Aug. 5, 2011 – The Michigan Hispanic Alliance (MHA) conducted its first ever annual State of Hispanic Business in Michigan survey to identify issues impacting Michigan’s Hispanic business community. The Hispanic business community in Michigan represents nearly 11,000 businesses. The survey, conducted in spring 2011 and issued in June, focused on specific issues involving Regulatory Environment, Economic Development, Job Creation, Financing, Taxation, and Health Care. The survey was sponsored by the West Michigan Hispanic Chamber of Commerce, Lansing Area Hispanic Business Association, Michigan Hispanic Chamber of Commerce, and the Great Lakes Bay Region Hispanic Business Association. The Michigan Hispanic Alliance through its partners represents approximately 1,000 Hispanic business owners and Hispanic professionals across Michigan. The survey was distributed to Michigan Hispanic Alliance partners’ membership base with a survey response representing 8 percent of the total MHA partner membership base.
Basic Demographics of Michigan’s Hispanic Business Community
The State of Hispanic Business Survey in Michigan represents a broad spectrum of respondents from across Michigan, including Lansing, Saginaw, Bay City, Grand Rapids, Kalamazoo, Holland, Benton Harbor, St. Joseph, Ann Arbor, Detroit, Jackson, Battle Creek and other cities. About 67 percent of businesses surveyed are majority male owned businesses and 33 percent are women owned.
The top three business formations for Hispanic business owners are Corporation, Sole Proprietorship and LLC. Nearly 88 percent of business owner respondents are non-franchised owned businesses, 12 percent are franchise related businesses. Revenues earned by Hispanic businesses ranged from $100,000 to $10 million. The number of employees employed by survey respondents ranged from 1 to 500. The industries represented by survey respondents include, but are not limited to, professional services, construction, information technology, engineering, financial services, publishing, legal, industrial design and hospitality/food services.
Job Creation - Hispanic Businesses Will be Hiring in 2011
Approximately 51 percent of respondents report they plan to hire over the next 12-18 months. Nearly 64 percent of respondents report their hiring plans will stay the same or increase from last year.
A significant number of positions Hispanic businesses will need to fill will be higher wage positions. More than half the respondents plan to hire over the current year. Positions survey respondents stated they would need to fill include, but are not limited to, construction workers, sales, graphic designers, IT, finance, engineers, customer service representatives, administrative/office and drivers.
Taxation - Michigan State Tax Code and MBT Negative Impact on Job Creation, Entrepreneurialism, Business Growth
Approximately 65 percent of business owners report the Michigan tax code is burdensome to their businesses. Nearly, 54 percent of business owners report that the MBT negatively impacts businesses’ ability to create jobs. Approximately 63 percent of respondents feel a Michigan Service Tax is not preferable over the MBT.
The survey results from the Hispanic business community clearly show the tax code for Michigan may need to be reviewed and restructured to determine how businesses can pay their fair share of taxes to support state services and education, without negatively impacting job creation and Michigan’s economic environment. Hispanic business believes in a fair tax system that does not penalize entrepreneurialism or existing business growth initiatives. (Editor’s note: The survey was conducted before the repeal of the MBT.)
Regulatory Environment - Need for Fair, Transparent State Bid Process with Streamlined Documentation
Nearly, 68 percent of respondents believe Michigan’s regulatory environment does not support small business. Over 91 percent of business owners believe Michigan’s regulatory environment can be streamlined to improve efficiencies.
Survey respondents feel Michigan’s current regulatory environment limits their ability to effectively compete for state contracts. Unnecessary documentation requirements make it difficult to participate in many purchasing/bid opportunities with the state. In addition, many respondents also feel many of the state’s departments do not effectively reach, if at all, the Hispanic business population to inform them of upcoming business opportunities with the state of Michigan. Hispanic business believes in a fair and transparent purchasing/bid process with a streamlined documentation process.
Economic Development - No Contact by Local Economic Development Agencies, MI-SBTDC, or MEDC
Nearly 84 percent of respondents have not been contacted by a local economic agency to assist in developing and growing their business. More than 60 percent of businesses surveyed are not familiar or have not been contacted by a local Small Business Technical Development Center (MI-SBTDC). Nearly 64 percent of businesses see a need for support services to help grow their business or to navigate Michigan’s regulatory environment. Approximately 56 percent of business respondents believe the Michigan Economic Development Corporation (MEDC) does not provide support to their businesses.
Survey respondents clearly see the importance of having available resources and support services to assist them in launching, growing or managing their business. Unfortunately, Hispanic businesses in Michigan have not been on the radar of local economic development agencies and MI-SBTDCs. Interestingly, even with very limited support from local economic agencies and MI-SBTDCs, approximately 51 percent of Hispanic businesses in Michigan continue to grow and plan to hire additional high wage employees over the next 12-18 months. Additional support from local economic agencies, MI-SBTDCs, and MEDC could stimulate additional job growth within Michigan’s Hispanic business community.
In addition, the Michigan Hispanic business community may benefit from the MEDC economic gardening initiative to help strengthen and build industries within Michigan. The Michigan Hispanic business community has strong ties to agricultural resources and labor that may be utilized to create agricultural economic development initiatives to help strengthen Michigan’s agricultural industry and to ensure Michigan plays a significant part in United States food security initiatives.
Financing - Difficulty in Borrowing Funds, Impacting Growth, Hiring and Equipment Purchases
Approximately 70 percent of businesses do not feel they will be able to borrow funds during the current lending environment.
Survey respondents have advised of increased difficulty in borrowing funds for startup, working capital, and growth initiatives. Such difficulties could strain already limited budgets and have a negative impact in limited business growth opportunities, hiring, and capital/equipment purchases. Support services from economic development agencies may help many of these businesses overcome financing issues.
Health Insurance - Too Costly for Hispanic businesses; Offer Advanced Health Care Tax Credits to Minimize Cash Flow Impact
Nearly 81 percent of businesses surveyed advised they offer no health insurance to employees. Approximately 91 percent of respondents believe offering health insurance to employees will impact the cost of doing business. Nearly 62 percent of businesses believe health insurance premiums will increase in 2011. More than 81 percent of respondents believe the state of Michigan should assist small business to provide health insurance coverage to employees.
Survey respondents have clearly shown health insurance is a costly expense that impacts their bottom lines. Respondents believe the state of Michigan needs to step in to help small business provide health insurance to their employees.
Providing a support mechanism to assist small businesses, especially Hispanic businesses, in offering health insurance to employees creates an opportunity for them to attract and retain talent. Often, potential employees who might consider working for a small firm may not choose to do so because the small business does not offer health insurance coverage as a benefit, because it is too costly. It may be beneficial to consider offering advanced health care tax credits to small businesses that may be seeking to offer health care benefits to employees. An advanced health care tax credit may help small businesses minimize potential impacts on profitability or cash flow.
Economic Environment - Overall Michigan’s Economic Environment Improving, but Hispanic Business Environment Feeling Less Improvement
More than 70 percent of respondents feel the current economic environment is improving. Only 54 percent of respondents believe the current economic environment is improving for Hispanic owned businesses. Nearly 56 percent of respondents do not believe the economic environment will normalize to pre-recession levels.
Those who completed the survey believe the current overall economic environment in Michigan is improving. But fewer feel the economic environment is improving overall for Michigan’s Hispanic business community. The discrepancy between the general economic environment and the Hispanic business environment must be noted. Many of the issues highlighted in previous sections play a significant part in the less favorable view regarding the Hispanic business environment. Further review will be required to determine whether this general mood within Michigan’s Hispanic business community improves.
In addition, many survey respondents believe Michigan’s economic environment will not rebound to pre-recession levels. If this is the case, it is imperative that Michigan’s Hispanic business community begins evaluating their existing business systems to streamline efficiencies, identify potentially new business models to adjust to the post recession environment, and develop opportunities to build strategic partnerships with other businesses (Hispanic and non-Hispanic). Support services to make these changes can be provided by external consultants or economic development agencies.
The initial State of Hispanic Business in Michigan 2011 survey results highlight that the Hispanic business community in Michigan has been on the sidelines for some time. The community’s limited participation in addressing Michigan’s business issues has had negative consequences. The Hispanic business community in Michigan now realizes the need to play a part in advocating for job creating taxation policies, a fair, transparent, and streamlined regulatory environment that encourages Hispanic business participation, and successful outreach by local economic development agencies to provide support services for business startup and growth initiatives.
Michigan Hispanic Alliance partners look forward to working with business organizations, local economic development organizations, foundations, Michigan state officials, and any other interested parties seeking further clarification on the issues highlighted and to provide potential recommendations to resolve current deficiencies in reaching and partnering with the Hispanic business community in Michigan. For additional information, please contact a representative from one of the Michigan Hispanic Alliance partner organizations listed below.
Lansing Area Hispanic Business Association
John Castillo, President
Ph: (517) 381-8804
Great Lakes Bay Region Hispanic Business Association
Jim Jaime, Executive Board member (former 2010 President)
Ph: (989) 752-7911
Email: [email protected]