The 2012 U.S. Census revealed that Hispanic-owned small businesses are growing at nearly twice the rate of the national average with annual revenues at $350B (though many industry insiders believe this is a conservative estimate with the true figure being well-north of $600B). The U.S. Minority Business Development Agency reports that between 2002 and 2007, Hispanic owned businesses grew faster than the national average of 44 percent in 28 states. Clearly, the impact of the Hispanic population and the entrepreneurial spirit we bring with us is influencing the emergence of Hispanic-owned small businesses. – and with this rapid growth the need for Hispanic specific resources and support to help enable revenue generation and profitability is at an all-time high.
In a recent Fox Latino interview, Hector Barreto, the former Administrator of the U.S. Small Business Administration under George W. Bush, said that there are many intangible factors inhibiting Hispanic small business growth. According to Mr. Barreto, Latino business owners are filled with uncertainty and lack confidence in the U.S. government.
I respect Mr. Barreto’s candor in identifying the challenges that both Hispanic (and non-Hispanic) small business owners are faced with in our current economic environment. However, for Hispanics in particular, the obstacles run much deeper and this is where the Presidential candidates and politicians across America are all missing the mark. Hispanics, perhaps more than any other community, are rich in diversity and self-identify with their culture. As such, they require tools, resources, government and educational programs that are culturally-relevant so that they can grow their business in ways they can identify with most naturally. This factor alone explains why Hispanic consumers (let alone Hispanic small business owners) represent the largest unbanked community in America.
Can you imagine the incremental impact of Hispanic-owned business revenue generation to the U.S. economy?
Many Hispanic-owned business owners are faced with the inability to consistently create and sustain relationships with Fortune 500 corporations. Revenue generating and job creation opportunities are not being seized fast enough. Hispanic business leaders are not at the forefront of supplier diversity programs at a time when corporations are looking to expand their business partnership outreach with the community.
To overcome this challenge, Hispanic-owned businesses must lead and operate with a strategic versus a tactical approach. There are many opportunities here, but for the purposes of this article, I can recommend two fundamental areas: leadership and operational excellence. Learning how to apply both of these factors within a small business is the difference between success and failure and both can be attained through one variable: executive education. Business owners must invest to educate themselves on how to be better leaders and, at the same time, better business operators. As a small business owner, you can’t do one without the other; this has been an unwritten rule amongst those who lead supplier diversity programs (which are quickly becoming the standard).
According to Luis Cuneo, Hispanic Segment and Channel Market Development Executive at IBM, “One of the most common questions I am asked by Chamber Executives is: ‘How can we help small businesses grow?’ ”
His reply: “Teach small business owners to run their company as an executive and the company will start to thrive. For the past seven years, I have been engaging with hundreds of small businesses across the U.S., and I have noticed the following leadership barriers that inhibit these companies from growing:
- The leadership style is Transactional.
- Unable to delegate and empower their team.
- Haven’t identified their successor.
- Haven’t created an exit strategy for both the owner and the company.”
In August 2012, a survey of Texas Hispanic-owned Businesses with Paid Employees was sponsored by The University of Texas at Austin, McCombs School of Business, and the Kauffman Foundation. Results from the survey suggest that Hispanic-owned businesses with paid employees need strategies that help them in two primary areas:
• increase business training in management and communication skills
• improve access to public- and private-sector customers
According to the survey, the following two critical findings revealed why Hispanic-owned businesses are performing behind mainstream businesses:
• Hispanics’ lower levels of assets and education, lower percentage of parents with business experience, and smaller networks than Caucasian business owners.
• Ineffective oral and written communication with customers, employees, and suppliers as well as limited access to procurement opportunities.
Think of the opportunities for job creation, economic growth and innovation if the majority of Hispanic-owned businesses increased their business training in management and communication skills – while improving their access to public- and private-sector customers?
Finally, Hispanic-owned small businesses must forge greater levels of relations with the banking and financial management community. One of the Small Business Administration’s top priorities is to provide access and opportunity to small business owners in traditionally underserved communities.
However, small business owners must minimize the risk profile for a potential SBA lender by showing them that their business is being managed and led with leadership and operational protocols that can be trusted. In today’s risk adverse climate, small businesses must operate with the same strategic due diligence and leadership principals as a mid-size / larger corporation.
Hispanic-owned small businesses can no longer be led through a tactical lens where the owners operate like an old-fashioned “mom and pop” shop. Leaders must become executives, and learn to trust their employees to assume the responsibilities that the owners used to be accountable for when the business was new. If small businesses are to steadily grow and mature, owners must begin leading and focus on developing the talent around them. When this happens productivity multiples, a workplace culture begins to take shape and a “real business” begins to blossom with operational guidelines, organizational structure and leadership that is being strategic versus tactical in its thinking, planning and execution.
In the end, Hispanic-owned businesses must focus on building infrastructure and systems to support growth and business scalability. This requires strategic thinking enabled by leadership and operational excellence that continuously matures to foster best practices and relationships so that you can see and seize the opportunities that matter most.