SPRINGFIELD, MA - Massachusetts Mutual Life Insurance Company's "The Business Owner Financial Wellness" study emphasizes the lack of a long-term strategy by many Hispanic entrepreneurs, who in 89 percent of the cases founded their firms to economically support their families and seven of 10 of whom want to hand the company down to their children although the majority do not have any concrete succession plans.
According to the U.S. Census, Hispanic-owned businesses are growing at double the national rate. While Hispanics are leading the way in this country as entrepreneurs, the new study reveals contradictions and gaps in Hispanic business owners' fiscal knowledge and usage of tools available to them to help them create a more solid future for themselves, putting achievement of their "American Dream" at risk.
The study is a comprehensive review of multicultural business owners' dreams, opinions and overall financial health. Growing at double the national rate, the study found that 89 percent of Hispanic entrepreneurs started their business to provide financially for their family vs. 77 percent of the general population and 31 percent wanted to provide jobs for other family members (versus 19 percent generally).
Seventy percent of Hispanic business owners plan to pass their business on to family members vs. 54 percent of the general population. And yet only 1 in 4 Hispanic entrepreneurs have a succession plan.
The study's Hispanic entrepreneur findings were unveiled at the Association of Latino Professionals in Finance and Accounting's (ALPFA) national convention today. Researchers surveyed Hispanics, along with Caucasian, African American and Asian business owners.
The study's look at Hispanic entrepreneurs is part of MassMutual's Fiscal Fitness Initiative created to arm Latinos with the information and tools they need to improve their fiscal health.
"Latino business owners report to a higher degree that providing for their families is the strongest driver for going into business. Also, Hispanics' definition of family is quite broad, meaning they have more people counting on them," said Chris Mendoza, assistant vice president of multicultural markets at MassMutual. Yet they're not planning what they need to do in order to help protect their families and businesses. This is especially surprising when you consider that 55 percent of Hispanic entrepreneurs vs. 35 percent of the general population report a major reason why they created their business was to have something to pass on to their children."
The research shows that Hispanics want control over their personal finances, yet three in 10 say it is all they can do to keep up with everyday business expenses, much less think about the future. This leads to real concerns among respondents related to their financial situation both at home and at their businesses. These challenges are even greater for those without a higher education and limited English-language skills.
"As an organization that empowers future Hispanic leaders in all aspects of finance, our members will be on the front line of providing Hispanic entrepreneurs with the tools and information they need to safeguard their future security," said Manny Espinoza, CEO for ALPFA. "It is our responsibility as business leaders to examine solutions to the disparity of knowledge, confidence and usage of financial services. We're pleased at MassMutual's leadership in shedding light on this issue and exploring solutions."
MassMutual has collaborated with ALPFA to help the non-profit organization achieve its mission of expanding Latino leadership in the global workforce. ALPFA is a natural partner for MassMutual as the organization works with its members to expand their skills and knowledge they need to serve Latino and the general population.
Key findings of the study reveal motivations to start their businesses were to pursue the American Dream, take control of their lives and support their families. About two-thirds of participants said they wanted to follow their dreams, a much larger percentage than with the general-market business owner at only 36 percent. This is more prominent among 1st generation owners. Seventy-nine percent of Hispanics said they wanted to be their own boss vs. fifty-seven percent of the general-market business owners.
Approximately fifty-four percent reported that "giving back to the community" was a driver of opening their businesses compared to twenty-one percent of the general population.
Hispanic business owners are worried about meeting their personal long-term financial goals and express discomfort with financial investments. Approximately twenty-eight percent don't have time to get involved in managing investments vs. Eighteen percent of general-market business owners. Twenty-three percent have too many immediate financial concerns to think about saving for retirement, compared to sixteen percent of general-market businesses. Eighteen percent say they wouldn't know where to go for financial assistance vs. twelve percent among general-market businesses.
Hispanic entrepreneurs feel that financial planning for their business is important, but their behaviors in key areas such as succession planning show a disconnect between beliefs and actions. Only seventeen percent are concerned about transitioning ownership upon retirement vs. thirty-two percent of the general population. However, most Hispanic business owners do know who will take over their business, as 7 in 10 plan to pass their business on to a family member. This would be their child (forty-seven percent) or their spouse (twenty-one percent) – in both cases more likely than among general-market business owners. More than a third say they are interested in growing their business but do not have the knowledge to do so vs. fourteen percent in the general population.
"Latinos understood the meaning of the 'American Dream' long before the term was coined," said Mendoza. "As businesses owners, they put incredible pressure on their shoulders to succeed, not just for themselves, but for the good of their families. The good news is they actually know to whom they want to transition their businesses, as part of their dream in providing for their families – they just need to understand the advantages of having a formal succession plan, the information and tools to help improve their ability to achieve that dream," he concluded.
The collaboration with ALPFA is a key component of MassMutual's Hispanic Fiscal Fitness Initiative, which includes partnerships with Latino non-profit business organizations across the country to help Hispanic business owners and professionals improve their financial health. MassMutual has commissioned research on Latinos' fiscal health in Houston,San Antonio and Fort Lauderdale. The research unveiled today represents its first comprehensive analysis of Latino business owners at a national level.