Dallas is known for its diversity and that extends to the business sector, as the Dallas-Fort Worth area leads the nation with the most minority-owned startups, and the state of Texas ranks No. 2 among best states for Black entrepreneurs. The disruptions of the past year have cast a spotlight on the unique hurdles that Black business owners face, in Dallas and beyond, including lack of access to capital, financial education and networking opportunities.
The JPMorgan Chase Institute recently reported that Black-owned businesses often face lower revenues, profit margins and access to cash, and are underrepresented among companies that have external financing, so it is no surprise the DFW region was hit particularly hard by the coronavirus pandemic.
As many businesses continue to recover from the events of last year, there are several actions that Dallas Black business owners can take to begin to overcome some of these challenges and better position their businesses for success.
Plan for the unexpected
In March of last year, we saw many business leaders running companies of all sizes pull back on their expenses as their revenue slowed. Having a contingency plan and a financial safety net was critical to navigate through the economic ripple effects of the pandemic.
In fact, according to JPMorgan Chase’s Business Leaders Outlook survey, one-third of small businesses increased cash reserves in 2020 as a cushion for future disruptions, and we expect this trend to continue as business leaders remain concerned about an uncertain future.
Research from the JPMorgan Chase Institute suggests that Black-owned businesses today hold materially less cash than white-owned organizations, so it is particularly important for Black businesses to manage and mitigate risks during periods of uncertainty and continue to scale.
When evaluating short and long-term funding needs, business owners should look at ways to reduce operating costs, consider new products and services that cater to new segments, or rethink their distribution model. Ultimately, these actions—paired with a strong strategy— can better position the business for long-term success.
Embrace the rise of e-commerce and digital banking
From a consumer-facing standpoint, small and midsize businesses are meeting changing customer expectations by adopting contactless payment options. And more are leaning into e-commerce as consumers increasingly shop online. According to the Business Leader’s Outlook survey, over 20% of small businesses started accepting contactless payments or expect to this year, while 14% went all-in on using e-commerce in 2020.
Focusing on adaptability and resiliency
The pandemic has forced many business leaders to re-evaluate their operating models. It also highlighted the importance of proactively creating a resiliency plan for a range of worst-case scenarios. More than half of businesses have made changes to their operating models or plan to do so permanently, showing that leaders are taking constructive action to safeguard their business’ future in this rapidly changing environment.
With many shifting their operations online over the last 12 months, cybersecurity has become one of the most important pillars of business resiliency. According to the 2020 Association for Financial Professionals Payments Fraud and Control Survey, 81% of companies were targets of payments fraud last year. To help protect their organizations against cyberattacks, executives today are making employee education and training their top priority.
Coming together to support Dallas Black-owned businesses
The local business community has an opportunity and a responsibility to lean in and better support Black business owners—whether it’s through advice, resources, mentorship or investment.
JPMorgan Chase recently announced a five-year, $30 billion commitment to drive an inclusive economic recovery and advance racial equity, and close the racial wealth gap in traditionally underserved Black and Latinx communities.
As part of this, Chase has launched a new national program to help strengthen sustainable growth for minority entrepreneurs in historically underserved neighborhoods. The firm has partnered with local organizations, including the Dallas Entrepreneur Center at Redbud and The DFW Minority Supplier Council, to reach more minority entrepreneurs and introduce them to Chase’s new program. Through this initiative, entrepreneurs are matched with a Chase senior business consultant who will provide advisory services such as mentorship, business development coaching, resources and financial planning. The program is available to small business owners in Dallas, Chase customers and non-customers alike.
Additionally, Chase is teaming up with the Dallas Black Chamber of Commerce to bring virtual small business training to local businesses. These workshops will tackle topics such access to capital, ways to attract investors, the benefits of certification, and how to do business with a financial partner like JPMorgan Chase.
As a society, we have a long way to go to fix racial disparities in the business community, but coming together to elevate Black business owners as they navigate the pandemic will help level the playing field and bring more value and ingenuity to our communities.
John Kadala is a Chase Senior Business Consultant based in Dallas.