Southwest Urban Metros Are Hot Spots for Hispanic Entrepreneurship
The areas in the U.S. providing the best opportunity for Hispanic entrepreneurs are most likely Southwestern, dense with small business and culturally diverse
While the total number of U.S.-owned businesses increased only 2% between 2007 and 2012, Hispanic-owned businesses are growing at the fastest rate of any minority group of business owners in the country. Hispanic-owned businesses in the U.S. have increased in number by 38% according to the U.S. Census Bureau’s most recent Survey of Business Owners. Within that group, female Hispanic entrepreneurs are pulling most of the weight: female-owned Hispanic businesses grew by 87% between 2007 and 2012, generated $473.6 billion in revenue and employed 2.3 million people.
However certain parts of the U.S. serve as hotbeds of opportunity for Hispanic business owners, offering up just the right balance of economic health and community support to launch a successful business. In a recent study by GoodCall.com research analysts, 381 metropolitan statistical areas were evaluated to determine where in the country Hispanic entrepreneurs have the most potential for success.
So which areas shook out on top? The top 6 spots were dominated by Texas metropolitan areas with the exception being the Washington D.C. metro at No.2. The Texas cities at the top of the list (Midland, Odessa, Houston, Austin, Dallas) illustrate the importance of having a dense Hispanic business owner population to support other business owners as well as a strong economic climate for businesses to operate in. Slightly farther down in the list other Texas cities make a prominent appearance such as Corpus Christi and San Antonio still ranking in the top 15. Many of the top ranking Texas cities have likely benefited in the economic health category due to increases in oil prices and fracking which have had a positive impact on local GDP. While a strong dependence in that one industry can create a more vulnerable economy, entrepreneurs are benefiting in the heyday from increased local consumption.
The Washington D.C. metro area in the Eastern region of the U.S. stood out in the No. 2 spot from other similarly ranked Texas cities. While having a lower than average Hispanic population in comparison to the other top ranking cities, The D.C. metro does has a high number of Hispanic-owned businesses when weighed with the total Hispanic population. Bottom line- while there isn’t a huge population of Hispanic residents in the D.C. area, the population that does exist is more entrepreneurial spirited than in many other parts of the country. That coupled with a strong local economy helped push the Washington D.C. metro up to the number 2 spot.
Louisiana’s two largest cities, New Orleans and Baton Rouge, both took spots in the top 15 ranking areas. New Orleans ranking well for networking potential (high density of small businesses in the area) and Baton Rouge taking a top spot due to strong YOY growth in GDP from 2014-2015.
The Miami-Fort Lauderdale-West Palm Beach metro and the Atlanta-Sandy Springs-Roswell area are the only two southeastern areas on the map. With only one Mid Atlantic area- New York-Newark-Jersey City metro- ranking in the top 20.
Some surprises among the top 10 were Anchorage, AK, and Casper, WY- which both ranked higher in affordability and had relatively low Hispanic unemployment rates, though they each have a fairly small Hispanic population of less than 4%.
Where are Hispanic owned businesses thriving?
To determine the top areas, GoodCall analysts focused in large part on the indicators that prove a strong business climate for Hispanic business owners such as the number of Hispanic-owned businesses already in an area compared to all businesses; the number of Hispanic-owned businesses per 1,000 Hispanic residents and the percentage of Hispanic-owned businesses compared to the percentage of the Hispanic population. Metro areas with high scores in these categories are proven to be strong areas of opportunity.
Six of the top 10 areas with the highest percentage of Hispanic-owned businesses (when compared to total businesses) are in Texas, and all but the Miami area are in the Southwestern U.S. The Miami area had more than 250 Hispanic businesses per 1,000 Hispanic residents, nearly 50 more than the next highest city.
Which areas have the strongest economies to support Hispanic owned businesses?
A rising tide lifts all ships. For that reason, economic health indicators such as GDP growth and GDP per capita; rate of unemployment among Hispanic residents and total unemployment rates were also taken into account. Areas with lower unemployment and higher GDP annual growth should prove more prosperous for Hispanic businesses owners.
The metros with the lowest unemployment rates for Hispanic residents ranged in geography across the country but all of them had lower unemployment rates for Hispanics when compared to the overall unemployment rates in the area. A big improvement over the lowest ranking areas in this category such as a Gadsden, AL where unemployment rates for Hispanic residents topped out at a whopping 17%- drastically higher than the overall unemployment rate for all residents in the area of 4%.
Midland, TX, had the highest growth in GDP and came in No. 1 for economic health on the GoodCall list. Midland also boasted a GDP per capita that was 35% higher than the next ranking city in this category, San Jose.
Which metros provide the most networking potential for Hispanic entrepreneurs?
The presence of other small businesses in the area can provide a broad network of support for a burgeoning entrepreneur, so GoodCall analysts included data showing the number of small businesses per capita to capture each metro area’s networking potential. More small businesses means more help for Hispanic entrepreneurs preparing to open a business.
Cities that ranked well in this category ranged in location and population. One thing that stands out- every top ranking city in this category has a Hispanic or Latino Chamber of Commerce within city limits to help support networking among Hispanic owned businesses.
Which communities most value educational attainment for Hispanic residents?
The percentage of Hispanic residents with a bachelor’s degree or higher, as well as the delta between Hispanic educational rates and total educational attainment rates in each area, illustrates how much a community values education for Hispanic residents.
Roughly 39% of small business owners nationwide had at least a bachelor’s degree in 2013, and 72% had at least some college education, according to data from the U.S. Small Business Administration. West Virginia metro areas stood out in this category. While the density of Hispanic residents is low, there is a higher than normal rate of educational attainment for Hispanic residents when compared to the total population in WV metros. For example, in the Weirton-Steubenville metro 59% more Hispanic residents have attained at least a bachelor’s degree over the average population. Cities with higher concentrations of Hispanic residents with no degree tended to fall near the bottom of the GoodCall list.
How much purchasing power do Hispanic business owners have?
Affordability is a delicate balance in the startup world. However, no one can argue that it’s easier to grow a talented staff in an area where employees can actually afford to live. Affordability was assessed by looking at the median gross rent in each area as a percentage of total household income.
Some of the highest ranked metro areas for Hispanic entrepreneurship are also areas that are more affordable. But the Miami area is one of the most expensive areas in the country and also falls in the top 10 on the GoodCall list.
The Future of Hispanic Entrepreneurship
When starting any business, it takes the right mix of a number of factors – plus a little luck – to be successful. Do Hispanic entrepreneurs need to pack up and move to the Southwest to be successful? Not necessarily. We can learn something though from the highest ranking cities in this report. When looking to lay down your business roots, look for an area that’s growing economically; is a relatively affordable place to live and operate a business; and that provides a lot of support and resources for Hispanic business owners.