The economic state of Latinos in America: Building up small businesses

From bustling urban centers to small towns across the United States, the economic power and business potential of Latino communities is immense. Today, 19 percent of the US population identifies as Latino or Hispanic.1 According to the US Census Bureau, Latinos are expected to comprise approximately 28 percent of the total US population by 2060. Latino small-business owners also skew younger, which means there is great promise for long-term value creation and growth, especially as the education levels of these young entrepreneurs continue to rise.

These demographic shifts hint at the potential for Latino entrepreneurs and businesses to play an even larger role in the economy than they do now. Much of the promise lies with small and medium-size enterprises (SMEs), since 99 percent of Latino-owned businesses are small businesses. Latinos start more businesses per capita than any other racial or ethnic group in the United States. In 2023, they created 36 percent of new businesses in the United States—nearly double their representation in the overall population.

The greater Miami area is an example of an environment where Latino small businesses and entrepreneurs can succeed. Latinos are a critical part of the local economy there. They account for 47 percent of the population and own 27 percent of local small businesses. Latino-owned small businesses in Miami also generate more revenue per employee than their non-Latino counterparts.

While aspects of Miami’s development are unique and can be challenging to replicate, its success can still provide considerations for other cities in supporting Latino small businesses. Three pillars can help create an environment where Latino entrepreneurs can better reach their full potential: educational attainment, network effects of local ecosystems, and access to funding. When cities have all three pillars, as Miami does, it is more likely that Latino entrepreneurs can own more small businesses, participate in higher-revenue-generating opportunities, and become a vital part of the local economy.

However, many places don’t offer all three pillars. Latino small-business owners in the United States face considerable challenges. The gap between the success of Latino-owned SMEs and non-Latino-owned SMEs underscores those challenges and the fact that Latino small-business owners often have a harder time overcoming them. For example, Latino SMEs have more trouble scaling up enterprises, hiring and retaining talent, and getting access to funding.

Creating the conditions that fuel growth

Under the right circumstances, Latino small-business owners can thrive. Miami is a prime example, with several factors contributing to its success (Exhibit 1). As mentioned, Latinos represent 47 percent of the population in the greater metropolitan area. Additionally, 43 percent of the population in Miami is fluent in Spanish. The result is a series of network effects that may help Latino entrepreneurs succeed. Twenty-five out of every 100 Latinos in Miami are small-business owners, compared with eight out of 100 in the United States. And Latino-owned small businesses in Miami generate $235,000 in revenue per employee, compared with $229,000 for non-Latino, White-owned small businesses there.2 Here are three conditions that help shape an environment for success.

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