Hispanic-owned businesses represent an important piece of the Texas economy, but a new study shows those businesses are mostly small, typically employing only a few workers, even after years of operation.

In the just-released Bureau of Business Research Survey of Hispanic Businesses with Paid Employees in Texas, data show that nearly half of Hispanic-owned businesses in the state have between one and four employees.

“Most Hispanic employers have yet to expand beyond small operations,” says Elsie Echeverri-Carroll, a principal investigator on the survey. “The two most critical challenges for such businesses to grow are lack of training in management and communication skills, and better access to markets.”

Small But Important

In 2007, Hispanic businesses accounted for 20.7 percent of all businesses in the state, based on the most recent U.S. census data.

“Hispanic businesses and the new jobs they create are one of the bright spots in the Texas economy,” says Echeverri-Carroll. She points to census data indicating Hispanics created 128,249 new businesses and 115,517 new jobs in Texas between 2002 and 2007. Census data also show the number of Hispanic businesses increased by 40.2 percent during those years.

“Hispanics are not only the fastest-growing demographic in Texas, but we’re also the fastest-growing business owners,” says Alex Jimenez, former chairman of the Texas Association of Mexican American Chambers of Commerce (TAMACC).

Understanding the Potential

To learn more about this key economic sector, researchers for the survey—produced by the University of Texas at Austin’s Bureau of Business Research (BBR) for TAMACC—mailed a questionnaire to 2,811 Texas-based, Hispanic-owned businesses with paid employees. The university invested $155,000 in the survey through the Herb Kelleher Center at the McCombs School of Business and through the Office of the President of The University of Texas at Austin. The Ewing Marion Kauffman Foundation also funded the survey.

“We were pleased to help the Texas Association of Mexican American Chambers of Commerce in studying this important economic issue,” said university President Bill Powers. “A better understanding of the challenges faced by Texas’ Hispanic businesses will allow TAMACC to identify strategies to help these businesses grow and create jobs and new opportunity in Texas.”

The BBR survey showed that of the firms polled:

• Eighty-five percent of firms have owners of Mexican origin.
• More than 80 percent of respondents indicated they hire mainly Hispanics or an equal mix of Hispanics and non-Hispanics, supporting prior evidence that minorities tend to hire minorities.
• Forty-seven percent have between one and four employees, and 73 percent have fewer than 25 employees.
• Eighty percent of young firms (five years or less) have fewer than 10 employees, while 66 percent of mature firms (16 years or more) still have fewer than 10 employees.

Stuck in a Bottleneck

As TAMACC’s Jimenez explains, only a few Hispanic-owned companies grow into large-scale enterprises. Census data show that only 9 percent of these businesses have paid employees.

What is holding back these small businesses? According to the survey, while most Hispanic business owners have high levels of education and many years of business experience, they believe their employees need additional training. In response to a question about their top three business training needs, business owners identified team management and leadership (24 percent), business/customer relations (16 percent), and written and oral communication (14 percent) as areas in need of improvement.

The survey also revealed that Hispanic business owners feel they have less access to private and public market opportunities, compared with other firms: 34 percent of respondents agree that they do not have equal opportunities in the private sector, while nearly half (49 percent) agree that they do not have equal opportunities in the public sector.

Jimenez says the survey results were surprising, since many people wouldn’t have predicted marketing and communications being among the top concerns for Hispanic business owners. But he says the findings suggest more business owners and their employees need to learn how to use the Internet, including Facebook or other means of communication, to reach their potential customers. “If there is a seminar on management or communication or the Internet, they should partake of that,” Jimenez says.

Barbra Peterson, vice chair of education for TAMACC, says it is helpful to know how business owners use—or don’t use—state agencies. “It gave us a little better way to develop programs that would meet those needs,” she says.

Organizations that are focused on this sector will be “looking at how we can best grow business in Texas,” Peterson says.

The BBR Survey of Hispanic Businesses with Paid Employees in Texas was produced by the university’s Bureau of Business Research (BBR) for the Texas Association of Mexican American Chambers of Commerce (TAMACC). The report can also be downloaded at ic2.utexas.edu/hob, and findings will be presented on Aug. 17 at the TAMACC annual meeting in San Antonio by the BBR’s Bruce Kellison and Elsie Echeverri-Carroll, who were the study’s principal investigators.