According to a Biz2Credit study, “Average annual revenue of Latino-owned business increased from $258,702 in 2016-17 to $327,189 in 2017-18, an increase in 26.5%.” Hispanic and Latino businesses are growing, and business owners are looking at a bright and successful future. Though they face unique challenges when starting and scaling a business, certain advantages and resources can help Hispanic and Latino business owners overcome them.
To learn more, check out the infographic below created by the Ohio University Online Master of Business Administration program.
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The Growth of Hispanic and Latino Businesses in the U.S.
There are an estimated 4.4 million Latino-owned companies in the U.S., contributing over $668 billion to the economy annually. Hispanic and Latino business of all sizes are enjoying healthy growth.
Business Growth and Success
According to a 2018 Biz2Credit study of 28,000 small and medium-sized companies, Latino-owned businesses make up 20% of the accommodation and food services sector. Other services excluding public administration services are 16.25% Latino-owned, as are 14.35% of construction businesses.
According to a 2016 survey of over 4,900 Latino business owners conducted by the Stanford Latino Entrepreneurship Initiative, 40 to 50% of Latino-owned firms have more than $1 million in revenue and more than 50 employees. The study also states 29% of Latino firms are owned by immigrants, 50% of Latino owners of startups and businesses in growth stages rely solely on internal funding sources, and 73% started their business alone. 43% of owners in the category are 18-35, and nearly half have at least a bachelor’s degree. 22% of California firms are Latino-owned, while Latinos own 18% of Texas firms and 12% of Florida firms.
Scaled Latino firms (firms with more than $1 million in revenue or more than 50 employees) use more external sources of capital to grow than internal funding sources. External funding sources include vendor credit, angel investors, or loans from the government or banks. Internal funding sources include personal funds, inheritance, and credit cards.
The Landscape for Latino Business
Latino and Hispanic business owners face unique circumstances: advantages, disadvantages, and opportunities that help and hinder business growth.
Doing Business as a Latino
One of the key challenges for Latinos doing business concerns limited credit history, as 45% of Latino-owned firms were denied due to insufficient credit history. Another key issue is an aversion to debt, evidenced by a heavy reliance on personal savings and informal financing to start a business. Studies also indicate that Latinos have greater difficulties purchasing inventory and securing finances compared to non-Latino white business owners, and scaled Latino businesses have difficulty finding talent. Additionally, Latino-owned small business owners have difficulties developing personal relationships with large national banks, and most Latino-owned businesses sell to individuals instead of businesses and the government. While there are chances to develop mentorship programs for Latino business workers, these opportunities tend to be limited to certain geographic regions. Finally, Latino-owned firms tend to generate less revenue compared to white-owned businesses.
Tips, Programs, and Resources for Growing and Scaling
Businesses have a large Hispanic and Latino market to target and do business with. A wide variety of tools and resources are available to help them create a strategy to grow and succeed.
The Opportunities of the Hispanic and Latino Market
The U.S. Hispanic population will grow by 163% between 2010 and 2050, and it will make up 30% of the population by July 1, 2050.
The demographic also leads others in the adoption of new digital devices, which has intriguing correlations. For instance, Hispanics are 17% more likely to access the internet through their phone instead of a computer, and they spend more than eight hours per month watching online video. Hispanics also consider having the latest technology an important aspect of social currency. Additionally, they’re 1.5 times more likely to buy mobile apps and digital media than non-Hispanics.
Tips for Connecting with Hispanics and Latinos
In order to reach the Latino market, it’s vital to research your Hispanic customer base to learn its interests, geographic location, and needs. It’s also wise to start small with research, being careful to avoid coming up with ways to delay the process. Additionally, it can be important to invest in Spanish-speaking employees.
It is also a smart choice to share and deliver content that connects directly to the Latino market. This includes creating video content that can easily be consumed on mobile devices, creating content in English and Spanish, and developing content that connects to Hispanic culture.
Programs and Resources for Hispanic and Latino Businesses
One of the key programs Latino businesses can utilize is Interise’s Streetwise “MBA”. This program allows small business owners to gain business knowledge, learn about management, and grow their networks through a curriculum that focuses on topics like business strategy, marketing, the growth plan development.
Goldman Sachs 10,000 Small Business program is another program that Latinos can utilize. The program’s components include practical business education through a partnership with local colleges, support networks via one-on-one businesses, and access to capital through local, regional, and national community development financial institutions.
Latino businesses can also turn to the U.S. Small Business Administration to gain access to resources on a host of topics. These topics include creating a business plan as well as launching, managing, and growing a business.
Building a business involves taking many risks to create jobs and achieve a dream. For Hispanic and Latino business owners, the opportunity to leave a legacy for their families can be well worth the risks.