Hispanic Businesses & Entrepreneurs Drive Growth in the New Economy

2nd Annual Report
2014

An intelligence briefing brought to you by:

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in conjunction with the United States Hispanic Chamber of Commerce

The Changing Landscape of Entrepreneurs in the U.S.

New data from Geoscape indicates that the number of Hispanic-owned businesses is expected to grow to more than 3.22 million this year, representing a staggering growth rate of 43% since 2007. The figure is more than double the growth rate for all U.S. firms. According to the same report, the growth rate for all U.S. firms between 2007 and 2014 is estimated at 20.2%. Between 2002 and 2007, the growth rate for Hispanic-owned businesses was 44% compared to 17.8% for all U.S. firms. On the next page is a breakdown of the growth in Hispanic-owned businesses by U.S. Census Division, indicating where the growth is occurring.

Changes in Ethnic Composition of Business Owners

As we witness the shift in demographics of the U.S. population, spurred by post-recession optimism about entrepreneurship, new data suggests the entrepreneurial landscape is shifting also. The most recent data shows the Latino share of all new entrepreneurs is 20.4%, compared to 16% a decade ago.

Percent Increase in Hispanic-Owned Businesses by U.S. Census Division 2007 to 2014*

  • The fastest growth in Hispanic-owned businesses continues to occur in the Southern Census divisions. It is projected that the number of Hispanic-owned businesses in the East South Central Census Division will grow by 59% from 2007 to 2014, while the South Atlantic Census Division will grow by 57% during that same period. These areas have seen considerably greater Hispanic migration compared to the rest of the country and much of this growth can be attributed to the Carolinas, Alabama, Mississippi, Tennessee and Kentucky. Further evidence of this explosive growth in Hispanic-owned businesses can be established in the fact that for all U.S. firms, the growth rate for the South Atlantic Census Division is projected at 27%, while the growth rate for the East South Central Census Division is projected at only 19%.
  • Not only is the South Atlantic Census Division the fastest growing area for entrepreneurial activity, but the division is now the largest in terms of sheer number of Hispanic-owned businesses. We project the number of Hispanic-owned businesses in 2014 to reach 893,867, up from 570,200 in 2007.
  • We project the Pacific Census Division to grow to 808,660 Hispanic-owned businesses in 2014, a figure that represents an increase of more than 200,000 since 2007.

The number of Hispanic-owned businesses and entrepreneurs in the U.S. has grown exponentially over the past decade, and despite the recession Hispanics continue to experience a higher rate of self-employment than the general population at large.

Business Ownership by Hispanicity® Segment

One distinguishing aspect of Hispanic business owners in the U.S. is in its diverse representation across bi-lingual and bicultural segments. While a growing number of Hispanic business owners belong to the “Americanizado” or HA1 segment, 54% are considered bilingual and bi-cultural, fitting into Geoscape’s Hispanicity classifications HA2 through HA4. These entrepreneurs are comfortable speaking either the English or Spanish language, and identify with both cultures.

According to Geoscape, 40% of today’s Hispanic business owners belong to the “Americanizado” or HA1 segment, a figure that has grown by 5% since 2013. However, the same study reveals a 16% one-year growth in the percent of Hispanic business owners who either belong to the “Nueva Latina” or HA2 segment or the “Hispano” or HA4 segment.

One quarter of Hispanic business owners belong to the “Hispano” or HA4 segment, making this group the second largest segment among Hispanic business owners. Consequently, this segment continues to have significant influence in entrepreneurial activity among Hispanics. The figure emphasizes the fact that many Hispanic immigrants bypass seeking employment with established firms for an opportunity to establish their own business — by necessity or choice.

Hispanicity segments are a proprietary metric developed by Geoscape to help marketers better understand the level and degree to which segments of the Hispanic population have adopted American culture, language, and traditions. Those Hispanics who are self-employed (rather than a business owner) also follow a similar trend. Those belonging to the “Americanizado” or HA1 segment, and those belonging to the “Hispano or HA4” segment are among the two largest segments for Hispanics who are self-employed. Furthermore, the study reveals a 24% increase from 2013 to 2014 in the percent of self-employed Hispanics who belong to the “Americanizado” or HA1 segment.

*HA1: Americanizado. English dominant (nearly no Spanish); born in US and often 3rd+ generation; has few Hispanic cultural practices. HA2: Nueva Latina. English preferred (some Spanish); born in U.S. and typically 2nd generation; some Hispanic cultural practices and often “retro-acculturate”. HA3: Bi-Cultural Hispanic. Bilingual (equal or nearly); immigrated as child or young adult; has many Hispanic cultural practices. HA4: Hispano. Spanish preferred (some English); immigrated as adult and in U.S. 10+ years; predominant Hispanic cultural practices. HA5: Latinoamericana. Spanish dominant (nearly no English); recent immigrant as adult (less than 10 years ago); primarily Hispanic cultural practices and identifies with home country more so than U.S. Hispanic.

Hispanic Business Owners Wealth Statistics versus All Hispanic Households

One of the reason so many Hispanics start their own business is the opportunity for financial reward. Among all U.S. Hispanic households, 37% earn greater than $50,000 in household income. However, among Hispanic business owners, 57% have a household income of greater than $50,000. Hispanic business owners are 82% more likely than Hispanics overall to earn between $100,000 and $149,999 and two and a half times as likely to earn in excess of $150,000.

Hispanic Business Owners versus All U.S. Households

Nearly 30% of Hispanics who are small business owners earn $100,000 or more in household income. Comparatively, 20% of all U.S. households earn more than $100,000 in annual household income. As a result, Hispanic business owners are 18% more likely to earn between $100,000 and $149,999 and 42% more likely to earn more than $150,000 in household income when compared to the general U.S. adult population.

As businesses rebound from the recession, more companies are re-investing in their businesses, creating greater demand for products and services from banks and financial institutions. Many financial institutions are banking on the growth of small business, with minority and Hispanic-owned firms at the center of U.S. economic expansion.

The Impact of Hispanic-Owned Businesses on the Financial Sector

Hispanic business owners take advantage of commercial banking services and invest at a significantly higher rate when compared to the general Hispanic population. According to data from Geoscape and Scarborough, Hispanic business owners are 56% more likely to conduct online banking with their primary bank and 83% more likely to invest in the stock market. Other banking services such as online bill pay and home re-financing are also utilized at a significantly higher rate when comparing Hispanic business owners to the general U.S. Hispanic population.

The Contribution of Hispanic Businesses to the American Economy

Hispanic-owned businesses are growing at a phenomenal pace. Since 2007, the growth rate is nearly double that of the growth rate for all U.S. firms. From 2002 to 2007 we witnessed a 44% growth in the number of Hispanic businesses. The trend has continued for more than a decade and the economic impact of Hispanic businesses is also phenomenal. Today, Hispanic-owned businesses are our nation’s fastest growing business community and at the forefront of our nation’s economic recovery. Hispanic-owned businesses generated more than $358 Billion in 2007 and are projected to reach $486 Billion in revenues in 2014.

The Contribution of Hispanic Businesses to the American Economy

There is little doubt that Hispanic-owned businesses will continue to be a major factor in the economic recovery of the United States. Whether their businesses are small, family-owned restaurants; landscaping and construction firms with a few to a dozen employees; or major consumer packaged goods producers that employ thousands of workers. Hispanic-owned businesses are fast becoming the bell-weather for future growth. Their relatively young age cohorts, increasing household incomes, and impact on the financial sector paint a very positive picture for the American economy during the next decade or more.

For more information, visit us on the web at www.geoscape.com.

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