How Black Entrepreneurs Forged a Community Path to Business Success

The following text is excerpted with permission from Believe-in-You Money: What Would It Look Like If the Economy Loved Black People? by Jessica Norwood (Berrett-Koehler Publishers, www.bkconnection.com, 2023).

It doesn’t matter where I am or who I’m asking, Black founders most often explain that freedom is the reason that they start their companies. They want the freedom to move how they want to move, to manage schedules how they want to manage them, and to show up for the life they want, not some version of life imagined by a society that excludes and negates their contributions and even their humanity.

In stark contrast to the venture capital approach, collective action has been foundation for the success of Black people and Black-owned businesses.

I am reminded of how different the experiences and motivations of Black business owners are from those of White business owners. Black business owners are motivated to start their companies because they need income not just for themselves but for the people around them. Black founders are driven by a desire and sense of responsibility to create financial stability that can lead to generational opportunities for their communities and families. This is why I think so many Black founders struggle with the pathway of venture capital. The notion of selling a company for public trade takes them further from the true purpose of their businesses to provide immediate and sustainable resources for the people around them instead of for some far-off master called the shareholder.

In stark contrast to the venture capital approach, collective action has been foundational for the success of Black people and Black-owned businesses. The history of business using collective action in order to bring more equity and justice is well documented. Jessica Gordon Nembhard’s Collective Courage: A History of African American Cooperative Economic Thought and Practice is a comprehensive study of the intersections of Black business and collective action¹ In her work, Nembhard notes how cooperatives have always been important for Black people, as they provide a way to build in spite of the exclusion from mainstream finance and employment.  Cooperatives are companies owned by the people they use their services.² Cooperative organizations can be federations of workers, farmers, and landowners; mutual insurance companies; or banks and credit unions.

…

Since their arrival in America, Black people have always pooled resources. Sharing resources allows them to grow healthier food, to purchase land, and sometimes to buy tractors and equipment for farming. “For two centuries they did not earn a regular wage or even own their own bodies, but they often saved what money they could and pooled their savings to help buy their own and one another’s freedom”³ writes Nembhard. Their efforts also created mutual-aid, burial, and beneficial societies and insurance companies, as well as buying clubs, which were often led by women and connected to religious institutions.⁴

W.E.B. Du Bois referred to the collective work of Black people through the avenue of cooperative business.⁵ He described cooperative business as the variety of ways in which Black people shared the costs, risks, and benefits of economic activity. The goal of collective business was to help Black families and communities. And cooperative business, as Du Bois documented, was key to ensuring economic success for Black folks inside of a racist world.

For Black business owners, collective action has always meant that if they wanted safe and fair schools, hospitals, parks, and employment for their own communities, they would not only have to dream it but also pay for it themselves. This means that after they paid taxes for all of the amenities that White people were allowed to enjoy, Black business owners would have to essentially tax themselves again in order to cover the needs of their own communities.

Black-owned businesses rely on the community for their help and protection in the context of unfair practices and policies.

This second tax is sometimes referred to as the Black tax. The Black tax describes the financial support that a professional or entrepreneur of color is obliged to provide to their family and community, outside of their own living expenses, as well as the cost that conscious and unconscious anti-Black discrimination creates. In both instances, the impact of this tax creates a significant financial burden for Black founders and dramatically reduces their ability to build a substantial legacy for future generations.⁶  Yet the Black tax has been necessary to sustain Black life in America. Used to build many of the institutions in Black communities across the country, Black collective action and cooperation have been the driving force behind the building of our churches, Boy Scout troops, alumni associations, and even textbooks, school supplies, and teacher salaries.

In 1955, just after the announcement of the Montgomery bus boycott, business leaders met at Dexter Avenue Baptist Church to plan for an alternate transportation strategy for workers who would be displaced by the boycott. This was an integral moment for Black business leaders to join in the collective action of the moment. The city had a large network of Black-owned taxi companies, which provided the first solution for moving people back and forth around town. But when city officials learned that this network of Black-owned businesses was providing critical organizational support to the protest, the police began to crack down on taxi drivers. That’s when Black pharmacist Richard Harris stepped up and suggested that they initiate a car-pool shuttle service using people’s personal cars, even offering to house the transportation hub at his drugstore.⁷ Without the support of small business, which was the source of the idea and provided the capacity to create the car-pool strategy, the boycott would not have succeeded.

If the club owners had followed the old entrepreneur playbook …the business would have remained closed. Instead, they took a different path.

With collective action, the issues of injustice and discrimination can be more effectively addressed in community. Black-owned businesses rely on the community for their help and protection in the context of unfair practices and policies. Though the roots of this history are deep, the promises and challenges of Black collective action continue to this day. For example, in [October 2021], two Black women wanted to open a nightclub in a commercial space in downtown Mobile, Alabama. After signing the lease, the women faced six months of delays in getting into the space because their license to operate was facing significant opposition from the residents who lived near the club. Although the nightclub was located in an entertainment zone, an area designated for such businesses, and the space had previously housed a club, residents protested that the club would be too noisy—at least that’s what they said in public. During the city council meeting to discuss the license, racist complaints and discriminatory restrictions were levied at the owners. “Is there an entertainment district on MLK Drive?” read one of the comments from a neighborhood resident; another comment asked if the business owners were “crackheads” and wanted the owners to take drug tests before they could open.⁸ Both comments are dripping with racist assumptions that suggest an intolerance for more than loud noises.

Having a location in the highly sought-after downtown area was a dream for the women, but the delays in opening led to thousands of dollars in accumulated back rent. With no revenue coming in, no clear opening date, and an ongoing battle between two business owners and local residents, the landlords locked the women out and changed the locks. Nearly ready to give up, the founders reached out to the community in a last-ditch effort attempt to make something work. Within 30 days, they raised $50,000, sourced straight from the community, and enough to keep their business afloat.

If the club owners had followed the old entrepreneur playbook, which says we should go it alone, the business would have remained closed. Instead, they took a different path…in the process, receiving enough financial capital and community support to eventually win the license. The lifeline that community brings can be a breath of fresh air for a business that’s being stifled and suffocated by strategic discrimination.

Notes 

1. Nembhard, J. G. (2014) Collective Courage: A History of African American Cooperative Economic Thought and Practice (1st ed.), Pennsylvania State University Press.
2. Ibid, p. 31.
3. Ibid, p. 32.
4. Ibid.
5. W.E.B. Du Bois (William Edward Burhardt), 1868-1963, Ed. Economic Co-operation among Negro Americans. Report of a Study Made by Atlanta University, under the Patronage of the Carnegie Institute of Washington D.C., Together with the Proceedings of the 12th Congress of the Study of the Negro Problem. Held at Atlanta University of Tuesday, May the 28th, 1907 (n.d.). Documenting the American South, https://docsouth.unc.edu/church/dubois07/dubois.html.
6. Rochester, S.D. (2018). The Black Tax: The Cost of Being Black in America. Good Steward Publishing.
7. About (n.d.). Dr. Richard Haris House, Retrieved January 4, 2023, from https://richardharrishouse.com/about.
8. Moore, J. (2021, October 6). “First Black Female Owned Bar Will Open in Downtown Mobile Despite Racial Controversy,” NBC News, Channel 15. Retrieved February 6, 2023, from https://mynbc15.com/news/local/first-black-female-owned-bar-will-open-in-downtown-mobile-despite-racial-controversy.