Start-up capital

Start-up capital
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          The Return of the Black Entrepreneur 

 A century ago, African Americans were the country's most ardent small-business owners. A new study suggests history is repeating itself.

 For all the ballyhoo about the role of entrepreneurs in helping the economy grow, there are precious few reliable statistics that tell us who becomes an entrepreneur, how they do it, and why they succeed or fail. In 1996, the Ewing Marion Kauffman Foundation set out the change that, embarking on a major study on entrepreneurship.

 The study solicited views from 120 scholars, 33 universities, 64,622 households, and 830 would-be entrepreneurs. The first report from the study, released at the end of September, 2002, merely identifies nascent entrepreneurs — people who are in the process of trying to start a business. But it has already produced some surprising results.

 The researchers found that about 6.2% of all adults are trying to start their own businesses, but that blacks are far more likely to doing so than whites. Just 5.7% of white households included someone who was trying to start a company, vs. 9.5% of black ones. (The differences between Hispanics and other groups were not statistically significant).

 Census data show blacks are far less likely to succeed: Blacks make up 12% of the population, but own just 4% of companies. By contrast, whites represent 75% of the population and own 85% of businesses. "Blacks are starting companies at greater rates, but there is something within the process that causes them to fall out at greater rates, too," says Patricia Greene, a University of Missouri professor and co-author of the study, which raises two important questions: Why are blacks more likely to try to start a business, and why are they having such trouble succeeding?

 BACK TO THE FUTURE? There's plenty of historical precedent for a thriving entrepreneurial culture among black Americans. The current high levels of black entrepreneurship could very well represent a resurgence rather than an unprecedented phenomenon. The 1910 census showed that blacks were more likely than whites to own companies, and nearly as likely as whites to be self-employed, according to Margaret Levenstein, an economics professor at the University of Michigan. But in 1910, over 90% of African-American entrepreneurs worked in agriculture, where small businesses have long been in decline, vs. about two-thirds of whites. Even excluding agriculture, black men were still more likely to be entrepreneurs in 1910 than in 1990 — 6% vs. 4.4%.

 John Butler, a professor at the University of Texas, shares the view that this isn't the first time blacks have been more entrepreneurial than other groups. When he was growing up, he says, the most important person in the black community was "not only the teachers but the teachers who had a business." The business provided important security, says Butler. "You didn't know when the hostility from the larger society was going to come up." He suggests the current wave of entrepreneurs have been struck by the realization that "civil rights and voting is one thing, but economic opportunity is another...I think magazines like Black Enterprise have brought the consciousness of having an enterprise back to black America."

 Zeal for self-employment doesn't matter much if businesses can't get off the ground and establish themselves. Potential explanations for the differences between different groups of entrepreneurs are mostly speculation: blacks may have less access to bank loans and other sources of funding, or may have less influential or less active personal networks. Butler, for one, thinks money is the answer. "Household wealth is the most important thing" in determining if a new enterprise is successful, he says. But the average black household has just one-tenth the wealth of the average white household, enabling it to spend that much less money sustaining a startup.

 EDUCATION'S DIVIDENDS. The study does hint at some reasons to be optimistic about the current crop of black entrepreneurs. Statistically, businesses started with substantial capital and run by an entrepreneur with a graduate degree are most likely to succeed. And the current wave of black entrepreneurs is heavily weighted toward the highly-educated and, well-heeled.

 Twenty-six percent of black men with some graduate school education are trying to start a business, vs. just 10% of white men. On the income front, 16% of black men making more than $76,000 a year are trying to start a business, vs. 10% of whites. These characteristics may help them thrive where other black entrepreneurs have struggled. The next phase of the study, due out next year, should begin to provide some hard answers.

                                              REPORTING PHRASES    <p class="MsoNormal"> <p class="MsoNormal"> <p class="MsoNormal"> <p class="MsoNormal">

<p class="MsoNormal"> 7 The author arrives at the following conclusions: …

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<p class="MsoNormal"><span lang="EN-US" style="font-size:14.0pt;font-family:Tahoma;color:black;background:white; mso-ansi-language:EN-US">A role play 

<p class="MsoNormal"><span lang="EN-US" style="font-size:14.0pt;font-family:Tahoma; color:black;background:white;mso-ansi-language:EN-US">

<p class="MsoNormal"><span lang="EN-US" style="font-size:14.0pt;font-family:Tahoma; color:black;background:white;mso-ansi-language:EN-US">Use this information to prepare a role play “Applying to the bank for the investments”

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">  Many banks offer a specialised service to people wishing to set up their own business. This may include advice on various aspects of starting and running a business, as well as financial assistance in the form of a loan.

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Work in pairs/small groups. You have decided to set up your own business together and have approached the bank for advice. They have asked you to prepare a business plan giving information about your proposed business. The list below shows some of the many details you will be required to give. With your partner(s), agree what type of business you are going to set up, then discuss each of the points listed in the business plan. When you have finalised all the details of your business, prepare a written plan to give to the bank.

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">

BUSINESS PLAN FORM
<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">    DETAILS OF THE BUSINESS

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Name of business

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Type of "business

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Format (limited company, partnership etc.)

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">   PERSONAL DETAILS Relevant work experience

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">   PERSONNEL

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Number of people/job function

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">   PRODUCT/SERVICE Description

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none">   MARKET

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Describe your market

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Who are your customers?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Is your market growing, static or in decline?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Who are the main competitors?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> What are the advantages of your product or service over the competition?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> MARKETING

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> What sort of marketing or advertising do you intend to do?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> PREMISES/MACHINERY/VEHICLES Where do you intend to locate the business and why? What sort and size of premises will you need? What machinery/vehicles do you require?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> OBJECTIVES

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> What objectives do you have for the business?

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Short-term

<p class="MsoNormal" style="line-height:150%;background:white;mso-layout-grid-align: none;text-autospace:none"> Medium-term

<p class="MsoNormal" style="line-height:150%"> Long-term

<p class="MsoNormal" style="line-height:150%"> When do you expect to reach the breakeven point?