As the adage goes, you get more mileage teaching one to fish rather than giving them a fish. The same goes for Black entrepreneurship: If we want to achieve lasting change, it’s critical to provide the necessary resources so talent can blossom.
As a follow-up to my last post, Entrepreneuring While Black: Driving Awareness, increased training will develop better informed, equipped and prepared entrepreneurs, as well as a pipeline of viable candidates seeking to launch their own entrepreneurial ventures or to apply their learned skills in existing ventures.
Improve Access to Professional Education
As the cost of education skyrockets, it is critical to provide would-be entrepreneurs with access to professional resources while partnering with companies and institutions to make technical resources (e.g. laptops, internet access) more readily accessible.
Entrepreneurship is hard on many levels and entrepreneurs need help to develop professionally beyond their venture. Without a support structure that a good institution can provide, entrepreneurs can be left in a vacuum — not learning the latest trends and receiving deeper professional and personal guidance through individual feedback, assignments and coaching.
Oftentimes, entrepreneurs project a false sense of confidence — hubris, if you will — to say that they know everything, which is usually the beginning of the end. One of my favorite quotes from W.E.B. Du Bois’s Souls of Black Folks comes from “The Story of the Two Johns’’ in which one of the Johns comments, “The more I know, the more I realize how little I know.” Just as individuals put effort into growing their company and learning about industry trends and new technologies, it is also their job to be aware of their blind spots and address them.
Here are some examples of organizations seeking to activate, connect, and mobilize Black entrepreneurs:
In my interactions with aspiring Black entrepreneurs, capital aside, oftentimes I also find that basic business acumen is missing. By that, I mean limited experience and exposure to what I consider the foundational elements to a solid business — a clear strategy, a solid business case (that can be captured in an executive summary), and a sound financial model.
Individuals (and companies) who interact with me will often hear me highlight the need for an overall strategy, which is often misconstrued as a plan. Strategy is derived from the Greek strategos, or “the art of the general”. And while there are many definitions for “strategy”, I simply define it as a plan of action designed to achieve an overall objective/aim that is unique and differentiating.
Commonly, I will point individuals to a great whitepaper, “Are You Sure You Have a Strategy”, which tackles this very issue and provides a very strong framework in the form of “Strategy Diamonds.” An organization’s success resides in its ability to define, execute, and stick to its strategy.
The executive summary, or management summary, is a 2-page document that should provide a strong overview of the venture/business plan. It is written for non-technical people and is intended to be BRIEF, containing enough compelling information for the intended audience to understand the concept, its merits, the path to success, and why they should invest.
Typically, the executive summary will consist of the following sections:
- One-Line Pitch: Summarize the business in 1 sentence/phrase.
- Business Summary: In less than 200 words summarize the business: its objective and the product/solution offering.
- Management Team: Highlight who’s on the team, why, and their role.
- Customer Problem: Define what problem(s) the product/solution seeks to address/solve.
- Products/Services: Provide details about the solution and why will it be more effective/impactful than existing alternatives.
- Target Market: Define the target market and size and why it is a receptive audience for the solution offering.
- Customers: Explain the primary customer base and demographics, and why customers would be willing to spend money on the solution offering.
- Sales/Marketing Strategy: Lay out the go-to market strategy to entice prospective customers (i.e., what will be done to excite/entice them to visit and spend money?).
- Business Model: Detail out how the venture will make money.
- Competitors: Specify the competition and how they compete.
- Competitive Advantage: Noting the competition, elaborate on the competitive advantage of the solution offering — why is it better and will succeed.
- Financial Model: Provide a 2–3 year projected income statement – Revenue and Expenses.
The Executive Summary is intended to be BRIEF and concise, but provide a very strong encapsulation of the business pitch. Brevity is not only important because of the limited attention that an investor has, but also because the ability to be clear and concise is perceived as a direct reflection of one’s ability as an entrepreneur.
To put it bluntly, having and understanding a financial model is a basic requirement to the success of a venture. A sound financial model describes how a venture will make money and how an entrepreneur will manage that money to sustain the business for the long-term. It is recommended that an entrepreneur provide 2–3 years’ worth of financial model projections.
A financial model must make assumptions to be sound. And, rather than see those assumptions as weaknesses, the entrepreneur should see them as opportunities to share how they think about their business. The way an entrepreneur thinks through their business model is often as important as the numbers themselves.
If an entrepreneur is unable to provide and communicate this, why should/would an investor entrust them with their money?
Typically, a venture’s financial model should consist of the following components:
- Income Statement (aka P/L Statement, Pro Forma) The income statement details the company’s projected revenues and expenses during a particular period. Think of your checkbook, which details how you make money and your expenses. The income statement helps determine a company’s financial health and the financial progress it made.
- Balance Sheet (Assets = Liabilities + Equity) The balance sheet provides a snapshot of the financial health of a company at a point in time detailing the company’s assets, liabilities and shareholders’ equity. In conjunction with the other financial statements, the balance sheet helps provide a clear evaluation of the health of a company/venture.
- Cash Flow Statement The cash flow statement summarizes the amount of cash and cash equivalents entering and leaving a company. The cash flow statement measures how well a company manages its cash position, meaning how well the company generates cash to pay its debt obligations and fund its operating expenses. The cash flow is typically broken down into operating, investing, and financing activities.
- Startup Expenses While the other three are critical, it is also useful to put together a breakdown of your anticipated expenses to start and launch your venture. As an entrepreneur raises money, this will help better explain to investors how investment money can and will be used.
Establish a Talent Development Pipeline
The establishment of a talent development pipeline, consisting of exposure, education, and skills development, is a critical pathway to develop and drive entrepreneurship. With our earlier focus expanding the supply side of the equation, it’s just as important that we place an equal emphasis on the demand side.
Many investors are seeking a diverse portfolio, but may not have the personal network connections to find high-caliber Black founders. Therefore, we should look to open channels of opportunity for the selection and placement of talented and aspiring Black entrepreneurs to positively impact business. In doing so, we should:
- promote the availability of strong ventures led by Black entrepreneurs; and
- improve the consideration of Black entrepreneurial ventures during investment rounds.
Measure Training Performance and Progress
To evaluate our progress, I recommend employing the following metrics to monitor and measure performance:
- Foundational Elements Available: This is one of the simpler metrics to evaluate: Do you have them? Do you understand them?
- Talent Development Pipeline Size/Capacity: How many members are you in your pipeline for entrepreneurial opportunities and/or investment?
- Talent Development Pipeline Velocity: It’s not enough to have a sizable pipeline but one where you can monitor progress. As the saying goes, still water goes stagnant.
According to Christopher Crawford, “knowledge without application is like a book that is never read.” By providing viable candidates with the skills and resources required to be proficient as entrepreneurs along with the avenues and arenas in which to put their expertise in action, we have a more meaningful and lasting impact.
The objective of this post was to offer recommendations and guidance regarding the need to equip Black entrepreneurs with readily available resources, while complementing this with a talent pipeline to ensure that there is an avenue to parlay learned skills.
We should look to equip entrepreneurs by:
- making resources readily available
- improve access and exposure to formal education programs.
- ensure founders are equipped with the sound foundational elements to a solid business — a clear strategy, a solid business case, and a clear financial mode.
- complementing this with a talent pipeline
- promote the availability of strong ventures led by Black entrepreneurs.
- improve the consideration of Black entrepreneurial ventures during investment rounds.
Increased training will enable 1) better informed, equipped and prepared entrepreneurs; and 2) a pipeline of viable candidates seeking to launch their own entrepreneurial venture or to apply their learned skills in an existing venture.
About the author
Ronald (Ron) Berry is a senior-level executive with global experience and success in B2B and B2C digital commerce in a variety of industries and businesses. If you have any further questions or would like to provide additional insights, please contact him at ron@EastanConsulting.com.