Latino entrepreneurs play a vital role in the U.S. economy. Approximately 350,000 Latino-owned businesses employ more than 3 million people. These businesses also represent the fastest growing segment of the U.S. business population. From 2007 to 2019, the number of Latino-owned businesses increased by 34%, while the number of white-owned businesses decreased by 7%.
And many businesses are still recovering from the economic shock caused by the COVID-19 pandemic: Between 2019 and 2022, Latino-owned businesses reported an average growth of 25%, compared with 9% for white-owned businesses.
These are some of the findings from the eighth annual survey. The current state of Latino entrepreneurs A report from the Stanford Latino Entrepreneurship Initiative (SLEI) at the Stanford Graduate School of Business.
“Latino entrepreneurs continue to thrive under unprecedented circumstances,” said Barbara Gómez Aguinaga, deputy director of SLEI and one of the report's authors, but she added that they “continue to face systemic disparities that impact business growth, including unequal access to government and corporate contracts.”
The report is based on a national survey of more than 10,000 business owners, about half of whom are Latino and half are non-Hispanic white, that had annual revenues of at least $10,000 and at least one employee other than the owner.
“The goal of our research is to understand the challenges and opportunities facing Latino-owned businesses,” Gómez Aguinaga said, “and we hope that our research will inform and inspire action by decision makers, including governments, businesses, and business owners themselves.”
Key findings from this year's report include:
Businesses are recovering from the pandemic.
As the pandemic enters its fourth year, Latino entrepreneurs are adapting to a new economic landscape. “The pandemic hit Latino-owned businesses hard, but they have recovered better than white-owned businesses and are more likely to report doing better than before the pandemic,” Gómez Aguinaga said.
One indicator: The share of Latino-owned businesses reporting business-to-business sales nearly doubled from 20% in 2020 to 38% in 2022. Overall, nearly a quarter of businesses said they were doing better than before the pandemic, compared with less than a fifth of white-owned businesses.
Mass exodus has created challenges for businesses of all sizes.
“The mass resignations were not as severe as the media made them out to be,” Gomez Aguinaga said, but the report found that Latino-owned businesses of all sizes are struggling to hire and retain employees.
Latino business owners are more likely to report low employee retention and are taking steps to improve it. The survey found that Latino-owned businesses are more likely than white-owned businesses to offer increased compensation and benefits, more flexibility in work hours and location, improved company culture, and more training and development opportunities. White-owned businesses are less likely than Latino-owned businesses to report taking steps to improve employee retention.
Contracting comes with challenges and opportunities.
While only 13% of Latino businesses received government or business contracts in 2022, these contracts can be an important source of stability and growth. The report found that while Latino businesses are slightly more likely to receive contracts than white-owned businesses, the contracts tend to be significantly smaller in value. For example, federal contracts for white-owned businesses were, on average, more than 30 times larger than those for Latino-owned businesses.
Additionally, it takes a long time to win contracts: The procurement process for government contracts takes more than a year for 37% of Latino-owned businesses, compared to 27% of white-owned businesses.
It's not just small businesses that need help winning deals.
Mercedes Enrique, a graduate of the SLEI Scaling Education program, would like to see more support for businesses that no longer qualify for small business loans.
Mercedes Enrique, a graduate of the SLEI Scaling Education program (SLEI-Ed) at Stanford GSB (a collaboration with the Latino Business Action Network), spoke to the report authors about her experience with a government program that helps companies overcome barriers to winning contracts. Having built CMS Corporation into an award-winning construction contractor with $80 million in annual sales, Enrique participated in the Small Business Administration's 8(a) program, which supports businesses owned by “socially and economically disadvantaged individuals.” Through the program, CMS was assigned a mentor who helped the company win its first federal contract.
But only 2.5 percent of businesses that grow large enough to no longer qualify for assistance are able to secure new federal contracts. Enrique advocates for a transitional program for these companies. “Once you're considered a small business, the federal government gives you more reasonable small business contracts,” Enrique says. “But if you can't apply for those small business contracts because of your revenue or size, then you just fall off a cliff.”
“Equal access to government and corporate contracts will not only level the playing field for Latino businesses, it will also strengthen the U.S. economy and benefit American workers,” Gómez Aguinaga said.
Access to capital remains a barrier for Latino entrepreneurs.
In 2022, Latino-owned businesses were 50% more likely to seek loans than white-owned businesses. Latino-owned businesses that applied for loans at national banks had, on average, three times the total revenue as white-owned businesses, less debt, and similar credit scores. While Latino-owned businesses had a higher approval rate for loans under $50,000, they were significantly less likely to be approved for larger loans.
“If you're a non-Latino owner and you've been in this country for generations, of course you have a support system,” Gustavo Suarez, founder of an accounting firm and alumnus of SLEI-Ed, told the report's authors. “We don't have that at all. We're growing our business from scratch with our own hands. Our people have no money, so who are we going to ask for money? The only option is to go to the bank, but when we go to the bank, the system doesn't communicate with us.”
Latino entrepreneurs are adopting innovative marketing strategies.
This year for the first time, The current state of Latino entrepreneurs The survey asked how businesses reach customers and promote their products and services. “Latino-owned businesses are more proactive in differentiating their products and services than white-owned businesses, and Latino-owned businesses use social media more across all platforms,” Gomez Aguinaga said.
Latino-owned businesses tend to advertise using a variety of channels, including social media, websites and blogs, email, flyers, search engine optimization and marketing, etc. The only strategy used more frequently by white-owned businesses is word of mouth.
For example, Saul Marchan of BLU Commercial Cleaning used technology to streamline connections between customers and technicians, which enabled him to reduce administrative costs, increase employee salaries by 30%, match employee retirement contributions, and provide educational tools to improve employee financial literacy.
Marchan, a SLEI-Ed graduate, The current state of Latino entrepreneurs This innovative product differentiation strategy sends a clear message to BLU’s customers: “When you invest in us, you invest in our people.”