Latinas Create New Firms At Nearly Double Rate of All Women-Owned Businesses

Latinas create more businesses

A series of new studies by Hispanas Organized for Political Equality (HOPE) offers interesting findings about Latinas in business in California and across the United States.

Between 2014 and 2019, Latinas in the U.S. created 2.3 Million new firms. This represent 18% of all women-owned businesses created in that time period.

Latina Business Findings

In the 2014-2019 period, Latinas created new businesses at almost twice the rate of all women-owned businesses.

Most Latina-owned businesses (89%) are “microbusinesses,” small operations with 5 or fewer employees.

Over the 2014-2019 period, the number of employees of Latina-owned businesses has increased by 30%, close to 700,000 workers.

Latinas have been affected more by the economic downturn and the COVID-19 pandemic: 28.9% of Latinas lost their jobs through May 2020, compared to 9.4% for white women.

Microbusiness, Defined

Government agencies define companies with five or fewer employees including the owner as “microbusinesses.” The overwhelming majority of U.S. business are microbusinesses. In California specifically, 90% of all businesses are microbusinesses.

Latina Microbusiness Owners, Defined

Latinas have proven to be enterprising small business owners. During the 2008 downturn, Latinas started businesses at a rate that exceeded the national average.

Latinas start micro businesses for independence, flexibility, improving their financial standing, to spend more time with family, serve their community, and use their talents. They are self-reliant by nature but have more limited resources than other business owners.

Latina-owned micro businesses serve community needs that other businesses do not: services for Spanish speakers and culturally focused arts and handicrafts. They seek to ensure that they serve family, culture, and community values. Latinas report that this shared language and culture give them an advantage.

Challenges

Latina business owners tend to self-fund their businesses via savings and credit cards. A lack of funding can limit business growth.

Latinas feel under-prepared and uninformed about how to access government or financial institution funding, or how to apply for loans and grants. They find the materials and websites for these institutions confusing and intimidating.

Latinas have been affected more by the economic downturn and the COVID-19 pandemic: 28.9% of Latinas lost their jobs through May 2020, compared to 9.4% for white women.

Latinas report they are regularly discriminated against. They also report that they feel they must work harder than men and white women to remain competitive.

Culturally, Latinas feel conflicted about money. This leads them to undervalue their products and services.

Latina business owners spend time juggling day-to-day home and business activities and they tend to have difficulty delegating to others.

California Statistics

In California, Latinas earned only 42 cents for every 1 dollar earned by white males. The home ownership gap has narrowed as Latinos have purchased homes at above-average numbers for several years. The California general home ownership rate in 2019 was 54.8% while the rate for Latinos was 47.5%. This is significant because wealth among Latinos comes primarily from home ownership.

For more information, view the 2020 Economic status of Latinas Report.

Infographic image by HOPE.

Oct 7 Free Online: Hispanic Innovation & Entrepreneurship Program

Patents Trademarks

Don’t miss the free, online Hispanic Innovation and Entrepreneurship Program from the United States Patent and Trademark Office (USPTO.gov). This is a chance for independent inventors, entrepreneurs, small business owners, and intellectual property (IP) professionals to learn about resources available to the Hispanic innovation community.

Time: October 7, 2020 1:00pm – 3:00pm Eastern

Register at the USPTO site: USPTO.GOV Link to this event

Take this opportunity to:

  • Learn from accomplished innovators, inventors, entrepreneurs, and business owners about best practices
  • Discover helpful resources available to innovators
  • Get practical tips on obtaining and protecting your IP

Keynote Speaker Roselin Rosario-Meléndez, Ph.D, Polymer and Cosmetics Chemist Associate Principal Chemist, L’Oréal

Networks and Resources Panel This panel will showcase service and support organizations for Hispanic inventors and entrepreneurs and the resources available for anyone getting started or in business.

Moderator:
Eliseo Ramos-Feliciano, Supervisory Patent Examiner, USPTO

Panelists:
Lu Cordova, Governor’s Advisor on Efficiencies and Digital Transformation at State of Colorado
James Foy, Founder of Hispanics and Technology
Oscar Garcia, Managing Director of Training, Manos Accelerator
Sandi Mays, CIO, CXO and Co-Founder at Zayo Group
Nicole Quiroga, President and CEO, Greater Washington Hispanic Chamber of Commerce

The USPTO Resource Overview will focus on free USPTO services and support for inventors, entrepreneurs, and small business owners. Presenters: Sean Wilkerson, Innovation Development Program Manager, Office of Innovation Outreach, USPTO and Matthew Martin, Pro Bono Assistant Coordinator, USPTO

Image source: mohamed Hassan from Pixabay

Economy Depends on Funding Latinx Biz

Latinx founders are the fastest-growing group of entrepreneurs in America, but their businesses are struggling to scale. “Scale” is business jargon for when a company grows in size, reach, and volume of sales.

While the percentage of all Americans running a business has stayed at 6.2 percent over the past two decades, Latinx founders are the fastest-growing demographic among all U.S. entrepreneurs. These businesses have gone from 6.5 percent of all entrepreneurs in 2001 to 15 percent as of 2019.

Latinx founders own 350,000 businesses with employees in the United States, and these businesses create nearly 3 million American jobs. Many more are “solopreneurs,” businesses run by one owner. Despite the number of businesses, only 3 percent of the Latinx-owned companies with employees reach over $1 million in revenue, compared with 9.2 percent for non-Latinx businesses.

As the saying goes, it takes money to make money, so some experts believe that this gap between Latinx and non-Latinx businesses is due in large part to a lack of access to funding for growth.

Research shows that Latinx founders tend to have fewer financing opportunities than other entrepreneurs, and the amounts they receive are generally lower. Latinx founders are more likely to have their profitability negatively impacted by lack of access to funding and a higher cost of capital (higher interest for loans). Without funding, small businesses can’t obtain what they need for growth: new hires, new equipment, marketing, manufacturing partners, etc., to scale.

Some organizations are working to better understand and close this gap. The Aspen Institute hosts a forum on Latino Business Growth that has advocated for changes to common misconceptions about Latinx entrepreneurs. The idea is to present Latinx businesses to investors, the media, and other partners in the startup ecosystem more accurately as thriving enterprises (not anemic ventures with special needs). The organization also advocates using community anchor institutions, such as universities and local banks, to aid in training and resource development for Latinx founders. The institute estimates that improving the system for Latinx founders could yield an additional $1.4 trillion to the U.S. economy.

Resources: Inc.com / Photo: Scott Graham, Unsplash

Latinx Businesses Outpace U.S. Economy

Mark Madrid, CEO LBAN

The good news: Over the past 10 years, the share of Latinx-owned companies in the U.S. grew 34 percent. The challenging news: Latinx-owned businesses continue to trail other businesses in revenues, averaging $1.2 million a year compared to $2.3 million for non-Latinx companies.

In January, several hundred Latino entrepreneurs and business leaders from across the United States gathered at Stanford University for a briefing on the health and well-being of Latinx-owned businesses. One of the goals of the Stanford Latino Entrepreneurship Initiative (SLEI) is how to get more Latinx-owned businesses to scale up and think bigger. SLEI is a program with Stanford’s Graduate School of Business aligned with the Latino Business Action Network (LBAN).

CEO of LBAN Mark Madrid says, “U.S. Latinos now constitute the 8th largest GDP in the world and Latina and Latino entrepreneurs across America are significant drivers of this uplifting economic result.”

Madrid’s organization holds a gathering of Latinx business owners at Stanford each year to learn how to grow, seek funding, and better manage their businesses. More than 580 business owners have graduated from the 7-week program, which is now seeking applicants for its ninth cohort.

In a survey released in January 2020 of 5,000 Latinx business owners, business growth was analyzed. If Latino-owned companies with employees (not “solopreneurs” where the owner is going it alone) generated the same revenues and had the same employee base as non-Latinx companies, their economic contribution would be nearly $900 billion and they would employ 4.2 million people. The report indicates that untapped potential in diverse entrepreneurship represents an opportunity gap for the U.S. economy of over $410 billion USD and 1 million jobs.

Here are some highlights in the report:

  • In 2019, Latinx-owned businesses outpaced the growth of the U.S. economy, with an average revenue growth of 14 percent.
  • These business saw growth of more than 30 percent in 6 industry sectors, not including government: Manufacturing; construction; trade, transportation and utilities; leisure and hospitality; other services like personal care services, maintenance and repair services; and education and health services.
  • Nearly half of Latinx-owned firms report 5 or more months of liquidity (cash and savings) for operations.
  • Small Latinx-owned companies (less than $1 million in revenue), typically get business financing from personal and business credit cards and other lines of credit. They find it hard to get approved for financing of $100,000 or more.
  • Latino-owned firms with over $1 million revenue typically apply for financing with business credit cards, bank loans and other types of credit. They have a 31 to 55 percent success rate in applying for funding over $100,000 in most funding categories.

President/CEO of The United State Hispanic Chamber of Commerce, Ramiro Cavazos says, “My big takeaway is that the data is compelling, it’s powerful and we need to own that data and communicate it over and over again because it’s not connecting with procurement leaders, the federal government, Fortune 1000 firms, and people who provide capital. And if we did those three things — help them with government contracting, private contracting and capital — we would make the American economy that much stronger.”

Resources: BizJournal.com / Photo by 3 Lopez Media: Several hundred people attended the 2020 State of Latino Entrepreneurship Forum held at Stanford University’s Graduate School of Business on Jan. 31, 2020.