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.

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