ARIZONA Minority Business Enterprise Study Report (2022)

A R I Z O N A MINORITY BUSINESS ENTERPRISE STUDY REPORT 2 0 2 2

A R I Z O N A

2 0 2 2

A R I Z O N A MINORITY BUSINESS ENTERPRISE STUDY REPORT 2 0 2 2 P R E S E N T E D

B Y

Arizona Hispanic Chamber of Commerce Foundation F U N D E D

B Y

U.S. Department of Commerce Minority Business Development Agency Coronavirus Response and Relief Fund R E S E A R C H

C O N D U C T E D

B Y

WestGroup Research MINORITY BUSINESS ENTERPRISE REPORT

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ACKNOWLEDGMENTS

E N D O R S I N G

O R G A N I Z A T I O N S

A r i z o n a H i s pa n i c Cha m b e r o f C o m m e r c e FOUND ATION

R E S E A R C H

T E A M

G l e n n I wata Wes t Group Rese arch

K at y G a l l e r t Wes t Group Rese arch

Monica S. Vil l al obos A r i z o n a H i s pa n i c Cha m b e r o f C o m m e r c e

C ata l i n a P e r e z A r i z o n a H i s pa n i c Cha m b e r o f C o m m e r c e

Ceril a Gail liard O r c h e s t r at i n g Y o u r S u c c e s s

K a a r e n - Ly n G r av e s A I A NN H * P r o j e c t N A BEDC

P R O D U C T I O N

T E A M

Carmen G. Martinez A r i z o n a H i s pa n i c Cha m b e r o f C o m m e r c e *AMERICAN INDIAN, ALASKA NATIVE, & NATIVE HAWAIIAN (AIANNH)

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ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

TABLE OF CONTENTS ACKNOWLEDGEMENTS

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STUDY HIGHLIGHTS

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CONCLUSIONS

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STUDY OVERVIEW

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STUDY FINDINGS

11 Challenges/Strategies – COVID Pandemic

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BUSINESS PROFILE – Fair Trade Cafe, Owner Stephanie Vasquez

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SECTION II.

Challenges/Strategies – Minority Business Enterprises

28

SECTION III.

Access to Capital

35

SECTION IV.

Role Models/Resources

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BUSINESS PROFILE – Gamez Lining Systems/ Gamez Equipment, Owner Carlos Gamez

42

SECTION V.

Business Characteristics

45

SECTION VI.

Owner Characteristics

52

SECTION I.

SECTION VII. Rural and Economically Distressed Areas

54

SECTION VIII. Indigenous Community/Remote Tribal Communities

59

STUDY BACKGROUND AND METHODOLOGY

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END NOTES

69

NOTE: INDIGENOUS AREAS INCLUDE RURAL AND/OR ECONOMICALLY DISTRESSED AREAS

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STUDY HIGHLIGHTS The Arizona Hispanic Chamber of Commerce designed this study to be a resource for businesses, organizations, educators, government agencies and individuals who want Minority Business Enterprises (MBEs) to succeed. This was funded by U.S. Department of Commerce, Minority Business Development Agency, Coronavirus Response and Relief Fund to assist with the following: a) identifying potential policy topics for MBDA to champion, b) comprehensive data collection which could be used in future MBE studies, c) information analysis on minority business enterprises, and d) information programming for business organizations. The MBE Study focused on providing insights regarding the challenges businesses faced during the pandemic and the strategies they used to overcome them. Other topics include challenges and strategies of being an MBE as well as gaining access to capital. Comparisons were also made with businesses located in Historically Underutilized Business Zones (“HUBZones”), (1) and businesses operating in Indigenous Communities.

A total of 650 telephone interviews were conducted with Arizona businesses during January – February 2022.

This was broken down into 403 MBEs and 230 non-MBEs (27 were not identified). Specific targets included economically disadvantaged businesses, especially those operating in rural areas (HUBZone locations (1) – 325 interviews), minority businesses in general, comparison with non-minority-owned businesses, and businesses in Indigenous Communities (56 interviews).

The businesses represent a range of industries, company sizes and locations throughout the state.

SURVIVING AND RECOVERING – The storylines that surfaced in this study represent businesses that made

it through the pandemic up to this point. While an estimated one-third of businesses nationwide shutdown (2) from March 2020 to approximately March 2022 during the pandemic, those surveyed for this study provide a picture of those who survived (or reopened during) the pandemic and have recovered/are in the process of recovering.

It is also important to note that the pandemic is still not considered “over” at the time of this writing so the challenges, solutions, and insights covered in this report are based on this continually evolving story.

MORE COMMONALITIES THAN DIFFERENCES – The challenges faced and strategies used by businesses during the pandemic were very similar when comparing the various target groups (e.g., MBEs, non-MBEs, HUBZone, Indigenous Communities). The economic, technological, and operational business problems created by the pandemic generally did not differ by type of businesses or ownership. Similarly, the strategies and solutions used were also common to most businesses; however, there were differences, not by types of problems and solutions, but by the intensity and impact they had on MBEs and the various target groups.

PANDEMIC CHALLENGES – While some businesses/industries thrived during the pandemic, most of those

surveyed had faced a series of challenges that were mentioned throughout the study. The following were among the top three challenges facing MBEs (and non-MBEs) during the pandemic: INITIAL ECONOMIC HIT (29% top-of-mind mentions) – Most of the businesses took an initial hit to their revenue at the start of the pandemic. Experiencing the impact of governmentmandated shutdowns and adjusting business practices/technologies to accommodate a remote workforce were among many of the challenges mentioned directly affecting business revenues.

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ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY HIGHLIGHTS WORKFORCE ISSUES (26% top-of-mind mentions) – Businesses experienced a range of workforce issues, including laying off employees and then having to re-staff their organizations during the recovery while relying on an unpredictable and sometimes reluctant workforce.

SUPPLY CHAIN ISSUES (11% top-of-mind mentions) – Initial pandemic panic resulted in supply chain issues at the consumer level (e.g., toilet paper shortages). Two years later, businesses experienced broader supply chain issues that continue to affect operations and revenue.

An article from Duke University highlighted some of the causes of the supply chain shortages: It appears that three major issues have contributed most to the (supply chain) chaos: COVID creating a shortage of workers that has reduced production capacity around the world, distortions to typical demand due to changes in customer purchasing behavior, and the fact that manufacturing and logistics systems are often run at or near their maximum capacity. (3)

PANDEMIC STRATEGIES – In the two years since the start of the pandemic, MBEs (as well as non-MBEs) top strategies fell into the following three categories and followed a natural progression.

Reducing the damage (10% mentioned top-of-mind switching to remote working, 9% changed their hiring practices and 9% changed their operations) – During the initial pandemic shutdowns, MBE businesses mentioned having to close their operations (often due to the government mandates), cut staff, and reduce operational expenses. Operational changes were considered “low hanging fruit” decisions, especially with the uncertainty of the length of the pandemic, and were typically the first solutions that were implemented.

Seeking help (10% mentioned top-of-mind) – As expenses mounted, businesses began to apply for the government loans that were made available. Almost half the MBEs surveyed applied and received some government assistance (e.g., Paycheck Protection Program and Economic Injury Disaster Loans). While most MBEs are self-funded without much reliance on commercial, government or private funding, the PPP and EIDL were key strategies to help during this phase.

Increasing marketing efforts (23% mentioned top-of-mind) – As the pandemic continued, MBEs needed to identify new revenue sources to make up for the lost customers. The top pandemic strategy mentioned involved changes to marketing efforts. A wide-range of solutions were mentioned including starting new lines of businesses, increasing advertising, targeting new customer markets, expanding social media efforts, networking, and promoting MBE status.

MBE DIFFERENCES SAME LIST, BUT GREATER IMPACT FROM THE PANDEMIC – While the ranking of top pandemic issues were generally the same as non-MBEs, MBEs appeared to have significantly more of a challenge with decreasing sales during the pandemic than nonminority businesses. Minority businesses also had greater obstacles gaining access to

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STUDY HIGHLIGHTS

capital than non-minorities. In addition, those saying they had “no different challenges than any other business” during the pandemic was higher among non-MBE businesses than MBE businesses.

MORE AGGRESSIVE EFFORTS – MBEs seemed to have a greater urgency to respond to the pandemic challenges than non-MBEs. As a result, MBEs were significantly more likely to try new marketing strategies, apply for loans and downsize their operations than non-MBEs.

MINORITY BUSINESS CHALLENGES/STRATEGIES NEGATIVE IMPACT – Despite the overwhelming impact of the pandemic on their

businesses, these owners were also aware of negative repercussions associated with being an MBE. Almost half felt they had to overcome negative perceptions of being a minority. Onethird felt cultural differences had an impact on their business and almost one-third felt like they have been treated differently because they are a minority.

INCREASING VISIBILITY – The main strategies used to address the negative impacts of

being a minority-owned business involved increasing their visibility. Most network with other MBEs. Half promote the fact they are an MBE, and half use their minority status to pursue business opportunities.

OVER TIME – Comparing results over time, the percentage of businesses having negative experiences being minority-owned have not changed significantly (compared to results from the 2012 study, 10 years earlier).

ACCESS TO CAPITAL SELF-FUNDING – Most MBEs fund their business internally – i.e. through the business, from owners’ personal savings/credit (63%).

BIGGER CHALLENGE – MBEs were twice as likely (58%) to feel gaining access to capital was a challenge compared to non-MBEs (29%).

BUSINESS CHARACTERISTICS The following are some of the characteristics of an MBE during 2022. o o o o

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Median revenue was $279,000 in 2021 compared to $480,000 for non-MBE companies.

Median staff size is 5 employees. – Same as non-MBE companies.

Median age of the MBE businesses is 9 years old (down from MBE businesses’ median age of 12 years old in 2012).

Almost half conduct business outside of Arizona and within the U.S. (not including Internet-based business); One in eight work with customers internationally (not including Internet-based business).

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY HIGHLIGHTS

OWNER CHARACTERISTICS The following is a profile of the MBE owners: o o o o o

o o

Most started the company (84%).

Were born in the U.S. (76%) Two-thirds speak another language besides English (62%) o 72% speak Spanish (of those who speak a second (or more) language Median age of the owner is 50 years old.

Political affiliation: o Independent – 28% o Democrat – 22% o Republican – 18% o No preference – 7% o Refused – 24% Education: o College graduate – 63% Owner’s median annual income in 2021: o $92,300

RURAL AND ECONOMICALLY DISTRESSED AREAS One of the key research objectives was to survey businesses in rural and economically distressed areas as defined by their location via “HUBZones.” The Small Business Administration defines HUBZones as “... small business in historically underutilized business zones.” (1) HUBZone businesses throughout the state were surveyed for this study. HUBZone and non-HUBZone businesses were compared for this analysis.

There were surprisingly few major differences between HUBZone and non-HUBZone areas regarding the challenges and strategies they faced during the pandemic as well as being a minority-owned business. The differences that did surface were mainly rural vs. urban challenges (e.g., supply chain issues). In addition, capital access was an even bigger challenge for HUBZone businesses, especially since they tend to be lower revenue (twothirds the size of non-HUBZone businesses).

PANDEMIC CHALLENGES o

PROS AND CONS – Supply chain issues were more of a problem within HUBZone businesses compared to urban areas most likely due to more limited access to supplies and inventory. On the other hand, retaining labor force seemed to be less of an issue, especially when there are fewer job options in the rural areas.

o

ACCESS TO CAPITAL – HUBZone MBEs were more likely to feel gaining access to capital was a significant challenge compared to non-HUBZone and HUBZone businesses overall.

o

PPP LOANS – More HUBZone MBEs applied for PPP loans than HUBZone businesses or those in non-HUBZone locations.

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STUDY HIGHLIGHTS

MINORITY DIFFERENCES o

CULTURAL DIFFERENCES – HUBZone businesses experience more cultural differences than non-HUBZone locations.

BUSINESS PROFILES o

BUSINESS CHARACTERISTICS – HUBZone businesses tend to be smaller in revenue and older than non-HUBZone businesses.

o

OWNER CHARACTERISTICS – HUBZone business owners make significantly less income, are less educated and less likely to actually have started the company than non-HUBZone companies.

INDIGENOUS COMMUNITY/ REMOTE TRIBAL COMMUNITIES WestGroup completing 56 interviews with businesses in Indigenous Communities/Remote Tribal Communities in Arizona (targeted completing at least 50). While there were very few differences when comparing these businesses with other MBEs or non-MBEs, a few themes surfaced.

MINORITY DIFFERENCES o

NEGATIVE PERCEPTIONS – Tribal Community businesses were more likely to feel they have had to overcome negative perceptions as minority as well as change their business practices due to cultural differences than other MBEs.

o

PROMOTING THEIR STATUS – MBEs in Tribal Communities were more likely to promote and position their minority status in marketing the business compared to other MBEs.

ACCESS TO CAPITAL o

Gaining access to capital among Tribal Community MBEs is clearly a significant challenge (38% consider gaining access to capital is a significant challenge, 21% consider this somewhat of challenge among Indigenous MBEs).

BUSINESS PROFILE o

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The small sample size of Indigenous Community/Remote Tribal Communities businesses made it difficult to isolate differences with other target groups, but these businesses tended to be younger than others. In addition, the owners made significantly less annual income than other MBEs (almost 20% lower).

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

CONCLUSIONS 1. While the pandemic was difficult on most businesses, Minority Business Enterprises were more severally impacted than non-MBEs. MBEs as well as those in HUBZone locations and businesses in Indigenous/Tribal Communities are generally smaller (revenue), self-funded, and less likely to have the financial depth to have handled a disaster like the pandemic. As a result, MBEs had to be more aggressive in order to survive the challenges of lost sales, workforce limitations and supply chain issues.

Many businesses followed a natural “survival” progression during the pandemic– Cutbacks first – layoffs, shutdowns, reduction in operations Seek help – Government assistance such as PPP and EIDL Rebuild/recover – Developing new products/services, finding new ways to attract customers, networking, advertising, and increasing visibility.

The difference was that MBEs appeared to be more aggressive than non-MBEs to take these steps.

2. Negative impact of being a minority-owned business still surfaced in the midst of the pandemic. Even though the focus was clearly to survive and recover, MBEs were still aware of cultural differences and the negative impact of being a minority-owned business, especially when it came to gaining access to capital. In the midst of the pandemic, MBEs were promoting their minority status, networking with other businesses, and increasing their communication to customers in order to address these challenges.

3. The one theme that surfaced in every target group was the need to find capital sources. A focal point for companies wanting to assist MBEs (as well as those in HUBZone locations and businesses in Indigenous/Tribal Communities) is to help educate them on the process of applying for loans/grants (e.g., PPP).

When asked what they would have done differently during the pandemic, twice as many MBEs than nonMBEs said they wish they would have applied for the PPP loan. During one of the interviews with an MBE manufacturing company, the owner mentioned hearing about loans to support minority owned businesses over the years, but has never successfully applied. Having funding available for MBEs is one issue, but showing them how to apply for funding that is already available seems like a more immediate solution.

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STUDY OVERVIEW The Arizona Hispanic Chamber of Commerce and Arizona Minority Business Center have been conducting research with minority-owned businesses for the past 17 years. The focus of the research has been to provide insights into the needs and opportunities of minority business enterprises as a resource to a wide range of audiences including government officials, and analysts; business and community leaders; and educators.

For perspective, the U.S. Census records prior to the pandemic estimated the following in 2018: Arizona had 168,000 minority-owned businesses, which represents the total number of firms with or without paid employees. (A total of 16,400 minority-owned businesses had paid employees.) (4) Minority-owned firms represented 28% of all Arizona businesses. (4) The size and impact of these businesses take on an even greater importance with the continued population growth of minorities in Arizona. For example, Hispanic buying power in Arizona reached $63 Billion in 2020.(5) The 2022 study is the fourth of a series of studies conducted since 2005. While some of the concepts covered in the research have been tracked over time, the study has adapted to understand the needs and issues facing minority businesses during specific timeframes. In addition to tracking the challenges, strategies and firmographics of minority business enterprises, the 2022 study also focuses on the following topics: Impact of the COVID-19 pandemic on minority businesses.

Strategies minority businesses have taken to address these challenges.

Comparisons of these challenges and strategies of businesses in rural/economically distressed areas.

Comparisons of these challenges and strategies of businesses in Indigenous Communities.

Research conducted by WestGroup Research throughout the pandemic has highlighted that the impact and adjustments made by all businesses (as well as individuals/households) have been a moving target since March 2020. The uniqueness of the pandemic’s challenges has resulted in a continual series of pivots being made by minority businesses in order to adapt to the changes in the marketplace. Government-mandated business shutdowns, medical/mask requirements, work-from-home adjustments, school shutdowns/impact on workforce, rapidly changing employment opportunities, quickly rising labor costs, and now record levels of inflation have affected all businesses, but especially minority business enterprises.

The purpose of this study is to help focus the overall and specific needs of minority-owned businesses.

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STUDY FINDINGS SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC Minority Business Enterprises provided a top-of-mind perspective of their biggest challenges during the pandemic and what strategies they used to address them. It is important to note that the input from companies/organizations is primarily from those that stayed in business throughout the two years since the start of the pandemic. There were 39 out of 403 minority owned businesses that started during the pandemic, but most of the companies were in business since before 2020.

A. Challenges – What types of challenges have minority business enterprises (MBEs) faced during the COVID pandemic and how have they addressed them?

The biggest challenges that both MBEs and non-MBEs faced during the pandemic were o

Financial – e.g., decrease in sales – Even though all of the businesses surveyed made it through the pandemic so far, 29% specifically mentioned facing significant decreases in sales. It was clear that some businesses had started recovering to pre-pandemic sales levels by the time of this survey in 2022, but they still remembered the challenges recovering from decreases in revenue.

o

Keeping employees – As the pandemic progressed, new issues surfaced and became more severe, such as the labor shortage. Several factors affected the availability of the workforce during the pandemic, including concerns of COVID keeping potential workers at home and the shifting talent pool due to the economic downturn (e.g., restaurant workers switching to new professions rather than returning back to work). In addition, baby boomers continued to turn 65 years old at a rate of 10,000 people a day nationally (6) and the pandemic led many employees to retire earlier than they might have.

o

Supply availability – Supply chain issues surfaced in a number of high visibility challenges over the past two years, starting with consumer shortages in toilet paper and progressing to cargo ships waiting to be unloaded off the California coast. These supply chain issues continue to affect businesses resulting in delayed project timelines and rising prices of high demand products.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

CHALLENGES DURING PANDEMIC MINORITY VS. NON-MINORITY

Challenges During Pandemic Minority vs. Non-Minority

29%

DECR EAS E I N SA L ES / LOSS O F B U S I N E SS

21% 26% 26%

K EEP I N G E M P LOYE E S

11% 14% 10% 10% 7%

S UPPLY S H ORTAGES / D EC REAS ED I N V E N TO RY KEEPIN G EMP LOY EES F R C ATC H I N G V I RU S ACC ESS TO C A P I TA L

1% 7% 5% 5% 8% 6% 4% 5% 5% 5% 4% 4% 11%

COM MU N I C AT I N G WI T H CUSTO MERS/ EMP LOY EES D U RI N G Q UA RA N T I N E EM P LOY EES WORK I N G FR O M H O M E CHANG ES I N GOVERN M EN T R EG ULAT I O N S I N F LAT I ON / R I S I N G COSTS S HU T T I N G D OW N D UR I N G COV I D N O P ROB L EM S /C H A LLE N G E S 0%

MBES

20%

Non-Minority

fferent at 95% confidence level between MBEs and non-MBEs s made by 3% or less not listed

CIRCLED IN BLACK – SIGNIFICANTLY DIFFERENT AT 95% CONFIDENCE LEVEL BETWEEN MBEs AND NON-MBEs NOTE: OTHER INDIVIDUAL COMMENTS MADE BY 3% OR LESS NOT LISTED

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ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

40%

STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC MBE/non-MBE pandemic differences – When comparing MBE challenges with non-MBE companies, the top three were basically the same: – decrease in sales, keeping employees, and supply availability issues; however, MBEs appeared to have significantly more of a challenge with decreasing sales during the pandemic than nonminority businesses. Minority businesses also had greater issues gaining access to capital than non-minorities.

In addition, those saying they had “no different challenges” during the pandemic was higher among non-MBE businesses than MBE businesses.

To better understand the potential reasons for the higher concerns among MBEs than non-MBEs in these areas, a McKinsey survey conducted early during the pandemic highlighted that Hispanic and Black owned businesses were more likely to be at risk or distressed prior to the COVID-19 crisis.

In 2020, Black business ownership rates dropped 41% between February and April 2020, the largest rate of any racial group. The pandemic has exacerbated longstanding inequalities that make it harder for black-owned businesses to endure the crisis and access recovery resources. Historically, Black entrepreneurs face systemic barriers to success like lack of access to capital, fewer business mentorship relationships, and a general lack of business opportunity. Over the past year, these historic inequalities have combined with hurdles brought on by the pandemic, to further hurt rates of Black-owned business formation and success. (7) Survivor’s perspective – It is important to note that participants in this study were all businesses who had made it through the pandemic so far. Businesses who closed down during the pandemic would most likely provide a different perspective.

In a related news release by KTAR radio in Phoenix: About a third of Latino-owned businesses across the United States have shut down due to the pandemic, according to the U.S. Hispanic Chamber of Commerce. “What we’re seeing here in Arizona is also very close to that,” said Monica Villalobos, president and CEO of the Arizona Hispanic Chamber of Commerce. (2) Another report by the House of Representatives Small Business Committee, indicated differences in the availability of private or government assistance with MBEs and non-MBEs. In a May 2020 McKinsey survey, more than 50 percent of surviving Black-owned businesses reported being very or extremely concerned about the viability of their business. SCORE, one of SBA’s largest Resource Partners, also conducted a client survey in August 2020. Of the roughly 3,500 responses, they found that Black-owned businesses were significantly more disrupted than their white counterparts and were more likely to seek, but less likely to receive, additional private or government assistance.(8)

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

B. Strategies – NOTE: These are unaided top-of-mind recall of strategies companies tried. Aided recall would have had higher percentages, but these focus on the strategies that most stood out in the business owner’s mind that the companied tried during COVID. MBEs tried numerous strategies over the past few years with the top six being: 1. Changed marketing strategies (23%) – The top strategy focused on recovering the lost revenue streams by increasing advertising/contacting potential customers via emails, social media, website, phone calls, networking, and events, as well as starting new lines of business (e.g., curbside pickup for restaurants).

2. Applying for loans (10%) – Applying for Paycheck Protection Plan (PPP) and other financing sources.

3. Remote workforce (10%) – Some businesses were able to move their workforce from the office to their homes in order to stay productive while reducing employees’ exposure to COVID.

4. Following the CDC guidelines (10%) – This strategy focused at two levels – 1. Keeping employees healthy and 2. Providing assurances to customers about the safety of the products, services, and locations.

5. Changed hiring practices (9%) – Hiring practices changed as the labor pool began to

shrink, including finding new employees, setting higher standards in who they hired, adding bilingual employees, and added Anglo/male partners to help with the business.

6. Changed operations (9%) – Changed hours, added technology, outsourced more, changed

inventory practices. When analyzing the data, changes to hiring practices and switching to remote working force (see above), were also considered operational changes.

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ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

STRATEGIES/SOLUTIONS TO CHALLENGES DURING PANDEMIC Strategies/Solutions to Challenges During Pandemic Minority vs. Non-Minority MINORIT Y VS. NON-MINORITY

23%

C HA NG E D M A R KETING STRATEGIES

14% 14% 10% 11% 19% 10%

FOLLOWE D C D C G UI D E LI NE S , MASKS, VACCINES DID NOTHING A P PLIED FO R LOANS

4% 10% 10% 9% 11% 9% 7% 8% 7% 6% 5% 7% 3% 4% 4% 2% 4%

SW I TC H E D TO R E MOTE WO RK FO RCE C HA NG E D HIRING PRACTICES C HA N GED O PERATIO NS WO RK ED HARDER CH ANG E D ST RAT EG I E S , SOUG HT HELP, ADVICE D OW NS I D E D OPERATIO NS/ STAFF NE W REVENU E SO U RCES CH ANGE D AT T I T UD E S - PE R S I STENCE, POSITIVITY 0%

MBES

20%

40%

Non-Minority

CIRCLED IN BLACK – SIGNIFICANTLY DIFFERENT AT 95% CONFIDENCE LEVEL BETWEEN MBES AND NON-MBEs NOTE: OTHER INDIVIDUAL COMMENTS MADE BY 3% OR LESS NOT LISTED

nificantly different at 95% confidence level between MBEs and non-MBEs al comments made by 3% or less not listed

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

Pivoting – Of the businesses who made it through the pandemic, one key strategy involved changing their marketing strategies – i.e., pivoting from their current efforts and trying new things – new products/ services/lines of business, more advertising/promotions/networking/ social media. Bottom line, even though most businesses cutback operations to reduce costs, these businesses needed to make up for lost revenue on the other side of the P&L statement and bring in business.

In crisis mode, most businesses began the pandemic by cutting back operations and applying for loans (shorter-term solutions), but as the pandemic continued, MBEs (and non-MBEs) had to find a way to increase the revenue streams that were lost/reduced (long-term solutions).

MBE vs non-MBE strategies – Comparing strategies between minority and non-minority businesses highlight that MBEs were more likely to take more aggressive strategies than non-MBEs, especially in marketing efforts, applying for loans and downsizing their operations.

MBE PANDEMIC CHALLENGES AND STRATEGIES COMMENTS PHYSICAL FITNESS INSTRUCTION Challenge:

Not having enough funding is always a concern. COVID impacted us greatly – Our staff is not very technologically advanced (which is limiting our solutions). It’s hard to staff our facility. Staff outages due to sickness limited our hours of operations.

Strategy:

Applied for additional funding primarily loans; Looking to hire and pull in volunteers and working with other organization

R E A L E S TAT E B R O K E R S / A G E N T S

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Challenge:

Keeping employees because our business shuts down when someone gets COVID. They don’t really help anymore when we have to quarantine because of COVID. If we’re close (financially), we don’t make money. Throughout COVID, rent has gone up every year with no financial support.

Strategy:

Try to give something (work, pay) to employees during the time of quarantine.

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

TOURISM Challenge:

Lake Powell (tourism) going down. Also slow in the winter months.

Strategy:

Ramped up with new water company (started a new company).

E N G I N E E R I N G C O N S U LTA N T S Challenge:

We have a big issue with cash flow because we need to pre-order components that we know we are going to need before getting a job and we don’t have enough resources or money to do that.

Strategy:

Invested a lot of time to find components in order to stay in business (address the supply chain issue by finding other sources).

D I E TA R Y S U P P L E M E N T S Challenges:

Money was a challenge. Even though we got the EIDL and extension, we’ve been trying to grow but have been balancing everything off of loans. We had to take a loan just to stay in business. Throughout the whole process there was only 3 of us. Sometimes not even getting paid.

Strategy:

We rebranded the company. The new label created more traction because of differentiation of labels. We expanded our marketing, sales calls, social media posts.

FA B R I C AT E D S T R U C T U R A L M E TA L Challenges:

Getting access to capital and having a shortage of labor - people take off and are not here due to being sick. They can’t be here.

Strategy:

You just go through it. There really isn’t much help and you just have to accept as is. I just buy more time and become late (delivering service) with my customers.

T H A I R E S TA U R A N T Challenges:

Challenges are… prices for supplies have gone up/expensive, everything staffing and social distancing.

Strategy:

We have implemented plastic dividers throughout the restaurants and spread tables out.

We have charged more/increased prices on a few dishes. We have tried to give a probation period for new employees so they can learn.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC SENIOR SERVICES Challenge:

For our business, it was the hours we weren’t able to focus on the services we provide to our elders. We had to close our doors here but we still had meals delivered to our elders.

Having those meals delivered with no contact to our elders.

Depression. Loneliness. Our elders are a vulnerable population. When COVID hit, it gave those who isolated themselves from the elders a reason not to visit. Our elders live alone, and we could only reach them by phone calls. Our elders were slipping away from life, because they were isolated. We’re open about 2 1/2 hours. We didn’t have financial challenges, we had more grants being offered to us so the challenge itself was really the isolation. That was our hurdle here. The food from our vendors weren’t available to us, we had to get food items that our elders weren’t really familiar with.

Strategy:

We made a lot of phone calls to keep connected with elders. Went before counsel to request to open at least 2 1/2 hours to the public which they allowed. We’re open for 8 hours but not to the public. We have substitute meals. Recommended meals of the day. We have a bulk store we purchase items from as well.

C. Paycheck Protection Program (PPP) Did you receive a Paycheck Protection Program or PPP loan?

PPP loans were made available in 2020 and again in 2021. In most cases the loans did not require repayment in all or part to the government.

Half of MBEs received PPP – While 8% specifically said they applied for a PPP loan unaided, when asked directly if they received money from the Paycheck Protection Program, almost half of the Arizona MBEs (46%) mentioned they received something. Of those receiving PPP loan, two out of three of the businesses received one PPP loan during 2020 and one-third said they received two loans by 2021.

MBE vs. non-MBEs – Even though MBEs were more likely to receive a PPP loan, the median loan amount was $54,000 among MBEs which was almost half of the amount received by non-MBEs ($100,000 median). The main driver was that that MBEs median revenue were around also around half (58%) of non-MBEs.

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SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

RECEIVED PPP LOAN IN 2020/21 Received PPP Loan in 2020/21

MBE N=403

Non-MBE N=230

Not Received PPP

Not Received PPP

49%

56%

Don't Know Received PPP

5%

46%

Don't Know Received PPP

9%

35%

Among those receiving loan: Received 1 loan 61% Received 2 loans 33% Don’t Know 6% Median loan amount – $54,000

Among those receiving loan: Received 1 loan 65% Received 2 loans 38% Don’t Know 7% Median loan amount – $100,000

COMPARISON OF MBE SURVEY RESULTS TO NATIONAL PPP NEWS A review of various national articles written after the distribution of the PPP loans highlighted that the funds were disproportionate in assisting minority-owned businesses.

A New York Times analysis of data from several sources — including the Small Business Administration, which is managing the loan program — and interviews with dozens of small businesses and bankers show that Black- and other minority-owned businesses were disproportionately underserved by the relief effort, often because they lacked the connections to get access to the aid or were rejected because of the program’s rules.

Because lenders are not required to collect demographic details on their borrowers, data on the Paycheck Protection Program’s racial breakdown has been scarce, but economists have consistently found signs of gaps.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

And data from the Small Business Administration shows the relief effort’s tilt. The vast majority of lenders did not report demographic data on the 3.6 million loans they made this year, but of the 996,000 that included information on the borrower’s race, 71 percent of the dollars went to white-owned businesses. (9) Results from the Arizona MBE study highlighted that businesses receiving PPP funds were slightly higher than non-MBEs; in addition, the average funding received by non-MBEs was significantly higher. The difference in the amount of funding highlighted in the article and the MBE study seem consistent.

The initial results from the Census 2021 Annual Business Study also highlighted that the percentage of MBEs requesting government-sponsored financial assistance during the pandemic were comparable between minority (74%) and non-minority owned firms (72%). (10) Possible reasons for the potential differences between recent news reports and the MBE study regarding PPP funding include: Limited data – Since ethnic/race data was not required in the loan process, national and state level results do not appear to be available. MBE participation in PPP in Arizona, Nevada and Utah might have been different than other states.

Results of surviving businesses – All survey participants were currently in business at the time of the research. Companies that closed down at the time of the survey were not represented in these results. In other words, those who did not receive PPP and might have subsequently closed down were not included in the MBE study.

Confusion with PPP, EIDL and other government grants – A range of loans and grants were made available to businesses over the past two years under the umbrella of the CARES Act. Businesses could have been confused about the source of their loans.

D. New Lines of Business – Additional questions in the survey specifically asked if businesses added new lines of businesses. For some businesses, this meant closing one part of their business and opening or expanding another line – e.g. restaurants opening curbside service and closing dine-in options. While 2% of the MBEs mentioned this unaided, 11% agreed that they tried “new lines of business” when asked directly. This response was comparable between MBEs and non-MBEs.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

STARTED NEW LINE OF BUSINESS DURING COVID Chart 4 Started New Line of Business During COVID

MBE N=403

Non-MBE N=230

Did Not Start New Line

Did Not Start New Line

91%

88% Started New Line

11% Don't Know

1%

Started New Line

8% Don't Know

1%

E. Moving back to home-based operation – One cost cutting measure involved moving businesses operations from storefronts/bricks and mortar locations to 100% remote/home-based operations. Among home-based businesses, MBEs were asked if they moved their operations from a separate location and into their home as a result of COVID. Of the 35% who considered their business home-based, 34% switched to home based during the pandemic (12% based to all MBEs).

The percent switching to home-based were comparable between MBEs and non-MBEs.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC F. Online Business – MBEs were asked to estimate the percentage of sales conducted online before the pandemic and two years after the pandemic began.

There did not appear to be a large shift in customers conducting business online with MBEs before the pandemic compared to two years after the pandemic began.

BEFORE PANDEMIC

2022

CHANGE

(PERCENTAGE POINTS)

PERCENTAGE HAD ONLINE SALES MBE

49%

53%

4%

NON-MBEs

44%

8%

1%

AVERAGE PERCENTAGE OF ONLINE SALES AMONG THOSE WHO HAD AT LEAST SOME ONLINE SALES MBEs

43%

49%

6%

NON-MBEs

36%

36%

No Change

BOLDED ARE SIGNIFICANTLY DIFFERENT AT 05 LEVEL.

49% conducted some business online before the pandemic and 53% two years since the start of the pandemic The average amount of sales online before the pandemic was 43% and 49% two years since the start of the pandemic

G. Retrospect – What would you have done differently?

When asked how they would have changed their response to the pandemic, over half of the MBEs said they would have done the same thing (50%) or did not know any other options they would have tried (7%). In other words, they took the steps they felt were necessary at the time and did not regret their decisions.

Among those who provided steps they might have taken (based to the 43% who gave a response), the top solutions were:

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC Save more/stocked supplies/inventory/had a rainy day fund 31% (MBEs, and 21% among non-MBEs).

Implemented more technology and better prepared for remote working environment 14% (MBEs and 13%, similar to non-MBEs).

Applied for the PPP/government funding (13%, compared to 6% non-MBEs).

The first two options focused on being better prepared for the future. The third option of applying for PPP/ government funding seemed like a more realistic lesson to be learned from the pandemic.

Other strategies included increasing their marketing efforts, changing their staff (either hiring more or laying off sooner/more).

STRATEGIES/SOLUTIONS SHOULD HAVE TRIED DURING PANDEMIC MINORITY VS. NON-MINORITY

Strategies/Solutions Should Have Tried During Pandemic Minority vs. Non-Minority

31%

SAVED MORE , STOCKED SUPPL I ES/ I NVENTORY

21% 14%

MO RE TECHNOLOGY, P REP TO REMOTE WORKING

13% 13%

APPLIED FOR PPP/GOVERNMEN T LOANS

6% 11%

INCREASED MARKETING EFFORTS

9% 9%

IMPLEMENT COVID P ROTOCOLS

13% 7%

STAFF CHANGES - HIRE MORE OR CUT MORE

13% 0%

MBES

10%

20%

30%

40%

Non-Minority

CIRCLED IN BLACK – SIGNIFICANTLY DIFFERENT AT 95% CONFIDENCE LEVEL BETWEEN MBEs AND NON-MBEs NOTE: OTHER INDIVIDUAL COMMENTS MADE BY 3% OR LESS NOT LISTED Circled in black - Significantly different at 95% confidence level between MBEs and non-MBEs Note: Other individual comments made by 3% or less not listed

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

PANDEMIC STRATEGIES IN RETROSPECT COMMENTS HEALTH EDUCATION I wish we would have more applied for funding sooner and received more guidance through telehealth and digital format. I didn’t have much support or financial support. As a result, we lost a lot of customers.

BROADCASTING STATIONS Received more training for holding hybrid events (in-person and online).

AUTOMOTIVE REPAIR SHOP I would have sold my business.

FURNITURE STORE I would have taken all the free loans they were giving away. I did not take advantage of the loans or unemployment for myself. I only took advantage of one $5,000 loan and that is because they sent it to us.

BUSINESS CONSULTING I would have taken my entire business online.

MARKETING BUSINESS I would have started looking for staffing right away when things were uncertain instead of waiting.

DIETARY SUPPLEMENTS I would’ve cut out about 80% of products and focused on top 3 products. Focused our marketing.

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SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC

BUSINESS PROFILE

Fair Trade Cafe Owner

STEPHANIE VASQUEZ

C O M M U N I T Y- M I N D E D C A F É WHO IS FAIR TRADE CAFE? Fair Trade Café is a community-focused company that “also serves coffee/food.” Owner Stephanie Vasquez says the business was “founded on love” and focuses on …

Being sustainably-sourced Using local distributors Selling organically-grown coffee Recycling Promoting area businesses and artists Providing a focal point for the community that encourages “anyone and everyone to gather together” On the business-side, the Café serves a wide range of coffee, smoothies, baked goods, soups, salads, and hot/ cold sandwiches.

WHAT IS THE HISTORY OF THE FAIR TRADES CAFE? During a trip to Costa Rico, Stephanie saw an opportunity to combine her passions in education, communityinvolvement, and coffee together. Stephanie laughs about how she learned for the first time during this trip that “Coffee was a plant” – i.e. she realized you don’t need to know everything in order to start a business. After taking a tour of a local Costa Rico coffee plantation, Stephanie’s education background stirred her to do further research into coffee and uncovered the business/economic/societal impact associated with this “brown drink” that she always loved.

In 2007, Stephanie began looking for a possible location to open her Café and found an existing non-profit coffee shop that was operating by a local church who was looking to sell their business. Stephanie assumed the debt of that coffee shop and opened Fair Trade Café. Over the next 15 years, Fair Trade Café became entrenched in the local Roosevelt Row community, building a loyal clientele and bond with local businesses.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC WHAT CHALLENGES DID FAIR TRADE CAFÉ FACE DURING THE PANDEMIC AND HOW DID YOU ADDRESS THEM? Fair Trade Café was immediately affected by the pandemic. Overnight, sales dropped by 50%. The future was uncertain and none of her colleagues/associates had any experience dealing with the challenges that came with the pandemic. As a community leader, Stephanie’s fellow Roosevelt Row associates began seeking her advice on what to do, especially as some were beginning to lose their businesses.

Advocacy and Protection – Early during the pandemic, Stephanie and one of her associates, Carlos Velasco, met to discuss the impact of COVID on small businesses. An eviction notice could eventually lead to a business losing all of their assets with no recourse but to shut down. They concluded that small businesses needed advocacy at the governmentlevel in order to protect their companies. Stephanie and Carlos started a petition asking the Governor to provide relief for small businesses during this time. As they collected signatures, they began to build alliances with other organizations, such as Local First, who worked together to gain the protection/support they needed to survive.

Curbside – One of the earlier business strategies Stephanie tried to make up for lost sales was offering curbside pickup. She quickly concluded the solution would not result in enough return to get her through the pandemic.

Close down – A major step Stephanie executed early during the pandemic was to temporarily close down the Café. With 26 employees and a 50% decrease in sales, it was clear that the café could not continue as is. Stephanie needed time to develop new strategies, find additional funding, and reduce her costs so she closed the Café at the end of March 2020.

During this time, Stephanie used the shutdown to give the Café a much needed facelift and was able to reopen by August 2020.

Funding help – Stephanie self-funded the Café throughout the life of the business, but a call from the Raza Development Fund (RDF) in April 2020 provided an unexpected boost to help the Café. The RDF made funds available to Stephanie to help cover payroll and keep the business operating.

Continual adjustments – Since reopening, Stephanie continues to face pandemic related challenges, such as finding new sourcing for supplies, controlling rising costs, and staffing the Café. Her energy, passion and knowledge helped her make the adjustments needed to keep the Café open and successfully negotiate through the pandemic.

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STUDY FINDINGS

SECTION I. CHALLENGES/STRATEGIES/SUCCESSES – COVID PANDEMIC WHAT CHALLENGES HAS FAIR TRADES CAFÉ FACED AS A MINORITY-OWNED BUSINESS AND WHAT STRATEGIES DID YOU USE TO OVERCOME THEM? Stephanie acknowledges that she has faced challenges as a minority and woman-owned business, but also recognizes she has faced these same issues her entire life.

I’m so calloused from the systems in place (such as the discrimination or bias against minorities and/or women). I am so used to it…. But I have learned from these obstacles. They have made me stronger. I have experienced this my entire life and I know I can do this. I can survive and I can thrive….

When she heard non-minority business owners were facing challenges applying for PPP loans, Stephanie felt compassion towards them and hoped they might begin to understand the issues Latina business owners have faced their entire lives.

WHAT HAVE BEEN YOUR BIGGEST SUCCESSES AS A COMPANY? Stephanie recalled the day she had “made it” as a business owner: I remember when I first was able to buy a crush ice machine… not just a used one, but a new one. I still recall when the gentlemen were installing it. I felt I had really made it…. I felt like a five year old on Christmas Day!

WHAT WAS YOUR HARDEST LESSON? Closing the down the business during COVID was difficult for Stephanie. She knew she had to close down the shop in the short-term in order to succeed in the long-run. The phrase Stephanie used to describe this time was: The looser the grip, the tighter the hold.

Stephanie had to let go of the unknown future of the Café and close down in order for her to get the clarity she needed to succeed.

WHAT ADVICE WOULD YOU GIVE TO SOMEONE STARTING UP A BUSINESS? Don’t wait for the perfect moment… You don’t know what is ahead of you… Just get started!

Trust in your own decisions…. Trust in your gut to make the best decisions…

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

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STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES In 2012 when the MBE Study was previously conducted, the biggest challenge facing Arizona minority-owned businesses was trying to recover from the economic downturn which began in December 2007. Both MBEs and non-MBEs were still affected by the recession and this tended to influence the responses to questions about challenges being a minority-owned business – e.g. MBEs often mentioned general business related challenges rather than specifically about being a minority business enterprise. (11) In 2022, the pandemic was the overriding issue and had a similar impact as in 2012 by influencing responses about the challenges and strategies associated with being minority-owned businesses. Many of the MBEs and non-MBEs were struggling to keep afloat during the pandemic. While being an MBE had its challenges, the basic survival of the businesses had a significantly larger impact on them than issues such as discrimination or competing on “an even playing field.”

Over one-third of the MBEs did not feel they faced significantly different challenges (or could not think of any challenges top-of-mind) compared to non-MBE companies. While they might have experienced negative minority-related issues, most primarily focus their efforts at overcoming the challenges of running a business that is common to most organizations.

A. Top-of-Mind Recall of Minority-Related Challenges When asked for their most significant challenge as a minority-owned business, less than half could recall or mentioned a specific situation or issue. 56% either said no unique challenges or did not know.

Of those who were able to recall specific issues, the top ones mentioned were: Finding customers (i.e., finding contracts, clients) Being taken seriously Discrimination Competing on an equal playing field with other businesses The list is comparable to prior years when MBEs were asked top-of-mind about their challenges as minorityowned businesses.

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STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES

MOST SIGNIFICANT CHALLENGES OR BARRIERS FACED AS A MINORITY-OWNED BUSINESS Most Significant Challenges or Barriers Faced as a Minority-Owned Business

N O UN IQUE CHA LLE N G E S/ SA ME A S OTHER BUS I NESSES

46% 10%

DON 'T KN OW/ N O A N SWE R N OT BE IN G TA KE N SE R IO U SLY

7%

FIN DI N G CLIE N TS/G E T T IN G WO R K

7%

DISC R IM IN AT IO N

4%

COMPE T I T ION WIT H LA R G E R CO MPA N IE S

4% 3%

SEC UR I N G LOA N S/ F U N DIN G N OT MA KI N G E N OUG H MO N E Y

2%

OVE R COMI N G ECON OMI C DOWN T U R N

2%

ISSUE S WI T H CON T RAC TS/ U N A B LE TO G E T CON T RAC TS

2%

E A R N IN G R E SP EC T O F SUPPLIE R S/ C U STO ME R S

1% 0%

20%

40%

60%

B. Aided Recall of Minority Business Challenges While less than half of MBEs mentioned any challenge unaided, when asked outright, one-third to almost a half acknowledged had experienced at least somewhat of a challenge from a list of three challenges as minority-owned business.

MBEs were asked a series of aided questions to quantify the challenges they faced.

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STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES Almost half (44%) of MBEs felt overcoming negative perceptions of their business being minority-owned was at least somewhat of a challenge (18% significantly challenge, 26% somewhat of a challenge). These responses have held relatively even over the past 15 years.

One-third (37%) felt that cultural differences have had an impact on their business practices (12% significant challenge, 25% somewhat of a challenge). Ratings have not changed over the past 15 years.

One third (30%) agreed they have been treated differently because they are a minorityowned business.

OVERCOMING NEGATIVE PERCEPTIONS OF BEING A MINORITY-OWNED BUSINESS Chart 8 Overcoming Negative Perceptions of Being a Minority-Owned Business

2 007 M IN O R ITY N = 6 6 3

2 012 MINO R ITY N = 6 0 5

17%

14% 26%

18%

2 02 2 M IN O R ITY N = 4 0 3

0%

30

24%

57%

2%

58%

2%

26% 20%

40%

57% 60%

80%

0% 100%

SIGNIFICANT CHALLENGE

SOMEWHAT OF A CHALLENGE

NOT A REAL CHALLENGE

DON'T KNOW/NO ANSWER

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES Chart 9 Whether Cultural Differences Have Impact on Business Practices

WHETHER CULTURAL DIFFERENCES HAVE IMPACT ON BUSINESS PRACTICES 2 0 0 7 MI N OR ITY N = 6 6 3

2 0 1 2 MI N O R ITY N = 6 0 5

12%

23%

64%

1%

10%

24%

65%

1%

12%

2 0 2 2 MI N OR ITY N = 4 0 3

0%

25%

0%

63%

20%

40%

60%

80%

100%

SIGNIFICANT CHALLENGE

SOMEWHAT OF A CHALLENGE

NOT A REAL CHALLENGE

DON'T KNOW/NO ANWER

PERCEPTION OF BEING TREATED DIFFERENTLY

BY SUPPLIERS OR CUSTOMERS Chart 10 Perception of Being Treated Differently by Suppliers or Customers

2007 MINORI TY N =6 6 3

9% 19%

20%

201 2 MINO RI TY N =6 0 5

6% 20%

51%

2022 MINORI TY N=40 3

10% 20%

40%

0%

STRONGLY AGREE

20%

AGREE

DISAGREE

40%

2%

50%

60%

STRONGLY DISAGREE

22%

25% 80%

2% 4% 100%

DON'T KNOW/NO ANSWER

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

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STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES

C. Strategies Overcoming Racial Barriers MBEs were asked how they overcome the challenges associated with being minority-owned. The top-ofmind responses included: How Businesses Overcame Barriers as a Minority Owned Business – Top Unaided Responses

HOW BUSINESSES OVERCAME BARRIERS AS A MINORITY OWNED BUSINESS TOP UN AIDED RESPONSES

20%

CH AN G E D M AR K E T I N G ST RAT EGY

17%

C H AN G E D T H EI R AT T I T U D E

13%

SO U G H T A DV I C E/I N P U T

12%

N ETWO R K I N G

5%

W E NT AF T E R NEW C USTO M ER S G OT LOA N S

3%

TO O K C AR E O F EM P LOY EES

3% 0%

5%

10%

15%

20%

25%

Increasing visibility – MBEs significantly increased their efforts to promote their minority status as a way to overcome their challenges. Raising their visibility/branding as MBEs and building customer relationships as an MBE was the top unaided response.

MBEs were also asked a series of aided questions to quantify the strategies they used to overcome the challenges of being a minority-owned business.

More than two-thirds (69%) networked with other MBEs. More than half (53%) promoted the fact that they were an MBE. More than half (54%) used their minority status to pursue business opportunities.

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STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES

AGREEMENT WITH STATEMENTS UNIQUE TO MINORITY BUSINESSES ENTERPRISES Chart 15 Agreement With Statements Unique to Minority Businesses Enterprises

2007

I try to network with other MBEs

12%

2012

15%

2022

I try to promote the fact that my company is a MBE

2007

7%

2012

13%

2012

22%

STRONGLY AGREE

46%

31% 20%

53% 48%

34%

23% 0%

29% 31%

14%

69%

38%

33%

22%

2022

57%

42%

31%

2022

I use my MOB status to pursue business opportunities

44%

32%

40%

54% 60%

80%

AGREE

* Significantly different at 95% confidence level between 2007 and 2012 Note: MOB = Minority-Owned Business

* SIGNIFICANTLY DIFFERENT AT 95% CONFIDENCE LEVEL BETWEEN 2007 AND 2012 NOTE: MOB = MINORITY-OWNED BUSINESS

CHALLENGES FACING MBEs AND STRATEGIES COMMENTS SECURITY GUARD SERVICES Challenge:

Being a black woman in my line of business (i.e., not being taken seriously/ listening to me)

Strategy:

Faith and prayers, going out to get contract, cold calling. Asking clients to take chance on me.

EDUCATIONAL SERVICES Challenge:

Trying to get into larger organizations as a small business.

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STUDY FINDINGS

SECTION II. CHALLENGES/STRATEGIES – MINORITY BUSINESS ENTERPRISES

Strategy:

Trying to get network opportunities to get into these organizations and have to meet through matchmaking events.

REAL ESTATE BROKERS/AGENTS Challenge:

Client requested a copy of our drivers’ license and immediately declined it. After I disputed it, they changed their response to “We will consider”. If I hadn’t disputed it, they would have changed it.

Strategy:

Researching the rules and refusing to stop and not just accept what they say.

HOTEL/MOTEL/MULTI-FAMILY HOME RENOVATION AND REMODELING Challenge:

Financing projects have always been difficult.

Strategy:

Limited ourselves in terms of dollar amounts in projects we seek. We can’t get funding for larger job sizes.

AUTOMOTIVE SERVICES Challenge:

The way business is set up. I haven’t had any luck. There is support for Native American Indian business programs and haven’t gotten any help. There’s a lot of talk but it dies there. They tell me all that I can get enrolled in and then I sign up and nothing happens. I am very interested in the mentor program.

Strategy:

I try to educate myself the best I can. I have found mentors on my own. It helped me a lot with mentors.

AUDIO VISUAL EQUIPMENT/SUPPLIES Challenge:

Being a female and African American - 49 years old - is challenging. I have a Master’s degree, and the biggest barrier is not being taken seriously or valued by people in our profession and the higher up the harder it is.

Understanding the language, jokes, and difference in intellect of those unlike me.

People of my culture and of minority background are easier to relate to and hang out with. Differences in drinking habits and cultural habits. A lot of racial stereotypes, token compliments, institutional racism and implicit biases.

Strategy:

I pray and recognize that what will be is what is allowed. If I can help the next generation to be better, I will try. I rely to on my religion and prayer to keep me sane.

TRUCKING COMPANY

34

Challenge:

Banks not giving me the opportunity. That’s why I chose not to inquire for any commercial loans from banks.

Strategy:

I take the loans on my personal and re-loan to the company.

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION III. ACCESS TO CAPITAL One theme that surfaced throughout the interviews was the challenge associated with needing access to capital.

Topics included where MBEs obtain resources to finance their business, how difficult it is to obtain financing, and how they were treated when applying for a loan.

Credit Source – Most MBEs currently fund their business internally – either through the profits/revenue of the business or from owners’ own personal savings/ credit (63%). In addition: o 14% finance through financial institutions o 9% finance their business through government loans/grants Significant Challenge – More than half (58%) of MBEs said gaining access to capital was at least somewhat of a challenge (compared to 29% of non-MBEs).

Of those 58% who felt this was a significant challenge, the most often mentioned “capital-related strategies” they used to address the issue were: o o o o o

Applying for government loans – e.g., PPP Did nothing Self-financed Increased marketing efforts Cut back operations/save money to improve financial position

Chart 12 Those who did not feel they were treated with respect when applying for a loan decreased Gaining Access to Capital slightly over the past 15 years (not significantly) to 16% in 2022; down from 21% in 2012.

GAINING ACCESS TO CAPITAL MBEs N=403

Somewhat of a Challenge

20%

Non-MBEs N=230

Somewhat of a Challenge

Significant Challenge

18%

38%

Significant Challenge Not a Real Challenge

42%

Not a Real Challenge

70%

11%

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

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STUDY FINDINGS

SECTION III. ACCESS TO CAPITAL

OVERCOMING CHALLENGES OF GAINING ACCESS TO CAPITAL

ong top ponses:

Chart 13 Overcoming Challenges of Gaining Access to Capital

A M O N G T OP RE S PON S E S : A P P L I ED FOR G OV ERN M E N T LOA N S / G RA N TS (E. G . , P PP)

17%

C H A N G ED AT T I T U D E

17%

DI D N OT H I NG

11%

I N C REAS ED MA RKETI NG

11%

S EL F F I N A N C E D

9%

C UT BAC K EX P ENS E S

9%

FOUN D OT H ER F I N A N C I NG

9%

EDUCAT I ON / L EA RN ED MORE F R O M OT H ERS A B OUT F I N A N C I NG

8% 7%

DI D N OT G I V E U P BU DG E TE D

6%

WORKED HARDER

6%

B UILT UP C R E D I T

6%

0%

5%

10%

N-235 AMONG THOSE WHO FELT ACCESS TO CAPITAL WAS AT LEAST SOMEWHAT OF A CHALLENGE

e who felt access to capital was at least somewhat of a challenge

36

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

15%

20%

STUDY FINDINGS

SECTION III. ACCESS TO CAPITAL

TREATED WITH RESPECT WHEN APPLYING FOR LOANS

PERCENT WHO DISAGREE WITH THE STATEMENT

I was treated with respect when applying for a business loan at a bank or financial institution Chart 14 Treated With Respect When Applying For Loans

Start here!!!

Percent Who Disagree with the Statement I was treated with respect when applying for a business loan at a bank or financial institution

2007 MINORITY N=663

13%

2012 MINORITY N=605

13%

2022 MINORITY N=403

6% 0%

5%

6% 19%

21%

8%

16%

10% 10%

STRONGLY DISAGREE

15%

20%

25%

DISAGREE

Check how DK’s were handled in 2012

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

37

STUDY FINDINGS

SECTION III. ACCESS TO CAPITAL

STEPS TAKEN TO GAIN ACCESS TO CAPITAL COMMENTS HOLDING COMPANY Reaching out to smaller banks and developing relationships with them.

RADIO BROADCASTING STATION Working more closely with Tribal departments and the General Manager and itemize resources assets.

HVAC CONTRACTOR Cut back on bigger commercial jobs. Taking a lot more smaller jobs.

CANNABIS SUPPLIER Going through CPLC program, Minority programs.

PARALEGAL SERVICE Applied for the FDA Loan. But haven’t been able to get more money. So we are using our own personal money.

PHARMACEUTICALS Finding private funding through family.

ENGINEERING COMPANY Financing through high interest rate loans

BUSINESS SERVICES Trying to contact brokers and get a second line of loans and home equity loans

CPA

SBA loans have been very difficult. I had to involve the Senator. I reached out to an SBA lending program and did not hear anything so I reach out to the Senator.

They are working so that its gets approved.

WINDOWS AND DOORS PREFABRICATOR I kept going to different banks until I got my loan.

MANAGEMENT CONSULTING The problem is kind of beyond us because banks have so many regulations that they have almost become irrelevant to small businesses. A lot of small businesses don’t need a bank. A bank does not even want to talk to you until after you have been in business for 5 years but after 5 years you don’t need a bank because you are already operating.

38

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION IV. ROLE MODELS/RESOURCES If you could have anyone visit.... – “If you could have anyone in this world visit your business, and their intentions were to specifically help your business, who would you want these people to be?” Among the top individuals mentioned by MBEs were: Elon Musk (5%) Donald Trump (5%) President Biden (4%) Warren Buffet (3%) Oprah Winfrey (3%) In 2012, the top two names mentioned were President Obama (15%) and Warren Buffet (6%). More than one response was allowed in the 2012 study.

Among “categories” of potential advisors, business experts were mentioned most often: Business experts/advisors (25%) Politicians (11%) Celebrities (3%) Responses of non-MBEs wereChart comparable to MBEs’ role models/advisors.

17 People to Advise Business – Top Mentions

PEOPLE TO ADVISE BUSINESS TOP MENTIONS

BUS INES S EX P ERTS /ADVISO RS CP A, IT, M & A, H R. S UC CE SSFUL S P ECIF IC BUS INESS LE A DE RS P O L IT ICIA N S

3% 3% 1% 1% 1%

CEL EB RIT IE S FAM ILY M EM BER/FRIE ND REL IG IO US LE A DE RS S P O RTS FIGURE S M U SICIA N S

11%

21%

DO N'T KNOW/N O ONE *ALL INDIVIDUAL MENTIONS WERE LESS THAN 1% N=403

0%

10%

25% 22%

20%

30%

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

39

STUDY FINDINGS

SECTION IV. ROLE MODELS/RESOURCES

PEOPLE TO ADVISE BUSINESS TOP NAMES MENTIONED

Chart 18 People to Advise Business Top Names Mentioned

Chart 18 People to Advise Business Top Names Mentioned

3%

E LO N M U SK

Chart 18 People to Advise Business Top Names Mentioned

Chart 18 People to Advise Business Top Names Mentioned

E LON MU S K

5%

3% 7% 5% 5% DONAL D T RUM P 5% 7% 5% PRESIDENT BIDEN 5%

D ON AL D TRU M P 3% 5% DON ALD TRU MP P R E SI D E N T B7% IDEN 5% 4% P RE S IDE N T BIDE N 5% 1% 4% WARREN BUFFET WARRE N B U F F E T 6% 1% 6% 3% 4% WARRE N BU FFE T OPRAH WINFREY 4%3% 1% 4% O PRAH WI6% N F RE Y 4% OP RAH WIN FRE Y 3% 3% 3%4% JEFF BEZOS 4% 4% 3% 3% J E FF B E ZOS 3%JE F F B E ZOS MARK CUBAN 2% 2% 3% MARK CU BAN 2% M ARK C U BAN BARACK OBAM A 2% 2%

E LO N M U SK DO N A L D T RUMP P RE S I D E N T B I DEN WA R R E N B UF FET O PRA H W I N F R EY J E F F B E ZOS M A RK C UBA N

3%

ELON MUSK

BARACK OBAMA 2% BA RAC K O BAM A

5% 5% 5%

7%

4%

1%

3% 4% 4% 3%

6%

3% 2% 2% 1% 15% 2% 15% 1%

GOVERNOR DUCEY 1% 15% GOVE RN OR DU CE Y 2% 1% AZHCC PRESIDENT 1% G OV ERN O R D U C E Y 2% 0.50% 2% 1% AZ HCC P RE S IDE N T 0% 5% 10% 1% 0.50% AZ H CC PRE SI D E N T N=663 0% 5% 10% 15%2007 MINORITY 20% 0.50% 0.50%

1%

BA RAC K O BAMA

G OV E R N O R D U C EY

A ZHCC P R E S I D E NT 0%

5%

15%2007 20% 10% 5% MINORITY

10% 0%

N=663 15% 2012 MINORITY N=605 20%

2007 MINORITY N=66320072012 MINORITY N=605 MINORITY N=663

2022 MINORITY N=403

NOTE: OTHERMINORITY INDIVIDUAL COMMENTS 1% OR LESS NOT LISTEDN=403 2012 N=605 MADE BY2022 MINORITY

2012 MINORITY N=605

Note: Other individual comments made by 1% or less not listed n= 605

2022 MINORITY N=403

2022 MINORITY “IF YOU COULD HAVE ANYONE IN N=403 THE WORLD VISIT YOUR BUSINESS” COMMENTS…

Note: Other individual comments made by 1% or less not listed n= 605

ade by 1% or less not listed

ther individual comments made by 1% or less not listed

MANAGEMENT CONSULTING Warren Buffet, I like his mentality, work ethic, simple man. What he promoted with his company.

EYE CARE SERVICE Shaquille O'Neil, has own line of eye wear and that is what we are in.

40

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

15%

15%

STUDY FINDINGS

SECTION IV. ROLE MODELS/RESOURCES FASHION/CLOTHING Governor Ducey because I want him to help us bring more workers legally to fill our employment gap or give money train them.

DANCE/ARTS NON-PROFIT Jeff Bezos – He’s one of the richest men out there. If he gave us some attention that would help us out a lot. And it would help them to be more culturally aware and network with us.

TRANSLATION SERVICES I think the President of the Hispanic Chamber. I would like more contact with her and hear great ideas for expanding business. I never lived in Arizona.

I lived many years in Argentina and all my contacts have been in Argentina.

I would ask her to help me point me in the direction of more business.

CONSULTING SERVICES Brene Brown because specializes in research base for mental health.

POOL COMPANY Elon Musk, I respect what he has done with his company and philosophy RESTAURANT John Taffer from “Bar Rescue” for front of house and the angry chef, Ramsey, for the food.

INSURANCE AGENCY One of the sharks from “Shark Tank” to tell me how to successfully run my business, how to multiply profit.

MECHANICAL ENGINEER President Joe Biden because he listens.

RV PARK Donald Trump, because he runs business successfully.

LANDSCAPING COMPANY Alika Kumar. She's the director of the MBDA. PHARMACY

Governor of Chickasaw Nation, Bill Anoatubby and many different companies for medical services.

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

41

STUDY FINDINGS

SECTION IV. ROLE MODELS/RESOURCES

BUSINESS PROFILE

Gamez Lining Systems/ Gamez Equipment Owner

CARLOS GAMEZ

SUCCESSFUL BUSINESS OVERCOMING O N E C H A L L E N G E AT A T I M E WHO IS GAMEZ LINING SYSTEMS/GAMEZ EQUIPMENT? Carlos Gamez owns two businesses – Gamez Lining Systems and Gamez Equipment.

The lining business involves adding protective wear coatings within material handling systems in various manufacturing processes to help reduce equipment wear and tear. These linings help minimize maintenance and operational costs as well as increase the efficiency and prolong the life of the processing equipment. Gamez Lining offers rubber lining, spray lining, molded rubber, molded urethane, pulley lagging, custom sandblasting, new fabrications, rebuild and reline.

Gamez Equipment serves as a manufacturers’ representative for equipment related to the sand/rock and mining business.

HOW DID GAMEZ LINING SYSTEMS/GAMEZ EQUIPMENT GET STARTED? Carlos Gamez started in the business as an 18 year-old laborer working for a large urethane company. Carlos quickly learned that he could earn a decent living by expanding his skills set in the industry. His career path took him throughout the company in various positions starting as a laborer and into sandblasting, urethane and linings installation/pouring, delivery driver, office management, sales and estimation.

By 1997, Carlos was ready to move on from working in the corporate environment and wanted to step out on his own.

Carlos began Gamez Equipment by relying on his contacts in the industry to begin working as a manufacturer’s rep selling “crushers” (i.e., rock crushing machines) to the rock and mining industry. In 2009, Carlos took his business further and opened Gamez Lining Systems which sprayed/installed lining systems into mining/manufacturing equipment. Carlos has spent his entire working life in the “abrasive wear” industry which involves using products and processes to reduce the wear/prolong life of mining & sand/gravel process equipment.

42

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION IV. ROLE MODELS/RESOURCES WHAT CHALLENGES DID GAMEZ LINING FACE DURING THE PANDEMIC? Carlos faced a series of challenges starting at the beginning of the pandemic and continues to today.

Project shutdown – A large project Carlos was working on in Southern California was within 3 weeks of completion when the pandemic began which caused massive delays in completing the project. The delay extended the project completion date from the original 3 weeks to 9 weeks. The delay resulted in increased costs, such as adding six more weeks of living expenses for his crew.

COVID spread to workforce – Everyone in Carlos’ team (10 employees) contracted the COVID virus over the past two years with the exception of Carlos. Gamez Lining internal protocols were to have everyone in the team stay home for 21 days every time someone on the team would contract the virus in order to keep everyone safe.

Projects were cancelled – A number of approved projects were cancelled during the pandemic which resulted in reduced revenue over the past few years.

Rising costs – Carlos has several employees who are MSHA-certified (Mine Safety Health Administration) in order to work on the job sites and use the equipment. The skills and certification involve extensive training and investment into employees. Even during quarantine periods, Carlos kept the team employed/on payroll because of the time and expense it would take to bring new employees up to a productive level. Government regulations also resulted in additional labor hours in order to keep the worksite safe (e.g., reducing the number of employees per work vehicle onto the job). .

Material shortage – More recently, Gamez Lining has been experiencing raw material shortages which has slowed down project timelines. Some of Carlos’ materials are coming from overseas which sometimes add months to his project timeframes.

HOW DID GAMEZ LINING ADDRESS THESE PANDEMIC CHALLENGES? Each of these challenges had financial implications that hit Carlos’ bottom line. The main strategies Carlos used to get through the past few years involved financing. Carlos had to pull from his personal retirement to keep the business going. He was also able to receive funding from the government’s Paycheck Protection Program (PPP).

Carlos also applied for one of the government disaster relief loans (long-term, low interest loan) in April 2021.

He spent several months responding to information requests from the government related to the loan but has not received any money yet.

Another strategy that Carlos used was to expand his product lines, especially those not affected by the supply/ inventory shortages.

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

43

STUDY FINDINGS

SECTION IV. ROLE MODELS/RESOURCES WHAT CHALLENGES HAS GAMEZ LINING FACED AS A MINORITY-OWNED BUSINESS? Carlos has not experienced any discrimination-related issues within his industry or business. As long as the job is done well, he lets his work speak for itself. One minority-related challenge Carlos has faced involves financing. He mentioned that the government/banks often talk about offering loans for minority business enterprises, but he has not successfully used these various sources to actually obtain capital.

He understands that the SBA and other sources are having difficulty with their staffing which slows the loan process. As a results, Carlos has not found much success in receiving government support in financing targeted to assist minority-owned businesses.

Providing more information/assistance and streamlining the process would help Gamez Lining.

WHAT HAVE BEEN YOUR BIGGEST SUCCESSES AS A COMPANY? When I look at what (types of vehicles) my employees drive, where they live, and how they’ve grown, to me, that’s success. I’ve been able to offer them a job and they made something out of it and have grown in their own personal lives.

From the business side, Carlos enjoys finding creative solutions to large scale challenges. This has helped Gamez Lining Systems and Gamez Equipment win large contracts with major mining/aggregate companies.

WHAT HAVE BEEN THE HARDEST LESSON YOU HAVE LEARNED? One of the hardest lessons Carlos has had to learn is… how important it is to educate your employees to keep their lives in order. For example, if a guy is in a hurry and gets a speeding ticket, it affects Carlos’ business (e.g., higher insurance rates) as well as the employee’s driving record.

WHAT ADVICE WOULD YOU GIVE TO SOMEONE STARTING UP A BUSINESS? It’s easy to get started in a business, but difficult to keep it going.

If you are going into business for yourself, you have to know the business that you are going to start inside and out.

If you think it will take $50,000 to start the business, you are going to need $150,000.

44

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS WHAT ARE THE CHARACTERISTICS OF MBEs? A key screening criterion for survey participants was that the businesses had to have at least one full-time employee. This has been the definition used in past MBE studies for Arizona Hispanic Chamber.

A PROFILE OF ARIZONA MINORITY BUSINESS ENTERPRISE INCLUDES: Median revenue was $279,000 in 2021.

Median staff size is 5 employees.

Median age of the business is 9 years old (down from 12 years median in 2012).

Half are family-owned (51%).

One-third (35%) are home-based businesses Almost half (47%) were women-owned businesses Almost half (46%) seek after government or private contracts as a source of revenue.

Three out of four of the top industries MBEs work in involve parts of the services industry – “Other services, Professional services, Healthcare and Social Assistance. o Construction is ranked second out of the top five.

WHO ARE THE CUSTOMERS? Approximately half of the businesses conduct business with retail customers (50%).

Half do work for other businesses (business to business – 55%).

Almost half (40%) do work with the government.

WHERE ARE THEIR CUSTOMERS/EMPLOYEES? Service area – By design, the survey targeted almost half of the businesses who work in rural areas in order to better understand those working in HUBZone areas (SEE SECTION ON HUBZONE) in primarily rural areas.

Almost half of these firms conduct business outside of Arizona and within the U.S. and 13% conduct business internationally.

AMONG THOSE WHO WORK OUTSIDE OF ARIZONA IN THE U.S. (BESIDES ONLINE BUSINESS): Almost half work throughout the U.S. – i.e., multiple states in the U.S. (41%).

One-quarter (29%) serve specifically in the Southwest The rest service in the Midwest, Northwest, Southeast and Northeast.

AMONG THOSE WHO WORK INTERNATIONALLY (BESIDES ONLINE BUSINESS): Almost half service Mexico (43%).

One-third service Europe (32%)

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

45

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS 15% serve in multiple countries worldwide.

The rest work in specific regions of the world (e.g., Canada, Asia, Australia, South America, and Central America).

Firmographics comparison over time – Most of the company firmographics did not change significantly between the 2012 and 2022 reports. Despite being 10 years difference, both time periods also represented unique economic downturns – one due to effects of the 2008 recession. The most recent economic downturn was primarily pandemic-driven but had a different recovery time frame.

Median revenues of MBEs increased to $279K over $215K in 2011 (NOTE: The 2012 businesses were asked to estimate their 2011 revenues which was their last calendar year.

Similarly the 2022 study asked businesses to estimate their 2021 revenues).

Higher number of employees at 5 employees compared to 4 in 2012 among businesses with at least one full-time employee.

More administrators responding to the survey in 2022 (21%) compared to 2012 (11%). At the same time, fewer CEOs, primary stockholders, and Presidents responded to the survey (63%) compared to 2012 (80%).

COMPARISON BETWEEN MBES AND NON-MBEs Median revenue for MBEs was $279,000 compared to $480,000 for non-MBE companies.

(Significantly different).

47% of MBEs are women owned business compared to the 30% of the non-MBE businesses that were surveyed in 2022.

There is a generally higher percentage of MBEs in rural counties compared to Maricopa, Pima and Pinal.

MBEs were more likely to change their marketing strategies (23%) than non-MBEs (14%) during the pandemic (e.g., increase their advertising). In addition, they were more likely to seek loans (e.g., 46% applied for PPP loans compared 35% of non-MBEs) or cutback their operations than MBEs. .

MBEs were more likely to have a significant challenge gaining access to capital (38%) than non-MBEs (11%).

MBEs were more likely to seek government/private contracts as a source of revenue (46%) compared to non-MBEs (34%).

46

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS

MBE PROFILE OVER TIME MIN O R I T Y B U S IN E S S E S

2007

2012

2022

663

605

403

$201,000

$215,000

$279,000

4

4

5

9 yrs.

12 yrs.

9 yrs.

Family-owned

64%

56%

51%

Home-based

38%

44%

35%

Not for Profit

4%

3%

9%

Retail consumers

N/A

49%

50%

Business

N/A

55%

55%

Government

N/A

42%

40%

Conducts business internationally

16%

13%

13%

Conducts business nationally

32%

38%

40%

S A MPL E SIZE MEDIA N R E V ENUE MEDIA N NUMBER OF EMPL OY EE S MEDIA N AGE OF COMPA N Y BUSINE S S DE S CRIP TIONS

CUS T OMER DE S CRIP TIONS

GEOGR A PHIC S COPE

BOLDED FIGURES ARE STATISTICALLY DIFFERENT THAN PRIOR YEARS.

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

47

Chart 19 Customer Segments Served

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS

CUSTOMER SEGMENTS SERVED

55%

BUSI NESSES

50%

R ETAI L CONSUMERS

G OV ERNMENT (CITY, STAT E, F EDERAL , MUNI C I PAL I T I ES)

40%

N=403 0%

10%

20%

30%

40%

50%

60%

N=605 Type of Business

TYPE OF BUSINESS OTHE R SE RVI C E S ( E XC E PT P U B L IC AD M I N . ) CO N ST RU C T I O N P R O F E SS IO N AL S E RVIC E S E D U C AT IO N AL S E RVI C E S HE A LTH C AR E AN D SO C I AL ASS ISTAN C E R E TAIL T RAD E R E AL E STAT E , R E N TAL & L E AS I N G F IN AN C E AN D I N S U RAN C E TRA NSP O RTAT I O N AN D WAR E H O U S IN G A DMIN. SUPPORT, WAST E M G M T & R E M E D I AT IO N ACCOM O DAT I O N AN D FO O D S E RVIC E S M AN U FAC T U R IN G W H O L E SAL E T RAD E

2% 1% 1%

U T IL IT IE S A RTS , E N T E RTAIN M E N T, R EC R E AT I O N AG R IC U LT U R E

7% 6% 5% 5% 5% 5% 4% 4% 4%

10%

UN ABL E TO C AT EG O R I Z E / R E F U S E D 0%

5%

N=403

48 n=605

12% 10%

15%

19%

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

10%

15%

20%

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS

ANNUAL REVENUE

Chart 21 Annual Revenue

MINORIT Y-OWNED BUSINESSES

Chart 21 Annual Revenue Minority-Owned Businesses

Minority-Owned Businesses

Revenue in 2006Revenue in 2006

Revenue in 2011 Revenue in 2011

Median = $201,000 Median = $201,000

$500,000 $100,000 to to Chart 21 Annual Revenue $999,999 $499,999

$100,000 to $499,999

$500,000 to $999,999

24% 32% Revenue in 2006

32%

Median = $201,000

$1M to $4.9M, 6%

24%

Median $279,000

$5M+, 3%

Median= $215,000

$1M to $4.9M, 6%

Median $279,000Less than

$100,000

$500,000 to $999,999

$500,000 to $999,999

15%

15%

N=496 (25% did not report N=496 revenue) (25% did not report revenue) $100,000 $1M to $4.9M, 6% to $499,999 Less than $5M+,29% 3% $100,000

$1M toto $4.9M, $100,000 Revenue in 2021 $499,999 19%

36%$100,000 to

N=496 (25% did not report revenue)

30% 19%

Median $279,000

29%

$499,999

24%

$1M to $4.9M, 6

Less than $5M+, 4% $100,000 $500,000 to 36% $999,999

$5M+, 4%

24%

N=496 (18% did not report N=496 revenue) (18% did not report revenue) $1M to $4.9M, $1M to $4.9M, 6%

29%

$5M+, 8% Less than $500,000 to Less than $100,000, $999,999 $100,000,

35%

$500,000 to $999,999

24% 30% Revenue in 2011

30%

$1M toRevenue $4.9M, 6%in 2021 Revenue in 2021

Less than $5M+, 3% $100,000 $500,000 to $100,000 to 35% 35% $999,999 $499,999

Median= $215,000

$500,000 to $100,000 to $999,999 $499,999

$100,000 to $499,999

Minority-Owned Businesses

24%

Less than $100,000

32%

Median= $215,000

Less than $100,000

$5M+, 4%

$5M+, 8%36%

15% 29%

$1M to $4.9M,

$100,000 to $499,999

N=496 (18% did not report revenue)

19%

N=257 (29% did not report N=257 revenue) (29% did not report revenue) 29% Less than $100,000,

$5M+, 8%

29%

N=257 (29% did not report revenue)

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

49

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS

LENGTH OF TIME IN BUSINESS Chart 22 Length of Time in Business

40% 35%

34%

33%

34%

30%

23%

25%

26% 22%

19%

20%

24%

20% 21% 21%

24%

15% 10% 5% 0% 5 YE A R S O R L E SS

6 -1 0 Y EA RS

2007 MINORITY (N=663)

11-2 0 Y EA RS

2012 MINORITY (N=605)

Median: 9 years

2 1 Y EA RS OR LON G ER

2022 MINORITY (N=403) Median: 9 years

Median: 12 years

MBE Service Area

(Besides Internet-based business)

MBE SERVICE AREA

BESIDES INTERNET-BASED BUSINESS

38%

WITHIN NEIGHBOR H O O D

48% 48% 51%

WITHIN CITY/ TOWN WITHIN CO UN TY WITHIN STATE

40%

THROU GHOU T TH E U. S .

13%

INTERNATIO N A LLY N=403

50

0%

10%

20%

30%

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

40%

50%

60%

STUDY FINDINGS

SECTION V. BUSINESS CHARACTERISTICS

SPAN OF NATIONAL BUSINESS Chart 24 Span of National Business U.S. map with percentage of those who do business by section

of the U.S.- both national and international businesses.

U .S . M AP WI T H P ER C ENTA G E OF T H OSE W H O DO B USI N E SS B Y SE C T I ON OF T HE U . S . - B O T H NAT I ON A L A N D I N T E R N AT I ON A L B USI N E SSE S.

NORTHWEST 7% MIDWEST 11% SOUTHWEST 29%

NORTHEAST 6% S OUTHEAST 8%

ALL STATES 41% SAMPLE SIZE: N=152 THOSE WHO WORK OUTSIDE OF ARIZONA IN THE U.S. Chart 25 Span of International Business World map with percentage of those who do business in each continent.

Sample size: n=152 Those who work outside of Arizona in the U.S.

SPAN OF INTERNATIONAL BUSINESS

W O R L D MAP W I TH P ERC EN TAG E O F T HO SE WHO DO BUSINE SS IN E ACH CO NT INENT. CANADA

EUROPE

17%

32%

17%

MEXICO

43% CENTRAL AMERICA

6%

ASIA

AFRICA

11%

SOUTH AMERICA

11%

AUSTRALIA WORLD-WIDE

14%

15%

SAMPLE SIZE: N=47 THOSE WHO WORK INTERNATIONALLY Sample size: n=47 Those who work internationally

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

51

STUDY FINDINGS

SECTION VI. OWNER CHARACTERISTICS

WHO OWNS THESE MINORITY BUSINESS ENTERPRISES? MBE owners are educated, have higher income, speak multi-lingual, are middle-aged, and have wide spread of political affiliations.

Characteristics of the owners of MBEs included: Most started the company (84%) Were born in the U.S. (76%) Two-thirds speak another language besides English (62%) o 72% speak Spanish (of those who speak a second (or more) language Median age of the owner is 50 years old.

Political affiliation: o Independent – 28% o Democrat – 22% o Republican – 18% o No preference – 7% o Refused – 24% Education: o College graduate -- 63% Owner’s median annual income in 2021: o $92,300 Compared to the general population – MBE owners were twice as likely to have a college degree and had 50% higher annual income compared to the state’s median household income *.

2020 Arizona education attained – 29% college degree compared to 63% among MBEs owners in 2021. (12) 2020 Arizona median household income – $61,529 MBE owners in 2021.

(13)

compared to the $92,300 among

* Note: The income for MBE owners is not a direct comparison with the overall household figures because the state’s 2020 median income accounts for multiple wage earners in the home compared to the MBE owner’s individual income. The difference of MBEs household income would be even greater than Arizona household income. In addition, the 2021 median income figures were not available at the writing of this report for comparison to the 2022 MBE report.

52

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

STUDY FINDINGS

SECTION VI. OWNER CHARACTERISTICS

MIN O R I T Y B U S IN E S S E S

OWNER PROFILE

2012

2022

605

403

52 yrs.

50 yrs.

50%

63%

$72,300

$92,300

Born in U.S.

69%

76%

Speak another language besides English

71%

62%

Independent

N/A

28%

Democrat

N/A

22%

Republican

N/A

18%

No preference

N/A

7%

Refused

N/A

24%

S A MPL E SIZE DEMOGR A PHIC S

Median Age Percentage with college degree or more education Median Household Income CULT UR E / L A NGUAGE

P OLITIC A L A F FILIATION

BOLDED FIGURES ARE STATISTICALLY DIFFERENT.

ARIZONA MINORITY BUSINESS ENTERPRISE REPORT

53

STUDY FINDINGS

SECTION VII. RURAL AND ECONOMICALLY DISTRESSED AREAS One of the focuses of the research was to listen to challenges and strategies of businesses in rural and economically distressed areas as defined by their location via “HUBZones.” The Small Business Administration defines HUBZones as “... small business in historically underutilized business zones.” (1). HUBZone business from both urban and rural locations were used in this research, but rural areas were targeted when possible.

Business comparisons were made with the following groups: Operating in a HUBZone Not Operating in a HUBZone Minority Business Enterprise operating in a HUBZone.

CHALLENGES/STRATEGIES DURING THE PANDEMIC HUBZone businesses generally faced the same challenges and used similar strategies during the pandemic as those not operating in a HUBZone. In addition, there were few differences between HUBZone business overall and HUBZone minority-owned businesses. Even when differences were considered “significantly different” between the groups, the percentage differences were relatively small.

The research did highlight both upsides and downsides for HUBZone businesses.

CHALLENGES Supply chain issues were more of a problem within HUBZone areas compared to urban areas. Access to supplies and inventory is typically generally more challenging in rural areas due to transportation and ordering in smaller quantities than urban locations, but appeared to be amplified during the pandemic.

Supply chain issues were mentioned by 15% for both HUBZone respondents and minority-owned businesses in HUBZones vs.9% among non-HUBZone businesses.

Retaining labor seemed to be less of an issue in HUBZone areas, possibly due to fewer employment options for residents in more isolated rural areas.

Having trouble keeping employees was slightly less of a problem in HUBZones (23%) than those not in HUBZones (29%).

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STUDY FINDINGS

SECTION VII. RURAL AND ECONOMICALLY DISTRESSED AREAS

TOP CHALLENGES DURING PANDEMIC HUBZONE VS. NON-HUBZONE

Top Challenges During Pandemic HUBZone vs. Non-HUBZone

29% 26%

DECREASE IN SALES/LOSS OF BUSINE SS

25% 24% 23%

KEEPING EMPLOYE E S

29% 15% 15%

S UPPLY SH ORTAGES/DECREASED INVENTORY

9% 10% 10%

KEEPING EMPLOYEES FR CATCH ING VIRUS

11% 0%

MBE HUBZone

10%

HUBZone

20%

30%

40%

Non-HUBZone

CIRCLED IN BLACK - SIGNIFICANTLY DIFFERENT AT 95% CONFIDENCE LEVEL BETWEEN HUBZONE AND NON-HUBZONE NOTE: ONLY MOST OFTEN MENTIONED TOP-OF-MIND CHALLENGES WERE LISTED

Circled in black - Significantly different at 95% confidence level between HUBZone and non-HUBZone Note: Only most often mentioned top-of-mind challenges were listed

STRATEGIES No significant differences – Strategies by HUBZone businesses to address the pandemic were comparable with non-HUBZone businesses and HUBZone MBEs. For each of these groups, the top strategies they used were o Changing marketing/communication strategies o Choosing not to make any changes o Made staff changes PPP Loans – Slightly more HUBZone MBEs applied for PPP loans (47%) than HUBZone businesses in general (41%) and non-HUBZone businesses (41%).

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STUDY FINDINGS

SECTION VII. RURAL AND ECONOMICALLY DISTRESSED AREAS

CHALLENGES/STRATEGIES OF BEING AN MBE When asked about challenges and strategies associated with being an MBE, HUBZone and non-HUBZone had very few differences in what they faced and how they addressed the issues.

Slightly more HUBZone MBEs felt that cultural differences had significant an impact on their business practices (15%) than non-HUBZone MBEs (9%) Strategies they used to overcome being a minority-owned business were comparable between HUBZone and non-HUBZone, especially in marketing their companies through networking with other MBEs and promoting MBE status.

ACCESS TO CAPITAL One of the larger differences between HUBZone and non-HUBZone businesses was having access to capital.

More of a challenge - HUBZone MBEs were more likely to feel that gaining access to capital was a significant challenge (38%) than the other groups (27% HUBZone overall to 29% Non-HUBZone). o

During the application process, more than half of the HUBZone and non-HUBZone minorities felt they were treated with respect when applying for a loan – i.e., no significant differences.

BUSINESS CHARACTERISTICS A comparison of the business characteristics of HUBZone businesses highlight that they tend to be smaller (revenue) and older, than non-HUBZone businesses. Non-HUBZone businesses are more likely to be homebased.

HUBZone businesses have a higher percentage of manufacturing (6% vs. 2% Non-HUBZone) and hospitality businesses (9% vs. 5% Non-HUBZone). Non-HUBZone businesses have a higher percentage healthcare-related businesses (10% vs. 5% for HUBZone businesses).

Having trouble keeping employees was slightly less of a problem in HUBZones (23%) than those not in HUBZones (29%).

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STUDY FINDINGS

SECTION VII. RURAL AND ECONOMICALLY DISTRESSED AREAS

BUSINESS CHARACTERISTICS

HUBZone/Non-HUBZone/HUBZone MBEs

S A MPL E SIZE MEDIA N R E V ENUE MEDIA N NUMBER OF EMPL OY EE S MEDIA N AGE OF COMPA N Y

HUBZone

NonHUBZone

HUBZone MBE

325

325

184

$172,000

$254,000

$169,000

5

5

5

16 years old 10 years old 11 years old

BUSINE S S DE S CRIP TIONS

Family-owned

48%

47%

52%

Home-based

22%

32%

27%

Not for Profit

20%

11%

13%

Woman-owned

35%

45%

41%

Retail consumers

57%

53%

53%

Business

43%

53%

50%

Government

35%

36%

44%

Conducts business throughout U.S.

39%

41%

37%

Conducts business internationally

17%

16%

13%

CUS T OMER DE S CRIP TIONS

GEOGR A PHIC S COPE

BOLDED FIGURES ARE STATISTICALLY DIFFERENT.

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STUDY FINDINGS

SECTION VII. RURAL AND ECONOMICALLY DISTRESSED AREAS

OWNER CHARACTERISTICS HUBZone business owners have significantly lower salaries, are not as likely to have college degree and less likely to have started the company than non-HUBZone.

HUBZone

NonHUBZone

HUBZone MBE

S A MPL E SIZE

325

325

184

S TA R T ED THE COMPA N Y

64%

79%

77%

SPE A KS A SE COND L A NGUAGE

48%

47%

66%

COL L EGE GR A DUAT E

55%

68%

54%

53

52

51

$73,000

$95,000

$71,000

AGE MEDIA N INCOME BOLDED FIGURES ARE STATISTICALLY DIFFERENT.

IMPLICATIONS The pandemic and being a minority-owned business generally affected HUBZones similarly than non-HUBZone areas. The differences make sense when considering the rural locations of many of the HUBZone businesses (e.g., supply chain issues during the pandemic). Focusing on the needs of HUBZone businesses and HUBZone MBE businesses: 1. HUBZone MBEs have even greater needs when it comes to access to capital than MBEs overall and other businesses in HUBZones and non-HUBZone areas. While most self-fund the business, the inability to obtain financing appears to affect the businesses’ ability to grow. As a result, HUBZone businesses are significantly smaller than those in nonHUBZone areas (two-thirds the size).

2. Like most businesses who participated in this survey, HUBZone businesses survived the pandemic despite the challenges of lost revenue, labor shortages, labor issues and supply chain problems. Operating in rural locations as well as not having the financial positioning that other non-HUBZone businesses had accentuated the difficulty for these HUBZone businesses to survive. Those businesses who made it through the pandemic seemed to use similar strategies – increased/aggressive marketing, applying for loans, cutting back operations, and managing their workforce.

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STUDY FINDINGS

SECTION VIII. INDIGENOUS COMMUNITY/REMOTE TRIBAL COMMUNITIES WestGroup completing 56 interviews with businesses in Indigenous Communities/Remote Tribal Communities in Arizona (targeted completing at least 50) to provide some insights into their needs and strategies. Some of the businesses are located close to urban areas, but most were in rural areas.

CHALLENGES/STRATEGIES DURING THE PANDEMIC MBEs in Tribal Communities experienced similar issues as MBEs overall during the pandemic. These surviving businesses felt the biggest challenges were: Decreasing sales/loss of business (32%) Keeping employees (14%) Staying in touch with employees/customers (14%) Changing to remote workforce (14%)

CHALLENGES DURING THE PANDEMIC WITH BUSINESSES IN INDIGENOUS COMMUNITIES COMMENTS DISTRIBUTOR The government closed us up. If we did not close, we would have faced charges.

FORESTRY/HEAVY MACHINERY When we had to shut down and close, we became unproductive and lost money.

CONSTRUCTION We had to go through where they told us to shelter in place – we weren’t allowed to go out and do work on the Tribal lands.

HEALTHCARE I think it’s just the safety issues… i.e. the health issues of people who come here. We go on an honor system, trying to be as honest as we can about our health condition.

Some people can still test positive while vaccinated.

Their top strategies to survive/get through the pandemic were: Changed their marketing efforts (25%) Changed their operations (13%) Did nothing (11%) In addition, almost half received PPP loan (43%)

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STUDY FINDINGS

SECTION VIII. INDIGENOUS COMMUNITY/REMOTE TRIBAL COMMUNITIES

STRATEGIES DURING THE PANDEMIC WITH BUSINESSES IN INDIGENOUS COMMUNITIES COMMENTS RESELLER

Try to reach people at home to see if they needed product. Other than that, we could not do much waiting for product to become available.

RETAIL BUSINESS TRUCKING Talked with training centers and contacted them and schools (to find employees), and advertised more with newspaper and radio.

BUSINESS SUPPORT SERVICES I had to change my line of work and put all my computers and applications on hold and just do consulting

CHALLENGES/STRATEGIES OF BEING AN MBE More challenges – Tribal Community businesses were more likely to feel they have had to overcome negative perceptions as a minority as well as change their business practices due to cultural differences.

One-quarter (25%) mentioned that overcoming the negative perceptions of being a minority-owned business was a significant challenge which was higher than most MBEs (18%).

One in five (21%) felt their cultural differences had a significant impact on their business practices which was almost twice as high as most MBEs (12%) Marketing focus – MBEs in Tribal Communities appear to be more likely to promote and position their minority status in the marketing the business compared to other MBEs. Significantly more strongly agree that they promote that they are MBE (34% compared to 22% for MBEs overall).

More strongly agree that they use their MBE status to pursue business opportunities (41%) compared to 23% of MBEs overall.

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STUDY FINDINGS

SECTION VIII. INDIGENOUS COMMUNITY/REMOTE TRIBAL COMMUNITIES

ACCESS TO CAPITAL Gaining access to capital among Tribal Community MBEs is clearly a significant challenge (39% consider gaining access to capital is a significant challenge, 21% consider this somewhat of challenge among Indigenous MBEs). More than half (53%) currently finance their business from within the business or personal loans. These responses are comparable to other MBEs.

CHALLENGES ACCESSING CAPITAL SOURCES COMMENTS PROFESSIONAL SERVICES We are being under-represented in the banking area reduces our capital access.

Capital access is our biggest challenges as a minority.

LOCAL GOVERNMENT The banks are not owned by minorities. I know Bank of America made a financial decision to close branches especially in the communities next to reservations. There are no Bank of America (branches) that exist on the reservation or any other major bank for that matter.

SERVICES

Being on a reservation, it is hard to get loans. Not owning the land, we do not have the collateral for business loans.

HERBAL MEDICINE I received loans from the Chickasaw tribe.

EMERGENCY SERVICES We relied on Navajo General Fund, federal funds, and federal grants

PRINTING

I used my own money to finance my business.

Less respect – Businesses in Tribal Communities were less likely to strongly agree that they were treated with respect when applying for a business loan (14%) compared to most MBEs (22%).

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STUDY FINDINGS

SECTION VIII. INDIGENOUS COMMUNITY/REMOTE TRIBAL COMMUNITIES

BUSINESS CHARACTERISTICS Relatively smaller sample sizes made it difficult to compare business characteristics between those in Tribal Communities and MBEs overall. The following are some comparisons to serve as points of reference.

AMERICAN INDIAN, INDIGENOUS COMMUNITY

MBEs

56

403

$200,000

$172,000

5.5

5.0

10 years old

16 years old

25%

9%

59%

46%

Conducts business throughout U.S.

37%

40%

Conducts business internationally

12%

13%

S A MPL E SIZE MEDIA N R E V ENUE MEDIA N NUMBER OF EMPL OY EE S MEDIA N AGE OF COMPA N Y NON-PR OFIT CUS T OMERS

Seeks government/ Private contracts GEOGR A PHIC S COPE

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STUDY FINDINGS

SECTION VIII. INDIGENOUS COMMUNITY/REMOTE TRIBAL COMMUNITIES

OWNER CHARACTERISTICS Similar to business characteristics, the relatively smaller sample sizes made it difficult to compare owner profiles between those in Tribal Communities and MBEs overall.

AMERICAN INDIAN, INDIGENOUS COMMUNITY

MBEs

S A MPL E SIZE

56

403

S TA R T ED THE COMPA N Y

79%

84%

SPE A KS A SE COND L A NGUAGE

61%

62%

MEDIA N AGE OF OW NER

54

50

EDUC ATION – COL L EGE DEGR EE

73%

63%

$75,000

$92,300

MEDIA N INCOME

Business owners in Tribal Communities appeared to have lower personal incomes than MBE owners over.

IMPLICATIONS 1. MBEs in Tribal Communities appeared to have more negative experiences as minorityowned businesses than MBEs in general. As a result, they also appeared to take more aggressive action than other MBEs in order to overcome these challenges through promotion/marketing as well as using their MBE status to pursue business opportunities.

2. Like many of the businesses who participated in the survey, these MBEs’ biggest challenge was gaining access to capital. While some received financial support from Tribal and government sources, the loan process and funding availability continue to be obstacles that need to be addressed.

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STUDY BACKGROUND AND METHODOLOGY WHAT IS THE HISTORY BEHIND THE STUDY? The 2022 MINORITY BUSINESS ENTERPRISE SURVEY is the part of a series of related studies which began in 1990. The following is a brief timeline of these studies.

1990 — Dr. Loui Olivas began conducting research with Hispanic businesses as an annual project with the Hispanic Research Center at ASU.

2005 — WestGroup Research was hired to conduct the survey. The methodology was switched from mail to telephone survey and the sample size of businesses increased at this time.

2007 — The survey grew to include both Hispanic and non-Hispanic minorities.

2012 — The Arizona Minority Business Center and Arizona Hispanic Chamber of Commerce became the primary project coordinators for the study and expanded the reporting to include individual reports businesses owned by minorities overall, Hispanic (specific), women, and families.

2022 — The study focused on the impact of the pandemic on MBEs and expanded to include economically

disadvantaged/rural locations as well as Indigenous Native American businesses. Comparable studies were also conducted in Nevada and Utah.

WHY ARE THE ARIZONA MINORITY BUSINESS DEVELOPMENT CENTER AND ARIZONA HISPANIC CHAMBER OF COMMERCE CONDUCTING THIS RESEARCH? The Arizona Minority Business Center and Arizona Hispanic Chamber of Commerce would like this study to be a resource for government officials, planners and analysts; business and community leaders; and educators who want to understand the needs of minority-owned businesses. This research is designed to provide a voice to minority-owned businesses and let them give direction to these supporting organizations.

WHAT BUSINESSES PARTICIPATED IN THE SURVEY? A. Defining the business — This study focuses on businesses that have at least one full-time employee.

It is important to note that the definition of what is considered a “business” varies widely among sources and might present a challenge when comparing data and findings.

B. Defining minority businesses – Using the Arizona Minority Business Development Center definition,

“Minority group members are United States citizens who are Asian, Black, Hispanic and Native American.

Ownership by minority individuals indicates that the business is at least 51% owned by such individuals or, in the case of a publicly-owned business, at least 51% of the stock is owned by one or more such individuals i.e. the management and daily operations are controlled by those minority group members.” (14)

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STUDY BACKGROUND AND METHODOLOGY

C. Rural and economically distressed areas – One of the focuses of the research will be to listen to

minorities in rural and economically distressed areas as defined by their location via “HUBZones.” The Small Business Administration defines HUBZones as “... small business in historically underutilized business zones.” (1).

The following is a breakdown of various groups that participated in the research.

MINORITY GROUP REPRESENTATION MINORITY GROUPS

UNWEIGHTED PERCENT RESPONSE

HISPA NIC

52%

A F RIC A N A MERIC A N

21%

A MERIC A N INDIA N

14%

A SIA N

7%

N ATIV E /H AWAIIA N OR O THER PACIFIC ISL A NDER

4%

O THER

2%

D. Number of Paid Employees

EMPLOYEES

UNWEIGHTED PERCENT RESPONSE

1 TO 4

47%

5 TO 9

25%

10 T O 19

16%

20 OR MOR E

13%

NOTE: ROUNDING RESULTS IN TOTALS GREATER OR EQUAL TO 100%

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STUDY BACKGROUND AND METHODOLOGY

E. Woman-owned MBEs

MINORITY EMPLOYEES GROUPS

PERCENT RESPONSE

WOMEN- OW NED

47%

NO T WOMEN- OW NED

53%

WHO WAS INTERVIEWED FOR THE SURVEY? Telephone interviewers screened respondents in order to reach the “highest level” person in the organization.

In most cases, interviews were conducted with the owner/Chief Executive Officer or President.

POSITION

PERCENT RESPONSE*

OW NER /CEO/ PR E SIDEN T

63%

A DMINIS T R AT OR / M A N AGER

21%

BOA R D MEMBER / E XECU TIV E M A N AGEMEN T

10%

O THER

6%

HOW MANY/WHERE/HOW WAS THE SAMPLE DRAWN FOR THE STUDY? This year’s study expanded to include Arizona, Nevada and Utah. The overall survey results of the 1,983 interviews from the three states have a margin of error of +/-2.2% at the 95% confidence level. The 650 interviews in Arizona have a margin of error of +/- 3.8 % at the 95% confidence level. Subgroups with smaller sample sizes have a larger margin of error.

The following sample sizes were completed: Completed 403 MBE interviews (margin of error +/- 4.9 at the 95% confidence level)

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STUDY BACKGROUND AND METHODOLOGY Completed 230 non-minority business interviews (margin of error of +/- 6.5% at the 95% confidence level).

Completed 325 interviews with businesses within HUBZones (margin of error +/- 5.4 at the 95% confidence level) and 325 business outside of the HUBZones.

Targeted 50 businesses with Indigenous Native American ownership, resulting 56 completed interviews.

Data weighting was used when combining the various quotas in order to provide a representative sample of each state.

The sample used for this study was purchased from various sources, including Scientific Telephone Samples. The following organizations supplemented the sample by providing contact lists: Arizona Hispanic Chamber of Commerce Minority Business Development Agency Business Center Small Business Administration Chambers of Commerce throughout the Arizona.

WHAT METHOD WAS USED TO CONDUCT THE RESEARCH? The survey was conducted through telephone interviews. Due to the high incidence of Hispanic businesses, respondents were given the option of participating in the interview in Spanish.

WHEN WAS THE SURVEY CONDUCTED? The Arizona surveying began on January 18, 2022, and was completed on March 15, 2022.

WAS AN INCENTIVE USED TO ENCOURAGE PARTICIPATION? Respondents were given the option to include their name for a drawing for one of 10 $100 gift certificates.

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STUDY BACKGROUND AND METHODOLOGY

CONTACT INFORMATION For more information about the research, please email your questions or requests to: A R I Z O N A H I S PA N I C C H A M B E R O F C O M M E R C E

MS. MONICA S. VILLALOBOS MonicaV@azhcc.com WESTGROUP RESEARCH

MR. GLENN IWATA

glenn@westgroupresearch.com

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END NOTES 1.

U.S. Small Business Administration, 409 3rd St, SW. Washington DC 20416, https://www.sba.gov/federalcontracting/contracting-assistance-programs/hubzone-program

2.

Zetino, Griselda, “Latino businesses in Arizona hit hard by pandemic but found a way to thrive,” KTAR News, Nov 2, 2021, https://ktar.com/story/4749127/latino-businesses-in-arizona-hit-hard-by-pandemic-but-found-a-wayto-thrive/

3.

Duke University’s Fuqua School of Business, “Three Factors Contributing to the Ongoing Global SupplyChain Crisis,” December 13, 2021, https://www.fuqua.duke.edu/duke-fuqua-insights/robert-swinney-three-factorscontributing-ongoing-global-supply-chain-crisis#:~:text=It%20appears%20that%20three%20major,often%20run%20at%20 or%20near

4.

U.S. Census https://data.census.gov/cedsci/table?q=ab1700cscb%2a&tid= ABSCB2017 AB1700CSCB02&nkd=QDESC~B01

5.

Arizona Hispanic Chamber, 2021 DATOS publication, May 2021.

6.

AARP/FP Analytics, “The Aging Readiness & Competitiveness Report,” https://arc.aarpinternational.org/

7.

countries/united-states#:~:text=Every%20day%20in%20the%20U.S.,of%20the%20population%20by%202050.

Chairwoman Nydia M. Velazquez, House Committee on Small Business, “Committee Report Outlines COVID’s Devastating Impact on Black-Owned Small Businesses,” February 26, 2021, https://smallbusiness. house.gov/news/documentsingle.aspx?DocumentID=3578#:~: text=In%202020%2C%20Black%20business%20 ownership,rate%20of%20any%20racial%20group.&text=According%20to%20the%20report%2C%20Black,had%20less%20 access%20to%20relief.

8.

9.

Chairwoman Nydia M. Velazquez, House Committee on Small Business, “The State of Black Owned Small Businesses in America,” https://smallbusiness.house.gov/uploadedfiles/bob_report_final.pdf New York Times, “Minority Entrepreneurs Struggled to Get Small Business Relief Loans,” April 4, 2021, https://www.nytimes.com/2021/04/04/business/ppp-loans-minority-businesses.html

10.

U.S. Census, 2021 Annual Business Study, ABS Financing Module, https://www.census.gov/data/tables/2021/ econ/abs/2021-abs-financing-module.html

11.

12.

WestGroup Research, 2012 Minority Business Enterprise Report, 2012.

Harper, Sarah K and Newbert, Julie, “New ABOR College Completion Report: More degrees awarded in 2020, Arizona continues to lag nation in educational attainment,” June 11, 2021, Arizona Board of Regents, https://www.azregents.edu/news-releases/new-abor-college-completion-report-more-degrees-awarded-2020arizona-continues-lag

13.

14.

U.S. Census, https://www.census.gov/quickfacts/fact/table/AZ/HCN010212?

Premier Quantitative Consulting Inc., “Contracting Barriers and Factors Affecting Minority Business Enterprises A REVIEW OF EXISTING DISPARITY STUDIES” PREPARED FOR Minority Business Development Agency Under Contract SB1352-15-SE-0425.

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