2019 State of Latino Entrepreneurship Report

Bottom Line: Latinos continue to outpace all other ethnicities in terms of new U.S. business formation. The large and historically growing number of Latino-owned businesses pose an immense economic opportunity for the U.S. However, there are important gaps in the revenues at Latino businesses compared to white business owners. 

Latino-owned businesses employ more than 3 million people and contribute nearly $500 billion in annual sales to the U.S. economy. The total number of Latino business owners in the U.S. grew by 34% between June 2009 and June 2019. This is in stark contrast to all business owners, whose numbers grew by only 1%, and white business owners, who decreased in number by 6% over the same period.

Most Latino-owned businesses experienced revenue growth over the last 12 months. Over the last five years, Latino-owned businesses had an average annual growth rate in revenue of 14% and a 5-year compound annual growth rate in revenue of 9%. Some Latino-owned businesses are also growing at an even faster rate of nearly one-third annually. In fact, in most industry sectors, one in three grew revenue by more than 30% in 2019. 

A popular misconception about Latino entrepreneurs is that they start businesses out of “necessity,” but according to the Kauffman Foundation, 85% of new Latino entrepreneurs are “opportunity entrepreneurs.”  The number is nearly the same for new white entrepreneurs, 86% of whom are driven by opportunity rather than need.

However, Latino-owned companies tend to remain smaller than white-owned firms, with average revenues of $1.2 million per year for Latino-owned employer firms (those with paid employees), compared to $2.3 million for non-Latino-owned firms.

If Latino-owned employer firms generated the same average revenues and employed the same number of people as non-Latino-owned businesses, their economic contribution in annual revenues would be nearly $900 billion and the number of people employed would be 4.2 million. This represents an opportunity gap for the U.S. economy of over $410 billion and 1 million jobs.

Latino-owned businesses should consider the following revenue growth strategies:

• Diversify funding sources and know the characteristics related to funding outcomes in the financing matrix
• Establish relationships with capital providers before funding is needed
• Since liquidity is strongly correlated with growth, consider creating and implementing structured liquidity plans 
• Learn about government incentives for investment in low- to moderate-income and/or minority communities like opportunity zones
• Assess whether certifications can help secure attractive contracts with government and/or corporations

Read the full study HERE.