Latino-Owned Small Businesses Deserve More Support
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Latinos are projected to make up 29 percent of the U.S. population by 2050 and their purchasing power will soon surpass $1.3 trillion. Hispanic-owned businesses throughout the U.S. have climbed with revenues of over $660 billion, according to the U.S. Hispanic Chamber of Commerce. Latino small business owners will play an increasingly important role in our economy.
Hispanic-owned small businesses are the fastest growing business segment in the United States. America’s economic future rests on the backs of small businesses, and Latinos start three out of every four new businesses.
According to a study by the Stanford Graduate School of Business, Latinos are starting businesses more frequently than the others, but these businesses are smaller in scale and therefore, making less money than their counterparts. In fact, Latino businesses could have added an additional $1.4 trillion – almost eight percent to the $18 trillion U.S. economy in 2012 – if they were equal to the U.S. average in scale.
As more and more Latinos achieve upward economic mobility, it’s important that opportunities for small business ownership continue to be encouraged.
Among many challenges facing Latino business owners is access to capital. When Latino entrepreneurs start a business, 70 percent of their funding comes from personal savings, according to the Stanford study, while just six percent comes from commercial loans. Chances of a Latino business owner obtaining a commercial loan is less than their white counterparts.
Other critical resources including business training and education are not readily available to majority of Latino startups. It is true across the board in every industry and the construction industry is no different. Latino-owned small businesses are growing at a steady pace in the construction industry with tremendous potential to scale up, if they get the support they deserve with access to essential business resources. They need support with lines of credit, bonding, payroll and business training for vital business acumen.
In my 30-year career in the industry, I have worked with many Latino small business owners who strive to make their mark in the industry every day. Latinos are known for their entrepreneurial spirit. Latino-owned small business contractors have tremendous potential to get established successfully and scale up. They can reach for the stars with just a little bit of support.
Richard Diaz is a case in point. He worked his way through the ranks as an ironworker for over 30 years and started his own business as a construction contractor just 5 years ago. When he first started his business, having been an ironworker all his life, he needed support with business fundamentals. He had access to business training through IMPACT and was able to catch up to speed very quickly to get his business off the ground. IMPACT helps partner contractors with training and education on matters such as business fundamentals for getting established, including insurance, certifications and accounting as well as business development.
Today, Richard is a successful contractor having completed 15 structural steel and 15 ornamental projects. His company Architectural Unlimited is working on a couple of high-profile projects right now. He’s also helping one of his fellow contractors with business development.
Richard is a posterchild for Latino-owned small business success with his eagerness and entrepreneurial spirit. There are many budding Latino entrepreneurs out there in the construction industry with potential to scale up and add millions of dollars to the construction industry and economy. They should get the support they deserve in every aspect of business. ¡Para Adelante!
Diversity is Not an Afterthought
Corporate boardrooms typically look like the town from the film Footloose: white, stale, and stuck in their ways. For most Fortune 500 companies, diversity at the board level is just an afterthought. That’s because the conversation about diversity is usually posed as an ethical one. Having a diverse boardroom is “good” because diversity is inherently “good.” Of course, diversity for diversity’s sake is important, but that argument fails to resonate with business leaders who falsely believe that increased diversity leads to decreased revenue. I think there’s another case to be made for board diversity—the economic argument.
There are significant business advantages to having a board of directors that looks like the cast of Hamilton. In all seriousness, the modern business environment is facing unprecedented challenges. Consumers now expect to develop a relationship with each brand that extends far beyond the basic loyalty card. Corporations must communicate with buyers. The company that sells your paper towels probably has a Twitter page, and they have probably used that Twitter account to make political statements. People—especially millennials—want to be sure that they are spending money in a manner they deem to be socially responsible, and companies have to be prepared to respond to shifting public attitudes. Homogenous boardrooms are likely to find this very difficult.
Before diving into the distinct advantages of board diversity, let’s take a look at the current rates of diversity in the boardrooms of Fortune 500 companies. Earlier this year, the Harvard Law School Forum on Corporate Governance and Financial Regulation published the “Missing Pieces Report,” a diversity census of women and minorities on Fortune 500 boards. The results were disheartening.
There are approximately 5,500 board seats across all Fortune 500 companies. Almost 70 percent of these seats are held by non-minority males. Minority women hold only 3.8 percent of all seats, and only two serve as chairman of the board. The statistics for Hispanic representation are especially disconcerting. Only 3.5 percent of all seats are held by Hispanics, and only 41 seats are held by Latinas. In the last five years, Hispanic representation has increased only 0.5 percent, the equivalent of six board seats.
I am confident that, sooner rather than later, nondiverse boardrooms just won’t cut it. Today’s companies have to think about how their goods and services fit into a wide range of lifestyles. In order to truly understand how to appeal to a broad consumer base, diverse leadership is a necessity. The Hispanic consumer base—and, therefore, Hispanic representation in the boardroom—is particularly important.
The 57.5 million Hispanics in the United States have a $1.7 trillion purchasing power, and the economic significance of the Hispanic community will continue to grow. One in four children born in the U.S. is Hispanic, making the Hispanic population the fastest growing demographic in America. If your company is not already actively marketing to the Hispanic community, you are missing out on a massive source of revenue. And, if you want to effectively market to Hispanic families, you will need more than one Hispanic on your board of directors. The Hispanic community is diverse in and of itself. Your board of directors also needs diversity within Hispanic representation to better understand the distinct countries, cultures, and political ideologies.
The importance of board diversity goes far beyond appealing to America’s fastest growing client base. Companies must also appeal to America’s fastest growing labor force. By 2024, 20 percent of the American workforce will be Hispanic. This statistic is especially significant considering a recent phenomenon that is devastating key industries: the labor shortage.
For the past decade, as our nation struggled to recover from the Great Recession, job creation was top of mind. In recent years, however, several industries have experienced a dramatic reversal. Many companies have more open jobs than applicants. For example, just last year, 3 million U.S. jobs in science, technology, engineering, and math (STEM) went unfilled. If STEM-based companies want to have a robust workforce tomorrow, they need to start Hispanic outreach today. According to Pew Research Center, only 9 percent of all jobs in STEM are filled by Hispanic employees. This is yet another missed opportunity.
Industries experiencing labor shortages are often failing to promote career opportunities in Hispanic communities. Some companies and membership organizations are starting to catch on. The American Petroleum Institute, for example, has acknowledged that the growing workforce demands of the energy industry necessitate employee diversification. The organization is deliberately marketing jobs in energy to Hispanic communities, encouraging students to pursue a STEM-based education. To my original point, this outreach is most effective when guided by Hispanic leadership on the board of directors.
Too often, corporate leaders refuse to diversify their boardrooms because they fear that diversity causes a disruption that will alter the business environment. They are absolutely correct. That is exactly why we need board diversity! Everyone brings unique backgrounds to the table which directly translate into new ideas. Disrupting the nondiverse boardroom has distinct economic advantages. In my experience, the boardrooms with the most diversity are always the most innovative, collaborative, and in-touch with consumers. That is why the USHCC emphasizes racial diversity and gender equity on our board of directors. Even the role of Chairman is shared between Carmen Castillo and Peter Villegas, who work together as co-chairs. By consciously emphasizing board diversity, we our preparing our organization to succeed.
America’s new fascination with corporate social responsibility—CSR for short—is not a fad. It’s a transformation of the way that the public interacts with companies. This is ultimately an opportunity to develop a brand that wins the trust and loyacc.lty of the public, and our country is fortunate to have a diverse general public. Today, diverse bshoard leadership is an economic advantage. Tomorrow, it will be an economic necessity.
Fernand Fernandez served as Interim President and CEO of the USHCC.
Richard Diaz and Fernand Fernandez