a backup plan — if not multiple plans — in place. As a woman business owner of color, you can register your company as a minority-owned business (MBE). This enables you to reach out to organizations that exist solely to support MBEs, such as the Minority Business Development Agency (MBDA), which provides access to a variety of resources from consulting to capital.7 You can easily certify your business as an MBE online through the National Minority Supplier Development Council (NMSDC).8
Prioritize risk protection
Being a business-owner can have a positive impact on your family, community, and finances, but it also comes with some potential risk. If your business inadvertently causes damages, such as a traffic accident, injury, or a customer data leak, for example, you could be held liable. The resulting legal entanglements may even force you to temporarily pause your business, making it harder to cover your business expenses.
The first, and simplest, step to protecting your business is through general liability coverage or traditional whole life insurance. You may already know whole life insurance provides coverage for your family, but with guaranteed cash value, it can also help protect your business.9 In the event you become too sick or injured to work, disability insurance can protect the income you draw from your business and provide coverage for business expenses.10
Connect with experienced professionals
As a new business owner, you may encounter unforeseen challenges, but you don’t have to face them alone. Having a network of experienced entrepreneurs to call on for advice, insight, and resources can help you navigate obstacles. Business owners report higher revenues when they’ve received three or more hours of mentoring.11 Seek out like-minded entrepreneurs to connect with to help you drive forward. The Professional Women of Color Network (PWOCN) is a great place to start.12
Working with a financial professional is another great way to navigate the challenges of owning a business. Entrepreneurs often face financial risks and uncertainties around credit management, tax liability, and more.13 I can help you understand how to manage your finances and empower your decisions. As a result, you can work towards protecting what you have while expanding your future. If you have questions about your business’ financial picture, please reach out to me.
Do your research on pricing
One of the common mistakes new business owners make is underpricing their products or services. If your prices are too low, you may undercut the value you provide, as well as your bottom line. But if your prices are too high, you risk losing business to the competition. To ensure you enter the market at the right price point and maximize your margins, be sure to research the “going rates” in your industry. Tapping into your network of entrepreneurs in your industry is one way to gauge what the going rates are. This is another time when you may want to turn to the PWOCN or the Women’s Business Enterprise National Council (WBENC).
Manage your cash flow
Many new business owners are inexperienced in navigating the ups and downs of business cash flow. Seeking out education and training in this area can be a good idea. Women business owners of color may want to check out organizations, like the National Urban League and Our Village as they offer articles, workshops, and courses on managing cash flow. Here are a few tips to consider when trying to maintain your cash flow — build a cash reserve large enough to sustain you for three months or more and consistently follow up on past due receivables. Though you may also consider opening a line of credit with a financial institution, it might be best not to rely too much on lines of credit or credit cards to sustain your cash flow, since a default could have a significant negative impact on your personal credit.
Financially informed business owners build financially strong businesses
Not only can a thriving business help open a new future for you, but it can also create opportunities for your employees and help you positively impact your community. Following these steps can help inspire financial wellness that creates a foundation for your budding business.
Disclaimer
1 NWBC 2023 Annual Report, 2023, https://www.nwbc.gov/annual-reports/2023/BytheNumbers.html
2 Black Women helping close the gender gap as the fastest growing group of entrepreneurs, GoDaddy, 2023
3 2023 Women in Business Trends, Guidant, 2023, https://www.guidantfinancial.com/small-business-trends/women-in-business/
4 Women-Owned Businesses Thrived In 2022, Forbes, March 8, 2023, https://www.forbes.com/sites/rohitarora/2023/03/08/women-owned-businesses-thrived-in-2022/?sh=319a2c9fdd4e
5 The Future For Women Entrepreneurs Is Bright — But Financial Challenges Remain, Rieva Lesonsky, Forbes, March 24, 2023, https://www.forbes.com/sites/allbusiness/2023/03/24/the-future-for-women-entrepreneurs-is-bright-but-financial-challenges-remain/
6 Mind, Body, and Wallet® 2023: Economic challenges and uncertainty take a toll on well-being, Guardian, 2023, https://www.guardianlife.com/reports/mind-body-wallet
7 MBDA Programs, Minority Business Development Agency, https://www.mbda.gov/mbda-programs
8 Benefits of Certification, National Minority Supplier Development Council, https://nmsdc.org/certifications/benefits-of-certification/
9 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values. Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
10 Disability insurance for the self-employed, Guardian, 2024, https://www.guardianlife.com/disability-insurance/self-employed-what-you-need-know
11 Small Businesses Grow and Thrive with Help from SCORE Mentors, January 7, 2025, https://www.prnewswire.com/news-releases/small-businesses-grow-and-thrive-with-help-from-score-mentors-302343473.html
12 Professional Women of Color Network, https://www.pwocn.org/
13 The Financial Risks and Uncertainties of owning a small business, Melissa Houston, Forbes, September 17, 2023, https://www.forbes.com/sites/melissahouston/2023/09/17/the-financial-risks-and-uncertainties-of-owning-a-small-business/
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