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Minority-Owned Firms on the Rise

Census: But data show that California businesses run by Latinos and blacks generate a tiny portion of overall sales.


The number of Latino-owned businesses nationwide grew by 30% between 1992 and 1997--four times the rate of all firms--while black-owned businesses increased by 26%, according to census data released today.

California again led the nation in the number of Latino enterprises, with 336,000. But although they made up 13% of all California companies, Latino firms accounted for only 2.4% of the receipts.

Despite the increase in numbers and revenues, Latino- and black-owned businesses in the United States remained disproportionately small, with only 1% and 0.4% of the $18.6 trillion in overall gross receipts respectively.

The 1997 economic census data offer a glimpse of the impact of demographic changes that have swept the country in the last decade. Though 2000 census figures on the U.S. population are now becoming available, the economic census is conducted separately every five years and the data released today will not be updated until 2002.

The Census Bureau used a new definition of minority-owned business in 1997, including larger corporations for the first time and excluding businesses that were only 50% minority-owned. The change complicates comparisons with previous years. However, data that exclude the larger corporations show Latino-owned businesses growing by 30% from 1992 to 1997, to 1.12 million, and black-owned businesses growing by 25%, to 780,770.

Inclusion of the larger "C" corporations pushed the number of Latino-owned firms up to 1.2 million, and black-owned firms to 823,500.

Growth of Latino-owned businesses slowed markedly from 1992 to 1997 from 76% increase in the previous five-year period. But the slowdown may be a sign of a stabilizing immigrant population that is focused on expanding existing businesses, said David Hayes-Bautista, director of UCLA's Center for the Study of Latino Health and author of Latino demographic research.

"We're basically looking at a maturing immigrant market here in California," he said.

Although Latinos have increased their share of businesses in California to 13%, that number is relatively low given that Latinos make up 30% of the population. Nationwide, Latinos account for as much as 12.5% of the population, according to recently released 2000 census data. The 1997 economic census data showed that only 5.8% of the 21 million nonfarm U.S. businesses were Latino-owned.

The number of Latino-owned businesses was lower than federal projections, leading some to question whether the data is accurate.

"That's an undercount," said Elizabeth Lisboa-Farrow, chairwoman of the board of directors of the U.S. Hispanic Chamber of Commerce. "It could be that smaller businesses didn't fill out the forms."

Lisboa-Farrow's organization will continue to use previously released Small Business Administration projections that place the number of Latino-owned businesses nationwide at 1.4 million, she said.

"We're starting chambers around the country continuously in places where we didn't think we had Hispanic businesses--in Utah, Nebraska, North Carolina . . . even Alaska called about starting a Hispanic chamber."

The barriers to growth, however, are real, Lisboa-Farrow said, perpetuated by lack of access to capital and bundling of contracts in the public and private sectors.

Nationwide, blacks make up as much as 13% of the total population, 2000 census data show, but owned only 4% of the businesses in 1997.

Forty percent of the Latino-owned businesses nationwide had receipts of $10,000 or less, and only 2% had receipts of $1 million or more. Receipts per firm averaged $155,200, compared with $410,600 for all U.S. firms. Black-owned firms averaged sales of only $86,500. Forty-nine percent had receipts under $10,000 and about 1% had sales of $1 million or more.

Earl Skip Cooper, executive director of the Black Business Assn. of Los Angeles, said the companies seem disproportionately small because the census data include people who are "just selling something on the side." Still, he said, many black-owned businesses have struggled to grow on par with other firms in part because of cutbacks in affirmative action.

"I think the cutbacks of the [Gov. Pete Wilson] administration on affirmative action programs were a major detriment to minority business, without question," Cooper said. But "business is always difficult and we have to rise to the challenge." More than half the black-owned firms were in the service industry, accounting for 36% of gross receipts. Retail trade accounted for 11% of black-owned firms but 19% of receipts. About 40% of Latino-owned firms were in the service industry and accounted for 21% of gross receipts. However, firms engaged in wholesale trade accounted for only 3% of total Latino-owned firms, but 22% of gross receipts.

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