Survey highlights opportunities for advisors to support Hispanic businesses

Columbus, OH – The fallout from the COVID-19 global pandemic, including inflation, market volatility and supply chain challenges, continues to impact business owners of all types. A new survey from Nationwide and the U.S. Hispanic Chamber of Commerce (USHCC), in partnership with Reimagine Main Street, a project of the Public Private Strategies Institute, shows Hispanic business owners remain optimistic about the future of their business despite experiencing a variety of headwinds. However, there may be opportunities for advisors and financial professionals to strengthen relationships with Hispanic business clients by helping them prepare for the next unexpected business disruption.

The good news is Hispanic business owners are more likely than other businesses to be       open to seeking guidance about ways to make their business more resilient (94%) but nearly half (44%) are struggling to find the right partners to enhance their business risk management strategy.

“Hispanic Heritage Month is an opportune time for advisors and financial professionals to reflect on ways to better serve the Hispanic business community. Our survey data highlights an opportunity for them to build or strengthen relationships with this group, as well as business owners in general, by helping them plan for resilience,” said Juan José Perez, President of Corporate Solutions at Nationwide. “The pandemic was a reminder to us all to prepare for the unexpected, and this group is looking for help to be ready for what’s next.”

Across the country, Hispanic Americans and five million Hispanic-owned businesses help contribute over $800 billion dollars to the U.S. economy each year. This growth is poised to accelerate as Hispanic entrepreneurs start businesses at three times the rate of the general population.

“We have the opportunity to help educate Hispanic business owners across the country now that we better understand their needs. The future is bright for their business if they're able to use their limited resources and apply them correctly through investments, financial services, and securing and mitigating risk,” said Ramiro A. Cavazos, President & CEO of the USHCC.

Optimistic about their business, cautious about the economy

Seven in ten (69%) Hispanic business owners are somewhat or very optimistic about the future of their business, more so than their general market counterparts (56%). However, they don’t expect economic storm clouds to clear any time soon with only four in 10 expressing optimism about the future of the economy. This group continues to face challenges like soft demand (44%), increased input costs (77%), higher interest rates (81%), supply chain disruption (74%) and a tight labor market (60%).

Liquidity

Following tough sledding over the past couple years, more than half of Hispanic business owners (56%) are left with no cash reserves. Similarly, 48% of the total sample of business owners surveyed report they have burned through cash reserves following the pandemic.

“A great way for an advisor or financial professional to help business owners right now is to develop a strategy for securing capital when they need it to either invest in their business or keep the lights on the next time sales hit an unexpected slowdown,” Perez said. “This could involve helping them build a stronger relationship with a bank or financial institution – or understanding solutions like Securities Backed Lending as a source of liquidity.”

Hiring challenges

Seven in 10 Hispanic business owners (70%) are actively trying to grow their workforce, with three fourths (75%) having made changes in response to labor market challenges – the most common action being increased compensation (41%). Only 18% of Hispanic businesses have increased benefit offerings and more than half (55%) offer no benefits at all compared to 45% of the total sample of business owners.

“One of the best ways to guard against the risks threatening a business’ ability to attract and retain the best talent is by enhancing benefit offerings. Advisors and financial professionals are in a great position to bring these resources to the table,” Perez said. “In some cases, business owners can do this with limited cost by passing the expense to the employee, who is happy to have access to a new benefit.”

Only 14% of Hispanic business owners worked with a consultant to explore new employee benefit offerings. Advisors can add value by connecting their clients with benefits professionals to address this opportunity.

Preparing for future risk

Nearly nine in 10 (88%) Hispanic businesses have taken steps to prepare for future shocks to their business, a rate higher than the total sample of business owners (71%). Hispanic business leaders are taking actions like:

• Reducing operating costs (55%)
• Building cash reserves (41%)
• Building a stronger relationship with a bank or financial institution (25%)
• Establishing a business line of credit or source of financing from which to draw from in future emergencies (25%)
• Diversifying revenue streams (43%)

“We see an emphasis on cost cutting as a major theme in our data,” Perez said. “One way to control, and even lower, expenses in a risk management environment is to self-fund your employee health plan. Advisors and financial professionals can help clients think about this opportunity, including medical stop-loss solutions that protect them from the impact of large claim activity.”

Hispanic business owners have taken other risk management actions to prepare for future challenges, including:

• Enhancing company’s risk management strategy (18%)
• Conducting a formal risk assessment (14%)
• Creating a business continuity plan (28%)
• Creating a succession plan (19%)
• Purchasing business continuity or other insurance (6%)
• Building or strengthening relationships with risk management partners (9%)

“Advisors and financial professionals can enhance the value they bring to clients by driving conversations about steps some of the business owners we surveyed have taken to become more resilient. Many of these activities involve no financial cost but can pay huge dividends for the business owner and the relationship,” Perez said.

Struggling to find the right partners

Hispanic business owners were more likely than their peers to say they struggled to find the right partners to enhance their business risk management strategy (44% vs. 40%).  Less than one third (29%) worked with an advisor or financial professional to update their business investment strategy and only 14% worked with an advisor or financial professional to plan for business disruption. Only about one fourth (26%) worked with an insurance professional to ensure coverage is up to date compared to 34% of the general sample. Fewer than one in five (18%) worked with a technology professional to update their business’ cyber security strategy.

Taking action

“Advisors and financial professionals are in a perfect position to help business owner clients identify gaps in their plan for business resilience and recommend additional members for their risk management team,” Perez said. “Leverage your professional network to identify the resources your clients need. Ask colleagues or other businesses you serve for recommendations to bring to the table.”

Survey Methodology
This poll is part of a regular series of surveys of diverse small business owners developed by Reimagine Main Street in collaboration with network partners including the United States Hispanic Chamber of Commerce. The online survey was fielded from June 9 to July 6 using a convenience sample of small employers with up to 500 employees. The survey was available to respondents in both English and Spanish. Business owners were contacted by email using business owner lists cultivated by the Public Private Strategies Institute and the USHCC membership list. The national sample of Hispanic small business owners included 671 respondents.