*The coronavirus continues to impact the U.S. economy reminiscent of the economic devastation of the Great Depression. Many companies have employees that are working remotely; some have furloughed or even laid off their workforce. Businesses are fighting to stay afloat while others have completely shut down.
The pandemic has adversely hurt small businesses and excessively harmed small black-owned businesses based on the analysis of government data by Robert Fairlie of the University of California, Santa Cruz. Black-owned businesses are particularly vulnerable during this time because they tend to have fewer employees than other small businesses since they tend to be in industries like restaurants and retail.
Due to the national lockdown, these two industries have been hit especially hard as observed by Ken Harris, President of the National Business League. To add to the mounting economic frustration, black-owned businesses appear to benefit less from the federal stimulus program. According to the New York Times, only twelve percent of Black and Hispanic business owners pulled from April 30 to May 12 received the funding they requested.
Based on the census survey, “half of all small businesses reported receiving from a single part of the stimulus packages — the Paycheck Protection Program.” Black-owned businesses face many hurdles and one major setback is their lack of access to a traditional banking partner and encounter difficulty in applying for assistance. Only two percent of a twenty million citywide small business loan program went to businesses in the Bronx, New York, fifty-seven percent went to Manhattan businesses. Despite the dismal landscape that many small black businesses are experiencing, Fulton-Mecklenburg has managed to stay afloat during this viral outbreak. Co-owner and founder, David Muhammad spoke to EURweb.com on how black businesses can survive during this financial turmoil, the strength of collaboration in the black community, and how to build black economic power.
Tell me about your background and your business partner?
David Muhammad: I spent twenty-five years in the digital marketing space. I started off working for a company in Nuremberg, Germany called Feldmann Media Group where I was a senior consultant. After that, I worked at a startup called DME Interactive, the first black-owned publicly-traded internet company in the world which was owned by Darien Dash, the first cousin of Damon Dash, co-founder of Roc-A-Fella Records. Then I started my own digital marketing agency and had a run for about five years in New York City. I sold the business to become the head of digital strategy for Uniworld Group which is one of the larger multicultural agencies and is part of the WPP Network; I worked there for several years. [Eventually], I moved from New York to Atlanta where I worked as a senior director of digital strategy for Moxie, a digital advertising and CRM agency, and that is where I met my [business] partner Greg Kerns. Greg’s background was he was senior creative at Grey Agency, Rauxa Marketing Agency, and he was a copywriter for BET. We decided it would make sense to come together and start our agency.
How did you raise capital for your business?
DM: We are self-funded and we didn’t see the need to go the venture capitalist route initially. Having said that, it is pretty difficult for black entrepreneurs to get venture capital and we didn’t feel like jumping through all of those hoops. We own a hundred percent of our agency but that is not saying at a certain point that we would not be looking to partner with an organization in an equity-based partnership.
Describe the process of how you landed your first client.
DM: Relationships are everything in most businesses and I worked on top accounts with organizations throughout the years like Verizon, Apple, Amazon, Nike, Coca-Cola, and eBay, you start to garner relationships. So when we were putting our shingle up we just went back to our professional network [to] let folks know we were in business and to see if there were some project-based work available to get our foot in the door.
Who would be your dream client?
DM: It depends on different reasons; we would like to work with Google or Apple because they are such iconic brands and to figure out how to continue to segment their market or bring new products to market would be exciting. Also with start-ups, we are partnered with Queen City Fintech which is an accelerator in Charlotte, North Carolina. We work with cool, innovative, financial technology start-up companies, as well as, helping them with their experience design, digital strategies, and their content strategies. It’s exciting to see start-ups understand human-centered experience design, digital strategy, and quick turn content can help build their brands externally and internally.
Do you face challenges in communicating the importance of digital marketing to small business owners, especially black-owned small businesses, as to why it’s necessary in today’s world to have an effective digital marketing strategy?
DM: I find it on a couple of ends of the spectrum. I find some black entrepreneurs are highly adept at digital strategy, digital marketing, and social content. Some are highly technologically savvy and are innovative and are not behind in any measure. Then of course there are some tech laggards in any demographic. I find that a lot of black entrepreneurs are highly innovative. Though some folks within our community suffer from the digital divide and are tech laggards, I found black women entrepreneurs, in particular, leverage digital marketing strategies, social media strategies, and show a pretty good return on investment for some of those strategies. It depends on which segment of the black business community you’re talking about. In Atlanta for instance, there’s a great black tech startup community there and you’d be hard-pressed to find anybody in any ethnic group that was more sophisticated. Now having said that there are folks from baby boomer generation across all ethnicities that I think lag as it pertains to technology, I just don’t want to put black entrepreneurs in that book. I think that’s a narrative that sometimes is a little over exercised when it comes to black business owners.
Describe the challenges you face being a minority-owned business and how did you overcome those obstacles?
DM: I like to use the term black-owned because when black entrepreneurs lump themselves in with other minority groups who are not facing similar challenges and don’t have similar social histories in the country I think it does a great disservice to what some of our challenges are. When I was working in the agency world I saw that East Indians, Asians, and Jewish folks were very highly represented there. Black folks are not as well represented in those spaces and black males, in particular, are not so I like to use the term black-owned. [As for the challenges we faced as black entrepreneurs] the same stuff that we’ve always been challenged with like difficulty getting capital to capitalize our business, folks questioning your credibility, and your ability to deliver services.
I think the biggest challenge for us as black entrepreneurs is our lack of collaboration amongst each other. That’s the biggest challenge, it’s not necessarily how other folks are challenging us because that’s kind on par for the course, but from what I’ve seen through my thirty-year career in corporate America, black folks have to be twice as good to get the same which still holds true.
I think the largest challenge is that we don’t collaborate as much with one another. One thing I’ve noticed is that Asian, Latino, and Jewish business owners tend to collaborate [within their communities] at a high level. That’s the greatest challenge is our lack of collaboration I think moving forward if we want to make some inroads into various industries that have very high rewards like technology and advertising, digital marketing, and social media, we need to collaborate a little bit more. But of course, we’re under-capitalized and viewed through a lens of not being as credible as some of our counterparts.
How can the challenge of creating collaboration between black business owners become realized?
DM: For me, I think what mitigates that is if we look back fifty years when black entrepreneurs were moving and shaking, black entrepreneurship was at an all-time high, everyone within the black community got their services and goods from black entrepreneurs, from lawyers to the dry cleaner, to doctors, carpenters, and plumbers. As we moved out of that sort of segregated environment to a more integrated environment we no longer saw each other as collaborators, it’s something that we had to do back in the day but we seem to have lost that in our assimilation into the broader society.
How do we fix that?
DM: I mean, simply, we have to start kind of looking at every to other through the lens of value. How do I add value, what do I bring to the table that adds value? It’s not easy but it’s a pretty simple solution is that we see each other as proponents of value and not as a liability but that we see each other as assets. That’s a simple solution but certainly not an easy one.
Have you seen any examples of collaboration between black business owners in the field that you’re working in or in other areas?
DM: That’s a great question, at Fulton-Mecklenburg we don’t target only black businesses most of our clients are not black businesses they are corporations, [like] Verizon, BB &T, and Children’s Hospital of Atlanta. We are members of the African-American Business Chambers in Charlotte and Atlanta we seek to continue to drive collaboration through those chambers. But as I pointed out it’s a problem and I don’t have a lot of examples of where we are collaborating at a super high level. I remember Tyler Perry and OWN Network collaborating at a high level where Tyler Perry was producing shows specifically for Oprah’s network. Tyler Perry garnered that same relationship with BET which is owned by Viacom. You’d like to see more of those collaborative efforts and you’d like to see that idea kind of trickle-down because we live in a capitalist society and it’s about you getting out there and making it for yourself. We sometimes look outside our communities first while not looking sort of within those communities to see how we can to create synergies that will enable us to get footholds within industries and we used to do that back in the day.
When establishing your digital marketing agency what mistakes did you make in the beginning and what did you learn from them?
DM: You’re always tweaking your model and we positioned ourselves as a design thinking agency, we do digital marketing as one of our components but we’re more focused on the user experience and user interface design our main focus is experience design. Digital marketing is becoming more of a commodity certainly with a lot of great software that are out there like Adobe Experience Manager, Salesforce, Marketo, Radian6 Crimson Hexagon, that allow you to create an automated digital marketing infrastructure. We see the next growth area within the digital industry is experience design, digital product design, visual design, user research, user testing, and digital product management.
It’s a highly competitive space and the challenge is to get talented designers and digital producers to want to work with a smaller shop like ours as opposed to working for Apple, Uber, or Airbnb. [The mistake we made] was not dumbing down our initial iteration just a little bit and we may have lost revenue being a little too innovative.
Considering the current pandemic how are you adjusting your business model in this period? What contingency plans did you have in place?
DM: We use what’s called an agile and lean-approach. Our model is a minimally viable product so we don’t have a ton of overhead, we run as lean as we can. We’re very lean and our clients like that because we can pass that value onto them. We didn’t have to lay off a bunch of people because we don’t believe in the old agency model of having sixty guys in the meetings.
Activity is slowing down with everyone, you can’t have a contingency plan for a pandemic, and there hasn’t been one since the Spanish Flu in 1918. It’s kind of hard to have that plan in place we’re just figuring it out on the fly like everyone else. But what helped us is the way that we’ve modeled this minimally viable approach where we don’t we need a ton of folks to get the job done we just need the right folks. We continually meet with clients virtually through Zoom and to work remotely, we have a space in Atlanta but most of our folks are spread out around the country. We also have some development resources in India that we leverage as well.
Our clients have been having a lot of difficulty with layoffs in the freezing of budgets and projects that were pending have been parked. What we’ve been doing in the interim is continuing to build up our internal processes and marketing tools that we will need when all this blows over.
What advice would you give small black-owned businesses going through this situation?
DM: It’s going to be tough for us small black business owners. My mom used to say ‘if white folks catch a cold, we’re going to catch the flu.’ The underlying issues that plague the black community become exacerbated when the general society is also under pressure. We should take some of this time to build out internal processes and frameworks. If you’re hurting for cash make sure that we’re applying for some of that small business money that’s out there. I think that’s one of the first thing black businesses should be focused on is making sure we get our cut of that stimulus money. So we need to be adept at using all those resources that are out there and get those stimulus resources to help undergird our fledgling businesses. But we need to focus on tightening up our ship as much as we can and have a positive attitude through this process as well.
What are some obstacles you foresee in receiving the stimulus package?
DM: The same stuff that black folks face when they want to get venture capital like you need more collateral, you’ve got to have better credit, you’ve got to have x amount of co-signers, it’s the same hurdles that we have to cross when we’re going into the professional lending community to get venture capital. Less than half of one percent of black business owners ever get any venture capital; this is the Small Business Administration’s own numbers. When we start talking about Asian and Latino business owners those numbers rise the lighter you get and course a lot of those same business owners can go to the lending mechanisms within their communities, there again is that collaboration, to get funding. But black folks are using their 401Ks and taking a second mortgage on their homes to start businesses which I think is courageous but you are in a highly leveraged situation and the margin for error is extremely slim.
The same challenges we have in getting venture capital are the same nebulous grandfathering mechanisms that they [may] use for the stimulus checks. That’s where your black elected are supposed to be running interference for you to mitigate some of those critical risk factors because as business owners you can’t mitigate them, you are not in those rooms. So that’s where your elected officials are supposed to come in your congressman and your congresswomen the Black Congressional Caucus need to be smoked out a little bit in that instance to make sure that [black owned businesses] are getting their stimulus check. The narrative is that when black business owners are trying to get their fair share of federal funds somehow it’s a handout, its corporate welfare for everyone else it’s a stimulus package, my point is don’t let them run that game on you.
For me you know you got to stay in touch with your small business directory in your region, call your congressman and e-mail and call Small Business Association regional director to make sure that there are no nebulous grandfathering clauses and mechanisms that adversely target black business owners.
In the area of the venture capital, there are black-led funds that are being created so some progress is being made.
DM: There are over one hundred black venture capitalists out there at the time but those funds still create less than half of one percent. It shouldn’t be the burden only black venture capitalists to make sure that black business owners get VC. If a black business owner has a strong business plan they should be able to go to anybody’s VC. They like they should be able to go to the bank and get funding based upon a strong business plan and good credit.
You’re coming against a system that will not permit that level of financial empowerment for black entrepreneurs.
DM: That is why I self-funded; I didn’t have time to deal with all of that. There’s [Harlem Capital Partners, Arlan Hamilton] in Silicon Valley, and three or four brothers in Atlanta that have multi-billion dollar funds the one in Harlem is one hundred and thirty million dollar fund. But the venture capital that white folks are getting is like six hundred billion. It’s almost a trillion dollars of venture capital that flows into small businesses every year and black-owned businesses get half of a percentage of that, it’s nothing more than financial redlining. In the advertising industry, black people spend 1.30 trillion dollars on consumable goods that would rank black people as the ninth richest economy in the world, that’s a larger gross domestic product than India, Canada, and Switzerland. But what do agencies and brands spend with black-owned media, you are not getting the same cut as Vlad TV. Black entrepreneurs are financially red-lined in all industries and the lifeblood of any business is capital. If you can get your hands on capital so that you’re not using your own funds and placing yourself in a highly leveraged scenario where your margin for error is very low, it’s probably going to be hard to make it out of those first five years.
How can we overcome financial red-lining and level the playing field?
DM: It’s not going to be leveled so we should get away from that notion. After four hundred years of this current situation to think that we are somehow going to get to an egalitarian construct, I think that’s a little naive. What we should be looking at is moving the needle, what is a good metric for us to hit over the next decade? What is an obtainable objective key result we should be shooting for? One of our key objectives should be collaboration, one of the key result that we should be looking for through more collaboration with black business owners is to create independent funding mechanisms like some of the VCs are doing. So ten years from now, if the VCs are at two or three billion collectively and they lend to black businesses and then those black businesses become solvent. Now those funds are then able to partner with larger white funds to bring even more power into the black community.
The notion of integration twisted our brains because we don’t think about building out our own value first. We think about how we go to the mainstream folks and extrapolate value when we should be looking to collaborate [with one another], it’s simple but it’s not easy. I met my business partner Greg while we were working at Moxie, the third-largest digital agency in the world; they do close to seven hundred million a year. While Greg and I were managing Verizon’s account, it was our job to execute those budgets from a creative and digital perspective, we said let’s come together and we’ll go back to these same corporate clients and try to [land them as] clients. Then we’ll hire some black kids to teach them the game, we’ll collaborate with other black-owned agencies and other black-owned platforms to create intrinsic value to go get some more [clients]; it all kind of starts with us being more collaborative with one another. To avoid being financially red-lined, the black community must generate their economic power, because power only respects power. Economic power doesn’t respond to you trying to make them feel guilty or have some sort of morality, it only responds to power.
The black community’s problem is two-fold because many black people have bought into the ideology of white supremacy while also having to constantly deal with institutionalized racism.
DM: I grew up in the Nation of Islam and I read the teachings of Honorable Elijah Muhammad who said to ‘love your own and go for self. It’s really simple but yet the execution is difficult because we view ourselves through the lens of white supremacy and white supremacy views us through an extremely devalued lens. Until we become more collaborative amongst each other and stop seeing each other that way we’re just going to keep going around in circles. We have to collaborate because we’re all in the same boat, we are all culturally, socially, financially, and economically red-lined.
We have to go for self and it doesn’t mean that you’re against anyone else. That’s a problem that black people tend to have when you start speaking up for black only advantages that you are somehow against everyone else. We as black people have got to stop being ashamed for sticking up for ourselves. Black people must know their value and their self-worth, if we knew better we would do better. The opinion that matters the most is the one that you have of yourself.
You touched upon the idea of collaboration as a means for the black entrepreneurs to gain power. Why is it necessary for the black community to gain power?
DM: Economics is power because with economics you can buy your politicians. You support your politicians and they have to help push your agenda through, have your interests at heart, and they’re willing to fight for your interests because they can get financial support from you. We live in a capitalist society that’s what people keep forgetting. You think you live in a democracy but you live in a capitalist free market that controls everything. The more capital you have you will get more democracy, better health care, better education, the nicer neighborhood you can live in. It’s a capitalist society, that’s where we live and we seem to have missed that. Other groups seem to get that, these immigrants that come over here and understand the rules of the game; I’ve seen it a million times.
How has your business allowed you to utilize your power within the digital marketing industry?
DM: In order to negotiate you have to negotiate from a position of power. When we talk to clients we show them the gaps, first, we show them what they’re doing wrong. We come in with data and insights to show them where there are some chinks in their armor. Then we pull back the scab a little bit and tell them we’re also talking to your competitor down the street, the only key is who’s going to get the solution first. We’re very assertive in our approach. If you read the 48 Laws of Power the first law is you have to negotiate from a position of power, if not you are just begging. At the end of the day, you have one life to live. You can waste it by running around with a cup in your hand saying you will work for food or you can collaborate with your brothers and sisters, try to generate some power, and then you can be in the position to negotiate with anybody that you want, that’s the solution.
Based on your experience what three skills are needed to be a successful entrepreneur?
DM: The first skill is the ability to be a continuous learner, to have a zeal for knowledge. The second is to have a business mind, the difference between being a practitioner and an entrepreneur is different. You might be a great artist and make cool t-shirts but how you turn that skill into a scalable business? Being business-minded is understanding operations, accounts payable, accounts receivable, legal, taxes, and cash flow. The third skill isn’t a skill but more of an attitude, you have to be able to manage your morale and that comes from having a relationship with a higher power like YAH. You got to have that relationship to fuel your morale. But the management of your morale is significant, it’s being self-motivated. Being able to talk yourself into the fight on a daily basis is a skill.
What are your future projects and how do you plan to grow your business?
DM: Greg says twenty-five by twenty-five by 2025, our plan is to have twenty-five million in revenue, have at least twenty-five employees that are full time in one place not remote, and have this done by 2025, that’s our goal. The way we intend to do that is to continue to expand inside of corporate clients that we have and then to bring more corporate clients into the pipeline. Also, one of the keys for black entrepreneurs is productizing, if there is a process, framework, methodology, or recipe that you have that is your secret sauce, make a product because now you’re scaling your intellectual property and capability, and you’re multiplying yourself exponentially by having a product. That’s what we’re looking into to create [proprietary] experience design software that we can then productize and sell to other agencies.
*Since the interview Fulton Mecklenburg has not received any benefits from the stimulus package for small business.
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