Latin entrepreneurs: increasing faster than ever.
Every day new businesses are created by entrepreneurs to satisfy the changing needs of consumers all around the world. As a growing force in the United States, Latinos are creating a path in the entrepreneurship environment and are becoming an important part of US economy because of their enterprises, the employments provided and generation of revenues.
Latinos represent 17% of the overall U.S. population and they will compound 30% by 2060. Their influence on the economy is undeniable, ranging from purchasing power to labor supply, but what has caused even more interest and attention during the last years is the recent explosion in the number of Latino Owned Businesses (LOBs).
According to the 2015 report of the Survey of Business Owners conducted by the U.S. Census Bureau, in 1997, Latinos owned an estimated 1.2 million businesses. The number grew to 1.5 million by 2002, increased to 2.3 million in 2007, and by 2012 to 3.3 million, representing 12% of the 27.6 million businesses in existence in the U.S. that year. About 70% of Latino firms are owned by people born in the United States and the rest by recent immigrants. Close to half of Latino owners are Millennials (ages 18-35) and almost half of them hold at least a four-year college degree.
Besides the increasing amount, Latinos are creating and developing profitable businesses. In 2012, the 3.3 million LOBs had an average of 8.6 employees per firm and their average annual sales were $155,806, employing in total 2.5 million workers and generating a total of $517 billion sales. It’s interesting to note than only 1.9% of LOB’s grossed over $1 million in revenue, which is 2.5 times lower than the 4.9% of Non-Latino Owned Businesses (NLOBs) who reached that mark in 2007. Even though LOBs are increasing and being profitable, the lack of capitalization and growth has caused this type of businesses to remain small, generating only one quarter of what NLOBs make and presenting an opportunity gap of $1.38 trillion in the US economy.
The reason behind this situation could be related to the funding sources. Three quarters of Latino owners report initially funding their businesses with their own money. The most common funding source used is personal funds, from either friends, family or the entrepreneur’s personal savings, at both the startup and growth stages. The opportunity gap presented before could diminish with the use of proper financial funds, like loans, credits or other figures.
Latino firms are distributed across a variety of industries and most concentrated in industries with the highest growth rate, according to2015 SOLE Report, like administrative and support and waste, construction, health care and social assistance, professional, scientific and technical and other services, breaking the common stereotype of Latinos focusing only in restaurants and supermarkets.
Almost 60 percent of firms are located in four states: California, Texas, Florida, and New York. By looking at a more detailed geographic level, one in nine firms is in one of five cities: New York City, San Antonio, Los Angeles, Miami, or Austin, which is consistent with the well-known amount of Latino populations in these cities and stated. Surprisingly, Latino firms are not concentrated in just Latino neighborhoods. 75 percent of Latino firms are in a majority of non-Latino neighborhoods, outside of Latino enclaves. Less than one-quarter of firms report being in majority Latino neighborhoods and for the majority of firms, over half of their clients or employees are non-Latinos. Together, these statistics tell us Latino firms serve a broader constituency than just Latinos, and that an increase in their wealth would impact more than just the Latino community.
This trend doesn’t seem to end soon, since Latinos’ entrepreneurship will keep rising as it has been in the past years. According to Kauffman’s 2015 report, Latinos had the highest rate of new entrepreneurs in 2014 with an index of 0.46 compared to 0.29 for Whites and 0.22 for African Americans. Also, Latino firms continue to be created at faster rates than the national average. While new business creation slowed through the recession overall, Latinos continued to create firms at similarly high rates as before.
Latinos are turning into one of the most important economic forces in the US, and their influence and presence will definitely shape the way businesses are made in the country. How do you see the future of Latin entrepreneurs? Can Latins revolutionize the US’ market? Do you know any Latin business?