Hispanic Americans believe business ownership is the key to harnessing the much- sought-after "American Dream."
More than any other segment of the population, Hispanic Americans view entrepreneurship as a way to pursue the American Dream, take control of their lives and support their families.
That's the finding of new research that reveals about two-thirds of Hispanic business owners (versus only 36 percent of the general business-owning population) said they started their businesses to pursue the dream of bettering their lives and providing for their families.
And these business owners are planning on keeping it in the family. While 54 percent of the general population of business owners plans to pass their businesses on to their children, 70 percent of Hispanic business owners plan to do so.
These findings were part of the Massachusetts Mutual Life Insurance Co.’s (MassMutual) "Business Owner Financial Wellness Study," which were presented at the Association of Latino Professionals in Finance and Accounting’s (ALPFA) national convention Aug. 6-10 in Anaheim, Calif.
This portrait of Hispanic business owners is particularly valuable because Hispanic business ownership has seen explosive growth over the last decade.
According to the U.S. Census Bureau, the number of Hispanic-owned businesses in the United States increased by 43.7 percent to 2.3 million, more than twice the national rate of 18 percent between 2002 and 2007. About 45.8 percent of all Hispanic-owned businesses are owned by people of Mexican origin.
The Census Bureau also reported that Hispanic-owned businesses generated $345.2 billion in sales in 2007, up 55.5 percent compared with 2002. Hispanic businesses are also outpacing non-Hispanic-owned businesses in terms of job creation.
Hispanic entrepreneurs were much more likely to say they started their businesses to support their families, according to MassMutual.
"Latino business owners report to a higher degree that providing for their families is the strongest driver for going into business," said Chris Mendoza, assistant vice president of multicultural markets at MassMutual. "Also, Hispanics' definition of family is quite broad, meaning they have more people counting on them."
Despite their commitment to passing their businesses on to family members, only 17 percent of Hispanic business owners surveyed are concerned about transitioning ownership upon retirement compared with 32 percent of the general population. They do, however, know who will be taking over their businesses — 47 percent said their child and 21 percent said their spouse.
Planning for the future
The research also shows that Hispanic business owners are struggling along with the rest of the population. While the latest available Census data shows that the number of Hispanic-owned businesses with more than $1 million in annual sales increased by 51 percent between 2002 and 2007, those numbers are pre-recession.
Today, 3 in 10 Hispanic business owners say it is all they can do to keep up with everyday business expenses. And, despite their desire to prepare for their futures, many are not doing much planning at all.
In fact, approximately 28 percent said they don't have time to get involved in managing their investments(versus 18 percent of general-market business owners who said the same thing). And, 18 percent say they wouldn't know where to go for financial assistance. Only 12 percent of the general business-owning population said the same thing.
Hispanic respondents pointed to employee retention, the need for a long-term financial plan, and developing a college savings plan for their children as their top priorities.
"Latinos understood the meaning of the 'American Dream' long before the term was coined," Mendoza said. "As businesses owners, they put incredible pressure on their shoulders to succeed, not just for themselves, but for the good of their families. The good news is they actually know to whom they want to transition their businesses, as part of their dream in providing for their families — they just need to understand the advantages of having a formal succession plan, the information and tools to help improve their ability to achieve that dream," he said.