Family-Owned Business Enterprise Report 2013

PRESENTED BY

FAMILY BUSINESS ENTERPRISE STUDY REPORT PRESENTED BY

Phoenix MBDA Business Center Arizona Hispanic Chamber of Commerce October 2013

RESEARCH CONDUCTED BY

WestGroup Research

1

ACKNOWLEDGMENTS

ACKNOWLEDGMENTS COLLABORATING ORGANIZATIONS Arizona Hispanic Chamber of Commerce Arizona Public Service Company Phoenix Minority Business Development Agency Business Center WestGroup Research

ENDORSING ORGANIZATIONS

RESEARCH TEAM Gonzalo A.

de la Melena, Jr. Arizona Hispanic Chamber of Commerce

SPECIAL THANKS for providing insights during the research

Michael Woodard

James e. Garcia Arizona Hispanic Chamber of Commerce

Arizona Public Service Company

Monica S. Villalobos Arizona Hispanic Chamber of Commerce

Andrea Whitsett

Dr. Loui Olivas

ASU Morrison Institute

for

Public Policy

Arizona State University

Glenn Iwata WestGroup Research Katy Gallert WestGroup Research PRODUCTION TEAM Carmen G. MartĂ­nez, Graphic Design Director Terri Morgan, Production Manager James e. Garcia, Co-Editor Monica S. Villalobos, Co-Editor AOT/Xerox, Print Production

2

Laura Fullington Macerich

Alika Kumar Minority Business Development Agency Business Center

Michele Valdovinos Republic Media

Jaime Boyd Univision

FOREWORD

WELCOME TO FBE REPORT Sometimes the people you work with are like family. Sometimes they really are family.

Working day-in and day-out with your spouse, siblings or children presents a unique set of benefits and challenges. For instance, how do you fire your brother? And should you hire your mother? Couple that with the usual responsibilities of running a small business and it quickly becomes apparent that operating a family-owned firm calls for a special brand of business savvy.

The 2013 Family-Owned Business Enterprise Report doesn’t delve into whether you should hire or fire family members, but it does explore the strategies, characteristics and resources of Arizona’s minority family-owned small businesses. Fifty-six percent (56%) of minority-owned businesses are family-owned and given the state of Arizona’s rapid economic recovery and the growing role of minority entrepreneurs, understanding how minority-family-owned businesses are faring and how they feel about the future is integral to planning our economy.

In the following pages, you’ll learn that many of the challenges faced by minority-family-owned businesses (MFBEs ) are similar to those faced by non-family-owned businesses. All businesses worry about staying in business, surviving the economic slowdown, building their customer base and finding operating capital. However, there also are unique characteristics of minority family-owned businesses: • MFBEs are slightly smaller in terms of median revenue in 2011 ($197,600) compared to MBEs that are not family-owned ($227,000).

• More likely to be home-based (49% vs. 38% not family-owned) and women-owned businesses (41% vs. 32% not family-owned).

• Less likely to be a professional services company (15% vs. 29% not family-owned).

• MFBEs tend to represent smaller-sized companies that have been around for a while and are less likely to be in a “professional/technical” field.

This report is part of the Arizona Business Research Series on minority-owned businesses commissioned by the Arizona Hispanic Chamber of Commerce and the Phoenix MBDA Business Center. Previous reports in this series surveyed minority-, women- and Hispanic-owned businesses. In September, the Chamber also released its annual DATOS: The State of Arizona’s Hispanic Market, a detailed analysis of consumer and demographic trends in Arizona’s Hispanic community. This series of market intelligence reports offer decision-makers the data and analysis necessary to make informed choices about the future of Arizona’s economy.

Special thanks to the presenting sponsor of this study, Arizona Public Service, Freeport-McMoRan, and WestGroup Research, which conducted the study, for being a part of this initiative.

Enjoy this report. And be kind to your family.

Gonzalo A.

de la

Melena, Jr., MBA

President & CEO Arizona Hispanic Chamber of Commerce

3

Freeport-McMoRan is pleased to support the Arizona Hispanic Chamber of Commerce and its efforts to promote the success of Hispanic-owned and small businesses.

We are committed to supporting partnerships today that lead to a stronger community and economy tomorrow.

Visit www.FreeportInMyCommunity.com or scan the QR code to learn about our commitment to communities.

CONSUMER TABLE DEMOGRAPHICS OF CONTENTS

TABLE OF CONTENTS ACKNOWLEDGMENTS

2

SECTION I. CHALLENGES: WHAT TYPES OF CHALLENGES HAVE MINORITY FAMILY BUSINESS ENTERPRISES (MFBEs) FACED?

9

SECTION II. BUSINESS CHARACTERISTICS: WHAT ARE THE CHARACTERISTICS OF MFBEs?

11

SECTION III. OWNER CHARACTERISTICS: WHO OWNS THESE MFBEs?

15

SECTION IV. THE FUTURE: WHAT DO THESE OWNERS THINK ABOUT THE FUTURE OF THEIR BUSINESS?

17

CONCLUSIONS

19

END NOTES

19

5

MINORITY FAMILY BUSINESS ENTERPRISE STUDY

Minority Family Business Enterprise Study August – October 2012

My top three accomplishments in running my business have been (1) Helping other people by putting them to work (2) Being able to have my own business (3) Helping my son in the future and helping his family (when he takes over the business).

Arizona Minority Family-Owned Business, October 2012

The purpose of the 2012 Minority Family Business Enterprise (MFBE) Study was to provide insights into the challenges, strategies, needs and resources of these Arizona businesses. The Arizona Minority Business Center and Arizona Hispanic Chamber of Commerce designed the study to be a resource for businesses, organizations, educators, government agencies and individuals who wanted to help Arizona MFBEs succeed. A total of 345 telephone interviews were conducted with Arizona MFBEs during August – October 2012. The businesses represent a range of industries, company sizes and locations throughout the state.

The study addressed four different topic areas: Challenges, Business Characteristics, Owner Profiles, and The Future. The following are highlights from the study.

7

For 30 years, Arizona Office Technologies has helped over 17,000 Arizona clients leverage technology to efficiently manage their print output and lower overall document costs.

Contact AOT today for a free AOT 360째 print assessment and see how we can reduce your overall document costs by as much as 20% or more.

SECCION I

SECTION I

Challenges WHAT TYPES OF CHALLENGES HAVE MINORITY FAMILY BUSINESS ENTERPRISES (MFBEs) FACED? Same as non-MFBEs – The challenges MFBEs faced were common to businesses in general, and not necessarily unique or related to being family-owned. The top responses to an open-ended question about the most significant challenges they faced as a minority-owned business was “no unique challenges/same as other businesses” (22%). None of the businesses mentioned specific challenges relating to family-owned businesses or succession planning. Most of their responses focused on the immediate/short-term need of staying in business today.

A review of comments throughout the survey highlighted that most just mentioned that they “worked harder” to overcome the challenges that surfaced in the course of their business.

9

SECTION II

SECTION II

Business Characteristics WHAT ARE THE CHARACTERISTICS OF MFBEs? A key screening criterion for survey participants was that the businesses had to have at least one full-time employee. In addition, small businesses represented the largest share of number of firms who were surveyed. The profile characteristics tended to reflect smaller size businesses.

Minority Family-Owned Business Enterprises are similar to most businesses, but there are a few differences in their overall characteristics. The typical MFBE is…

Slightly smaller in terms of median revenue in 2011 ($197,600) compared to MBEs that are not family-owned ($227,000, but not significantly different).

•

Older (14 years median age), compared to the median age (9 years) among MBEs that are not family-owned.

•

More likely to be home-based (49% vs. 38% not family-owned) and women-owned businesses (41% vs. 32% not familyowned).

•

More likely to serve retail consumers (56% vs. 40% not family-owned).

•

Less likely to be a professional services company (15% vs. 29% not family-owned).

MFBEs conduct business both nationally and internationally – One-third (36%) conducted business throughout the United States outside of Arizona; 14% conducted business internationally.

11

SECTION II

SECTION II • BUSINESS CHARACTERISTICS

2012 MINORITY FAMILYOWNED BUSINESS ENTERPRISE PROFILE

MINORITY BUSINESS ENTERPRISE FAMILY-OWNED

NOT FAMILY-OWNED

345

256

Sole Proprietorship

32%

35%

Corporation

19%

20%

S Corporation

25%

22%

Partnership

10%

7%

LLC

13%

15%

$197,600

$227,700

4.0

4.0

14 YEARS

9 YEARS

Home-Based

49%

38%

Non for Profit

3%

3%

Women-Owned

41%

32%

Conducts business internationally

11%

16%

Conducts business nationally

35%

41%

Retail consumers

56%

40%

Businesses

55%

54%

Government

40%

45%

SAMPLE SIZE OWNERSHIP

MEDIAN REVENUE (2006 AND 2011) MEDIAN NUMBER OF EMPLOYEES MEDIAN AGE OF COMPANY BUSINESS DESCRIPTIONS

GEOGRAPHIC SCOPE

CUSTOMERS WHO CONDUCT BUSINESS WITH YOU

Bold figures are significantly different between Family-Owned and Not Family-Owned Businesses.

12

SECTION II

SECTION II • BUSINESS CHARACTERISTICS

2012 MINORITY FAMILYOWNED BUSINESS ENTERPRISE PROFILE

MINORITY BUSINESS ENTERPRISE FAMILY-OWNED

NOT FAMILY-OWNED

Construction

19%

17%

Other services (except public admin)

16%

16%

Professional Services

15%

29%

Health care and social assistance

8%

6%

Retail trade

7%

3%

Real estate, rental and leasing

5%

6%

Manufacturing

3%

4%

Wholesale trade

3%

<1%

Agriculture

3%

<1%

Finance and insurance

2%

4%

Educational services

1%

2%

Utilities

1%

1%

<1%

1%

--

<1%

NAICS CATEGORIES

Arts/entertainment Information

Bold figures are significantly different between Family-Owned and Not Family-Owned Businesses.

13

SECTION III

SECTION III

Owner Characteristics WHO OWNS THESE MFBEs? Compared to MBEs that are not family-owned, characteristics of the owners of MFBEs are:

an annual income 36% higher than the state’s median household income.*

•

Slightly older (52 years old vs. 50 years old not family-owned).

•

2009 Arizona education attained – 26% college degree 1 compared to 40% among MFBE owners.

•

Lower median income ($63K vs. $86K not familyowned).

•

2011 Arizona median household income - $46, 709 2 compared to the $63,400 among owners.

•

Less educated (40% have a college education vs.

63% not family-owned).

•

More likely to be Hispanic (66% vs. 53% not familyowned).

Compared to the general population - MFBE owners were 50% more likely to have a college degree and have

2012 MINORITY FAMILY-OWNED OWNER PROFILE SAMPLE SIZE DEMOGRAPHICS Median Age Percentage with college degree or more Education Median Household Income CULTURE/LANGUAGE Born in U.S. ETHNIC BACKGROUND Hispanic Asian Black/African American American Indian Native Hawaiian or other Pacific Islander

* NOTE: The income for MFBE owners is not a direct comparison with the overall household figures because the state’s 2011 median income accounts for multiple wage earners in the home compared to the MFBE owner’s individual income. The difference of MFBEs household income would be even greater than Arizona household income.

MINORITY BUSINESS ENTERPRISE FAMILY-OWNED

NOT FAMILY-OWNED

345

256

52 YEARS

50 YEARS

40%

63%

$63,400

$85,900

70%

67%

66%

53%

16%

20%

10%

14%

11%

12%

1%

2%

Bold figures are significantly different between Family-Owned and Not Family-Owned Businesses.

15

& I N

P A R T N E R S H I P

W I T H

P R E S E N T

AZ MILLION DOLLAR CIRCLE OF EXCELLENCE Leading

2 0 1 3

the

W ay

in

Supplier Diversity

I N D U C T I O N

SECTION IV

SECTION IV

The Future WHAT DO THESE OWNERS THINK ABOUT THE FUTURE OF THEIR BUSINESS? Improving economic future - Most MFBEs felt that their financial situation will improve in the next 12 months (63%). Only 8% anticipated that their situation will become worse.

Expansion plans â&#x20AC;&#x201C; More than half (57%) planned on expanding their business during the next five years. Only 8% planned to shrink their business.

17

SECTION IV

SECTION IV • THE FUTURE

18

CONCLUSIONS & END NOTES

Conclusions 1. Similarities – Minority Family-Owned Business Enterprises generally faced the same challenges as non-family-owned businesses. Staying in business, surviving the economic slowdown, building their customer base, and finding capital sources were common to all businesses. When reviewing the challenges that MFBEs face, succession planning was not mentioned as a top-of-mind issue. Most businesses mentioned more immediate challenges that they the face in their daily operation. While succession planning would most likely have received some responses if directly asked, this issue appeared to be more of a longer term challenge. Those helping MFBEs with succession planning will need to focus these owners beyond the day-to-day challenges and try to convince companies to extend their planning horizon.

2. Smaller, older, businesses – The main differences between MFBEs and non-family-owned businesses were more firmagraphic in nature. MFBEs represented smaller-sized operations that have been around for a while. MFEBs were also less likely to be in a “professional/technical” field.

•

The owners of MFBEs also reflected smaller organizations. They tended to have lower median incomes and less education than non-family-owned businesses.

3. Opportunities – Organizations wanting to help MFBEs could focus on three areas that surfaced during the research: •

Helping market/sales/build their customer base

•

Identifying sources of capital

•

Provide support in how to expand their businesses

End Notes United States Census Bureau, Education Attained by State, The 2012 Statistical Abstract, The National Data Book, 2012, http://www.census.gov/compendia/statab/cats/education/educational_attainment.html.

1

Amanda Noss, “U.S, Census Bureau, Household Income for States 2010 and 2011,” American Community Survey Briefs, United States Census Bureau, September 2012.

2

19

THE ARIZONA HISPANIC CHAMBER OF COMMERCE

PROUDLY THANKS Los Amigos Partners PLATINO

ORO

PLATA

BRONCE

Effective 10/16/2013

Join Today at www.azhcc.com or [602] 279-1800

Teamwork makes it happen.

By pulling together, we can accomplish great things.

All of us at Anheuser-Busch proudly support the Arizona Hispanic Chamber of Commerce for leading the way.

©2012 Anheuser-Busch, Budweiser® Beer, St Louis, MO

Ad Name:Teamwork General Item #:PCS2012xxxx Order #:253255

Closing Date:8/2/13 QC: CS Pub: Arizona Hispanic

Trim:7.75x10 Bleed: none Live:7.25x9.5