Latino Small Business Booms in Southern California, But Not Revenues
Business is booming for Latino entrepreneurs, especially in Southern California, where the growth in the number of Hispanic-owned businesses (HOBs) has bloomed despite the recession and tough economic recovery. But revenues for those enterprises haven't grown at the same pace.
That's according to a new study published last week by the U.C. Riverside Center for Economic Forecasting and Development at the School of Business Administration, which parsed through data from the last U.S. Census Survey of Business Owners to see how Hispanic-owned businesses are faring in Inland Southern California, California, and across the U.S.
The news is mostly positive for Latino entrepreneurs in the region and in general, especially considering the period the data comes from, between 2007 and 2012, includes the worst economic recession years.
The Big Takeaways
- The number of Hispanic-owned businesses (HOBs) grew 46.3 percent from 2007 to 2012
- In the same period, the number of HOBs in Inland Southern California grew by 50 percent
- Growth of all businesses paled in comparison from 2007 to 2012: Under four percent for the U.S. and eight percent for Southern California
- Revenue growth for HOBs in Southern California, however, has been slow: under six percent compared with 35 percent for HOBs throughout the U.S.
- Nationwide and in California, HOBs still make disproportionately less total revenue compared to their numbers
Growth in Numbers
The numbers indicate how the relative surge in the share of Latino-owned businesses locally and nationwide helped keep the Hispanic employment gap under control through tough economic times.
"For years, Hispanics have made up a large and growing share of the population and workforce of the nation, state, and inland region," said Christopher Thornberg, Director of the Center for Economic Forecasting and Development at UC Riverside, and one of the lead authors. "As a measure of socio-economic advancement, it is an important and positive trend to see proprietorships increasing and a healthier balance developing between Hispanic business owners and workers."
However, even with that growth in the number of Hispanic-owned businesses, those enterprises accounted for a disproportionately low share of total revenues, nationally but especially in Southern California.
Latino entrepreneurship accounted for nearly 40 percent of all businesses in the Inland Southern California region, for example, while only making up about nine percent of total revenues. The gap is nearly as stark when you look nationally: HOBs make up about 12 percent of all businesses in the U.S., but generate just over four percent of total revenues.
The good news is that the researchers believe a major cause of the revenue gap is simply the lifecycle of businesses. Specifically for HOBs, many are relatively young, with many having been started in the past five years or less.
Early companies tend to make less revenue compared to when they're well-established, so the hopeful prospect is that part of the revenue gap that's unique to Latino enterprises, both locally and nationally, will diminish with time.
As the lead author put it, "The disparities in revenue and employment should improve as these businesses mature."