Latino-Owned Businesses: “Shining a Light on National Trends”

Article from The Federal Reserve Bank of New York

Latino-owned businesses are growing in number and importance to the American economy. Contributing more than $700 billion in sales to the economy annually, they are also an important source of employment as sole proprietors and as firms with employees on payroll.

The 2012 U.S. Census Survey of Business Owners estimated that Latino-owned firms have 2.3 million employees on payroll, a number that by several counts has grown since the survey’s release. One in four new businesses, traditionally key sources of new jobs, is now Latino-owned. Quite simply, small business growth is tied to the fortunes of Latino-owned businesses.

Yet, research also shows that Latino-owned firms face significant growth barriers. Estimates from the Stanford Latino Entrepreneurship Initiative (SLEI) highlight that only three percent of Latino-owned businesses grow to $1,000,000 or more in annual revenues, compared to six percent of white-owned businesses. In short, despite impressive numbers of startups, Latino-owned firms tend to stay small.

This report builds on earlier work from SLEI and the Aspen Institute to probe firm-level and environmental-level growth factors that influence Latino business performance. By comparing Latino-owned firms to non-Latino white-owned firms, unscaled Latino-owned firms to scaled firms, and metro areas of relatively strong Latino entrepreneurship to those with smaller shares of Latino-owned businesses, we are able to discern the most acute challenges and begin to highlight remedies to these challenges.

This report’s goal is to focus attention on potential investments at the firm- and community-level that will advance Latino business growth. It draws on analysis of U.S. Census Bureau data, surveys from SLEI and the Federal Reserve Banks, interviews with the owners of scaled and unscaled Latino-owned firms as part of a research collaboration between Stanford Graduate School of Business, the Federal Reserve Bank of New York, and Interise.

Written by Claire Kramer Mills, Jessica Battisto, Scott Lieberman, Marlene Orozco, Iliana Perez, Nancy S. Lee