In New Mexico, 30.7% of businesses are Hispanic owned, while the national average is just 12%, according to a U.S. Census Bureau survey in 2012. With Albuquerque’s unemployment sitting at 4.8% as of February 2019, competition for talent is fierce, with no signs of easing up any time soon. Regardless, the growth-minded approach of Hispanic business owners persists.
To better understand what’s driving one of the fastest-growing segments of the small business sector, Bank of America recently surveyed Hispanic entrepreneurs across the nation to identify their motivations, aspirations, and concerns. We were very pleased to find a strong majority of Hispanic business owners anticipate increased revenue and continued growth in 2019. At the same time, they are ramping up efforts to bring on new staff in a tight labor market.
According to our third annual Bank of America Hispanic Small Business Owner Spotlight, 79 percent of Hispanic entrepreneurs plan to grow their business over the next five years, surpassing their non-Hispanic peers by 24 percentage points. Addition-ally, 74 percent expect their revenue to increase (17 percentage points higher than non-Hispanics) and 51 percent plan to hire (25 percentage points higher than non-Hispanics).
Reflecting on their career paths, more than one-third of Hispanic entrepreneurs say their business has grown beyond what they originally envisioned. Many Hispanic business owners also see the long-term growth of their business as a multi-generational asset, with 38 percent intending to pass their business on to their children.
One often-overlooked step in ensuring the future of a business is to create a business succession plan – which is especially significant for family-owned companies, since the business is often the primary source of income and family wealth for the owner. While every business and family situation is unique, a few key tips to help get started with succession planning include:
1. One size does not fit all: The planning process should take into account a wide range of dynamic variables including roles, relationships and skills, personal goals and expectations, health and financial circumstances, market conditions, and the economic climate.
The transfer of ownership within a family can also come with a number of personal and business challenges – especially when family members are also employees, partners or co-owners. It requires that the current owner (generally a parent) be willing to cede some form of control to the new owner (generally their child or children).
It also includes the process of selecting the best person to be in control. Proactive business succession planning not only helps in the process of identifying potential family successors, but it also facilitates and prepares them to take over the business in terms of skills, knowledge and financial readiness.
2. Consider the financials: Some key financial issues must be considered in the case of transfers to family members. One of the first considerations is the impact on the current business owners’ wealth and cash flow. If the company is transferred by gift, be sure to understand the implications of any relevant gift taxes. When thinking about the financial future of a company, entrepreneurs should consider meeting with their local small business banker or similar expert to understand potential red tape or pitfalls to ensure their business and assets are protected.
3. Write out the plan: The plan itself will certainly take time to develop, but the up-front effort is important to ensure a meaningful transition that meets the best interests and needs of the business, the current owner and their heirs.
It is always best for business owners themselves to proactively decide upon the type of transaction, the type of tax and the timing of business succession – rather than allowing life events, liquidity needs or the tax code to decide for them. It is impossible to solve all questions and address all uncertainty at one time. Remember the plan is a living document that should be regularly reviewed and revised to reflect the best interests and needs of the business, while creating a meaningful next chapter for the enterprise.