After receiving $4 million in orders for her stem products the young black Entrepreneur and Russell’s Innovation Center for entrepreneurs said simply “I am not going to earn a single penny in profit from these orders”. This was the outcome of almost four years of extremely hard work that included becoming registered as a minority vendor and being in the multibillion-dollar purchasing programs from Walmart and Target. Although the idea of receiving $4 million in orders is something that would seem rudimentary to celebrate there are many parts to this are unclear to the naked eye and many extreme expenses that have been piled on the black business owner that completely degrade their ability to be competitive.
Like many entrepreneurs, the young lady had a business, for which we will not name in order to maintain the confidentiality of her business operations, is caught inside of a trap whose tentacles were laid by people who did not even stop once but consider the impact of their actions on her business. She simply did what any other young entrepreneur would do. Identified a massive need in the market, develop a product to serve that need come and mark it, and build with all our her heart and might.
But in America’s highly competitive business arena, searching the entire globe to find the best prices and products for your customers is not enough. The power of lobbies that far surpassed the reach of any of the entrepreneurs that are in the black-owned space seek to achieve their own goals and retention of their profits by successfully limiting the transport of low-cost goods from capable manufacturers that exist outside of the United States. While at the same time increasing the prices and the minimum order quantity and the requirement to purchase from manufacturers in the United States.
So many of the organizations and the initiatives that are focused on helping black-owned companies and entrepreneurs are targeted directly at the idea of raising funds. What is the use of raising funds if all the money simply goes back into the hands of the people that you’ve raised the money from? It’s a ludicrous proposition. The idea of bringing money into a black owned business should be increasing the liquidity and the bottom line of those entrepreneurs so that they have the funds necessary to fuel expansion, scaling and growth.
However, there are few initiatives, if not any that focuses on increasing the ability for black owned businesses to source the goods that they sell and to improve the dynamics in the supply chain. In addition there exist almost no initiatives that focus on the reduction of tariffs and duties and taxes that are levied against black owned businesses. These supply chain inefficiencies and reduction of sourcing partners contribute to an absolute reduction in the profitability of black owned businesses.
The average black owned business in the United States has a profit margin of less than 10%. And every program that is designed to help black owned businesses eats away at these margins. That means that a $1,000,000 organization will spend $900,000 simply to operate and to pay for basic cost of goods sold. The $100,000 that is left has to pay the owner and founder as well as fuel any ideas of expansion. In most cases the money that is left over will not even allow for purchasing additional inventory. Leaving these companies in an endless loop of trying to raise additional funds just to fund the inventory necessary to maintain sales.
It is this very problem that is being addressed by the Freedom Nation through their new initiative called the black competitiveness initiative. Instead of holistically focusing on bringing in new sales or additional funding or debt into black-owned companies the BCI is instead focused holistically on improving sourcing and fulfillment measures and increasing supply chain efficiency for black owned businesses.
This might seem simple, but these efficiencies can increase the 10% profit margin to 60%. In a company that has $1,000,000 in annual sales it is like driving an additional $500,000 into that business. But unlike many of the capitalists methodologies that are used in order to bring money into these businesses it is 100% debt free.
To put that in perspective, if you raise $2 million for your company through a loan of a modest six per cent rate then you will pay almost an additional $2 million in order to borrow that money. The concept of the cost of money is very real to businesses. Because although you have fueled $2 million into your business you must generate $4 million worth of profit at a 10% profit margin in order to even have a chance. That means that you will have to turn the $2 million into $20million in sales in order to survive. It is an impossible notion and very very few companies can survive.
On the other hand, $500,000 of debt-free liquidity inside of a business can be used to immediately generate capital and revenue without any hindrances or any future debt obligations. Call it magic money. It is all thanks to a focus on competitiveness instead of simply raising funds.
The black competitiveness initiative is in its early stages of development and is being rolled out first to the business citizens of the Freedom Nation. You can learn more by becoming a business citizen by going to https://www.freedomnation.me/apply
