Adapting to Pandemic, Latino-Owned Businesses Get Stronger
Research finds Latino entrepreneurs leaning into tech, bolstering employee benefits.
Latino-owned businesses in the United States employ almost 3 million people. | Martha de la Torre
As the nation’s businesses work through the second year of the COVID-19 pandemic, research by the Stanford Latino Entrepreneurship Initiative finds that many Latino business owners have used the crisis to strengthen their enterprises. The study also found that Latino business owners are just as likely as White business owners to start tech companies — and that they often provide more benefits and growth opportunities to their employees.
“There’s a real sense of resiliency with Latino businesses that we’re uncovering,” says Marlene Orozco, associate director of SLEI.
The 2021 State of Latino Entrepreneurship report provides a snapshot of a fast-growing segment of the U.S. business sector. It is based on a survey of 7,500 Latino business owners and 7,500 non-Latino, White business owners.
Latinos, who make up 19% of the U.S. population, represent a formidable customer base, with consumption totaling $1.85 trillion. They are not just consumers, though. In 2018, there were roughly 350,000 Latino-owned employer businesses that generated over $460 billion in annual revenue and employed 2.9 million people. The report estimates that there could be 400,000-450,000 Latino-owned businesses in the U.S. today. Moreover, Latinos are starting businesses at a faster pace than other groups, with 44% growth in the last 10 years compared to 4% for non-Latinos.
One meaningful finding in the report, according to Orozco, is that Latino entrepreneurs are engaged in tech startups at a higher rate than Whites. Among employer businesses (those with at least one employee other than the owner), 19% of Latino-owned businesses report “developing and selling a technology or software product,” compared to 14% among White-owned businesses. These findings were validated by data from the U.S. Census Annual Business Survey.
There is still a critical barrier: becoming an employer business to begin with. White-owned businesses outnumber Latino-owned businesses by a factor of 14. But Latino entrepreneurs who establish businesses and start hiring are just as likely as their White counterparts to own tech companies.
“There is a pipeline of technology businesses that are owned by Latino entrepreneurs, and this pipeline can certainly continue to grow once that employer threshold is crossed, ”Orozco says.
Latino tech entrepreneurs may not always define themselves as such. “I’ve never been chasing tech — I’ve been chasing ways to dramatically improve the world for everyone, because I think that’s the ultimate goal of good government systems,” says Paola Santana, founder and CEO of Social Glass, her second tech startup. A lawyer by training with expertise in government procurement and public policy, Santana started her first company 10 years ago — Matternet, a drone delivery service whose projects included shipping AIDS-fighting drugs to Africa. Just before the pandemic, she launched Social Glass, which aims to help governments make purchases “with the convenience of Amazon but with the compliance levels that governments need.”
“In a year where many businesses closed… we made $4 million in government sales because governments needed to find vendors that they had traditionally never purchased from,” says Santana.
Because much of that revenue came from one-time sales, Santana shifted the business model to selling the software platform, working with governments in the United States and Latin America. “We have less revenue but more repeatable revenue now,” she says.
“We’re super resourcefuI. I don’t think we see ourselves as tech entrepreneurs. We see ourselves as developing a piece of tech so we can get our work done. We see ourselves as people solving problems.”
Focus on Employees
This year’s report also measures employer-provided compensation, benefits, and growth opportunities. Researchers used an Employee Benefits Index (EBI) and an Employee Opportunities Index (EOI) to measure how businesses treat their employees.
The EOI considers whether employees have opportunities for promotions, training, pay above minimum wage, and employer-paid benefits. Latino-owned businesses with revenues below $1 million reported higher rates of employee opportunities than similar White-owned businesses. There was no difference in the EOI for Latino- and White-owned firms with revenue over $1 million.
The EBI finds that Latino business owners in almost all revenue categories provide more benefits than White business owners.
- 55% of Latino-owned firms reported providing health insurance to employees, compared with 44% of White-owned businesses
- 48% of Latino-owned firms reported providing paid holidays to employees, compared with 43% of White-owned businesses
- 29% of Latino-owned firms reported providing retirement benefits to employees, compared with 23% of White-owned businesses
Fresquez Companies, which operates more than 20 restaurants in New Mexico, Texas, and Colorado, adapted to the pandemic by boosting employee training and assistance.
As COVID spiked and then retreated, Fresquez’s restaurants had to temporarily close and then reopen, so the company retrained workers on safety procedures and changes to the menu.
“We invested heavily in training,” says company president LeeAnna Fresquez. “Our team members, first and foremost, are the people we take care of. We take care of them, and they’ll take care of our customers.”
The company also added an employee assistance program — an uncommon benefit in the restaurant industry — which it plans to keep in place. The HR team was fielding calls from employees about crises ranging from a fire in their apartment building to not having a safe place to isolate with COVID.
“There’s so much emotional load that comes from being furloughed and then coming back to work,” Fresquez says. “Our HR team is awesome, but no one is really equipped for those things except trained professionals.”
Finding Bright Spots in a Pandemic
Although the pandemic continues to take a toll on businesses, the survey finds that more than three-quarters of both Latino-owned and White-owned business owners are confident their businesses will recover.
Government aid has helped: The Paycheck Protection Program (PPP) distributed over $800 billion in federal relief aid to small businesses. Initially, Latino-owned businesses had trouble getting their loans approved at the same rate as White-owned businesses, but that improved over time. The report finds that over the entire time frame of the PPP, 30% of Latino-owned businesses received funding, compared with 23% of White-owned businesses.
Overall, Latino-owned businesses and White-owned businesses report similar numbers of negative impacts from the pandemic, though Latino-owned businesses report a greater likelihood of temporary closure (27% for Latino-owned businesses vs. 23% for White-owned businesses), lack of financing (16% vs 11%), layoffs (14% vs 10%), or looming permanent closure (8% vs 6%).
Latino entrepreneurs are more likely than their White counterparts to report making proactive changes during the pandemic. The most frequently cited: improved technology (21% for Latino-owned businesses vs. 16% for White-owned businesses), moving into e-commerce (18% vs. 13%), and improving client outreach (18% vs. 14%).
Fresquez Companies used several of these strategies to emerge from the pandemic stronger. For example, the company automated its accounts payable process with a system that uses artificial intelligence to read invoices and code them. “It’s much easier for our accounting team to process. It’s a simple click and the checks are cut,” Fresquez says.
The company turned to a platform called HubSpot to manage its online presence, resulting in an increase in online reviews.
The pandemic also pushed the company toward online retail. During the first year of the pandemic, with most airport locations closed, selling bags of coffee was harder.
“People that generally would travel and pick up a couple of bags weren’t traveling,” Fresquez says. “We were shipping out cases of coffee.” The company is now building an e-commerce site to sell its coffee online.
“COVID forced our hand to really lean on technology more,” Fresquez says.
The 2021 State of Latino Entrepreneurship report was produced by Marlene Orozco and research analyst Jonathan Furszyfer of the Stanford Latino Entrepreneurship Initiative. It was overseen by Stanford GSB faculty members Paul Oyer and Jerry I. Porras. Porras is cofounder of the Latino Business Action Network
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