4 Reasons Why BAME-Owned Businesses Don’t Pass the Test of Time After Launching

CXH Staff Writer | 14 July 2021

There is a large body of evidence that suggests that up to 90% of start-ups fail within the first two years. And as BAME-owned businesses, that statistic is substantially higher due to lack of access to funding, systemic disadvantages and a general uneven playing field.

A study conducted by the British Business Bank and consultancy Oliver Wyman, involving 3700 people, reported that BAME business owners are likely to bring in lower revenue and have less success in general, than their white counterparts. Furthermore, as Bloomberg reports: “Business owners from Asian and other ethnic minority backgrounds make up around 3.5% of business owners but account for more than 8% of business failures.”

Reasons Why BAME-Owned Businesses Are Highly Likely To Fail Within The First Few Years

Lack of Mutual Support: When asked for her opinion on why BAME-owned businesses fail, yoga brand owner and entrepreneur, Aysha Bell commented: As BAME business owners, we need to start supporting each other more rather than cutting corners and asking friends and family for favours. Saying this, in more recent times I have seen a rise in support from the community and a newfound understanding of business and the customer. As a community we need to work together and allow everyone in by sharing our gifts and talents. We need to start ‘thinking big,’ and believing that what we have is good enough for the whole world.”

Lack of Capital: Securing finance to start a business can be tricky, especially for BAME business owners who may be less “connected” in social and economic circles than white business owners. While there is no concrete evidence to suggest that BAME business owners are discriminated against by money lenders and banks on racial grounds, the fact is that white business owners enjoy privileges that extend beyond just the financial realm. White business owners are on average, more likely to have closer contact with financial networks, people who are able to provide loans and companies who are willing to provide financial backing. For BAME-owned businesses starting from scratch, the matter of building a business begins from the ground up, with little to no connections that are able to give them a “leg up,” or any kind of financial head-start.

Failure to Pivot with the Times: In the Age of Technology or what we have come to understand as the Fourth Industrial Revolution, resources are not equally distributed. The gap between classes continues to grow and this has been proven to affect BAME-owned businesses disproportionately. BAME-owned business owners historically, have less access to new technology and the level of education that is required to leverage technology as a business tool. As a result, they may lag behind when it comes to being able to pivot as fast as white-owned businesses when drastic changes are needed to survive. In the pandemic, many BAME-owned businesses were unable to get their businesses up and running online in time to continue to make profits and sustain their business expenses. The underlying reason for this is the lack of access to resources, particularly technological ones.

Inequalities Related to Access and Opportunities: As Angelica Louise Bagot, owner of Tribal Unicorn suggests: “There are disproportionate avenues of funding for black businesses and black founders. Women, in particular, are less likely to receive funding to help build their businesses. It’s important to note that not all businesses seek venture-capitalist funding. Bootstrapping is also an option, however again if we haven’t first identified the root cause of a problem, for example, if larger brands don’t source makers and brands outside of their usual supply chains, market share cannot be equally distributed. If black founders and change-makers do not have a ‘seat at the table,’ it’s unlikely that a problem will even be identified and opportunities will cease to be created. I don’t believe in placing barriers on any particular group,however I do think it’s important for the research to be done, for the problem and pain points to be identified and for structures to be put in place to help rectify the disparities.”

Another Perspective on the Subject

When asked to provide comment on this topic, Eliza Jones, owner of Chosan explained that:

“Not all BAME-owned businesses in the UK struggle to survive after the 2 year mark. There are significant differences between the experiences of black business owners and Asian business owners. Black business owners may find it hard to survive for example, in the convenience food sector as the main players in this sector have extensive community support behind them, considerable experience within the sector as well as group buying power. A lot depends on what their product is, which sector they are operating in and who their target audience is. Essentially, black business owners have less access to finance or knowledge/information networks as well as less support from their own immediate and wider communities. Research shows that one pound circulates for 28 days in Asian communities but only 6 hours in black communities.”

Her comment raises important issues around the nuanced experiences of the various minorities within BAME business as a sector. We will be exploring some of these hard-hitting issues in the coming weeks. We’d like to get your opinion. Comment on this article below or connect with us on social media.

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