The number of Latino/Hispanic businesses and entrepreneurships in the United States continues to grow “considerably faster” than the country average, according to the latest report (2019) on the State of Latino Entrepreneurship that the Stanford University’s Latino Entrepreneurship Initiative carries out each year since 2015.
Lead researchers Marlene Orozco and Inara Sunan Tareque led the development of this report, which is based on a survey of nearly 5,000 Latino-owned businesses across the United States.
The growth of the number of Latino businesses in the country has been sustained over the past 10 years: it now stands at 34% compared to the 1% average for all U.S. businesses, according to the report. However, Latino/Hispanic businesses remain small compared to White-owned companies; Latino businesses with employees reported $1.2 million revenues each, while non-Latino businesses nearly doubled that amount to $2.3 million.
In 2019 specifically, Latino/Hispanic-owned businesses reported a 14% increase in revenue, “outpacing the growth of the U.S. economy.” According to the report, out of the nation’s top 10 industry sectors, Latino businesses grew strongly in six: manufacturing, construction, commerce, transportation and utilities, leisure and hospitality, personal care services, maintenance and repair, and education and health.
Since 2016, Latino businesses have employed a total of 3.2 million people, with total revenues of $470 billion. That represents 5.5% of the U.S. employment rate and 4% of the overall businesses profits.
The report makes the following projection: if Latino companies generated the same average revenue and employed the same number of people as non-Latino firms ” their economic contribution in annual revenues would be nearly $900 billion and the number of people employed would be 4.2 million.” Therefore, the study continues, while this is not happening there is a gap in the U.S. economy of about 1 million jobs and $410 billion.
On the other hand, the report continues, Latino companies without employees tend to have more liquidity than those with employees, but the latter report higher profits.
And since most Latino businesses are small –unscaled–, the study concludes that adding employees “increases the challenge of having sufficient cash to ensure ongoing operations.”
The report says that external funding is critical for these companies to scale. However, the report’s researchers found that, in addition to company size, financers tend to consider other characteristics, beyond business growth or profitability.
The State of Latino Entrepreneurship 2019 report also looked at the personal and financial well-being of Latino/Hispanic business owners. They found that their well-being is lower than the one of other entrepreneurs, but they are “catching up.” “Their financial well-being has grown faster than that of other entrepreneurs over the past nine years.”
There’s other finding that sets Latino entrepreneurs apart from the rest: they have slightly lower financial well-being than Latino employees who earn wages. Wage workers have higher incomes, own more houses, and have a higher health insurance coverage. “Only 63% of Latino business owners have health insurance, the lowest rate of coverage of any demographic group, business owners, or wage workers.”
Stanford professor Jerry I Porras, co-director of the Latino Entrepreneurship Program, concludes: “Latinos are going to be one-third of the population in the future. And if the Latino portion of the economy isn’t more developed economically — if Latinos are basically at a subsistence level and not at a stronger level equal to everyone else — the whole economy will suffer, because the economy is driven primarily by consumption. That’s the long-term perspective, which is rooted in a 30-year horizon.”