Hispanic small-business owners are among the fastest-growing market of entrepreneurs in the United States. In fact, the 4th Annual Report 2016 by the U.S. Hispanic Chamber of Commerce cited that the number of Hispanic-owned businesses was on track to grow to more than 4.23 million last year.
Northwestern Mutual conducted a 2017 survey to identify Hispanic small-business owners’ motivations for starting their businesses, to understand their top financial planning priorities and determine how confident they feel managing their business’s finances. Within the results emerged the prominent theme: Hispanic small-business owners, who currently exhibit a strong grasp of day-to-day finances, must turn their focus to the long-term for the continued growth and longevity of their business.
Building a Foundation for Confidence and Success
According to the survey, Hispanic small-business owners’ entrepreneurial spirit is driven by a desire to have a career that offers them autonomy and independence. The survey also revealed their primary financial focus is on the day-to-day operations of their business. Long-term considerations fell lower in the list of top financial priorities. A lack of focus on the long-term extended into the business as well, with only 17 percent of those surveyed citing business succession planning (how they will transition their businesses after retirement) as a top financial priority.
According to the survey, 85 percent of business owners feel confident in the management of their businesses’ finances. However, 37 percent feel their confidence would improve if they established a long-term financial plan. Overall, the results indicate that, while a focus on day-to-day financial management is essential, there is a need for Hispanic small-business owners to place a greater emphasis on planning for the future, both professionally and personally.
Entrepreneurial pursuits can be expensive and time-consuming, which means a focus on personal finance can take a back seat. However, personal and professional financial habits are often more closely tied than we realize. According to a recent Latinum Network study, 59 percent of Hispanic business owners use personal savings to jumpstart their business, and 32 percent rely on personal credit cards. It quickly becomes important for business owners to ensure their personal short- and long-term financial goals stay on track while getting their business off the ground. Creating a personalized, holistic financial plan with a focus on long-term goals is critical.
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI and its subsidiaries. Leslie Howard Patterson Jr. is a District Agent of NM and Northwestern Long-Term Care Insurance Company, Milwaukee, WI, (long-term care insurance) a subsidiary of NM, and a Registered Representative of Northwestern Mutual Investment Services, LLC. (NMIS) (securities), a subsidiary of NM, broker-dealer, registered investment adviser and member FINRA and SIPC.
Top Motivating Factors for Being an Entrepreneur
| Being own boss | 62% |
| Higher earning potential | 33% |
| Pursuit of passion | 32% |
Priorities
| Focus on cash-flow management | 57% |
| Plan for future of their business, daily | 49% |
| Long-term considerations — plan for the unexpected | 37% |
| Long-term considerations — retirement planning | 30% |
Source: Northwestern Mutual’s Hispanic small-business study
Areas for Business Owners to Consider
Saving for Retirement: A key strategy for business owners is prioritizing contributions to a 401(k) or other retirement plan in order to meet goals in their lives after business.
Legacy Planning: In addition to their professional legacy, business owners should consider meeting with a financial professional to help structure a financial legacy for their families as well.
Succession Strategy: Creating a succession plan can help eliminate growing pains later, protecting and maintaining the hard work that went into building the business.
Creating a Safety Net: For any business, the owner (or a key employee) is the most important asset, which is why it’s essential to be protected. Disability and life insurance can help provide additional protection.
Lee Patterson is a financial advisor and managing director, Northwestern Mutual – Phoenix.
