STATE OF MINORITY OWNED COMPANIES AND ECONOMIC OPPORTUNITY IN TEXAS

HELLO. WE ARE STRATEGAR.

Strategar was founded as an incubator of marketing ideas and solutions Our name reveals strategy as the key cornerstone of our expertise and our goal is to solve our clients’ toughest marketing challenges Simply, our mission is to help brands (we serve) connect with their respective communities.

Our company has been working as a Texas HUB company since 2015. Multiculturalism and education are two of the four pillars we specialize in. Since 2013, we have worked with a variety of clients including Texas agencies that recognize us as a HUB and woman-owned entity.

Based on the current H.B. 5140, we are lending our expertise to help assist any entity, state agencies and other registered HUBs to have talking points needed to help raise awareness on why this will not be a positive move for the State of Texas.

As a Hispanic and woman-led team, we are also concerned with the language of the bill We want to encourage other organizations and HUBs to take action. Some things to note in our research include:

● 129,353 minority-owned companies are in Texas

● Minority-owned companies are an economic engine for Texas, paying taxes and contributing $42 billion to the state’s payroll

● 73% of these businesses are considered small businesses (under $1 million in annual receipts)

● Likely due to criteria, including being a U.S. citizen, there were 16,528 Texas HUBs, in fiscal year 22 (this includes 4,866 non ethnic women-owned companies and 296 service disabled veteran companies)

We urge you to take action and call any of the members of the House Committee on State Affairs evaluating this bill to not let it proceed.

We have provided as much data for all of the major ethnic groups ranked in order of size: Hispanic, Asian, and Black/African American groups. We hope these materials are of assistance to you.

For any information or media inquiries, please don’t hesitate to reach out to me.

Sincerely,

Yareli Esteban President/ CEO

m: 972.948.3781

e: yareli@strategar.com

Proud to be a minority-woman owned business

TEXAS HOUSE BILL 5140 & MINORITY BUSINESS OWNERSHIP

The purpose of this report is to provide data points on the overall numbers of minority owned companies beyond any certifications at the state or regional level.

Texas H.B. 5140

Texas House Bill 5140 is a bill to prohibit consideration of race or ethnicity as a factor in governmental employment or contracting, other governmental functions and in higher education admissions. H.B. 5140 stands to significantly harm minority business owners who are an important growth engine for the state of Texas.

Historically Underutilized Business (HUB) Program

Currently, minority business owners received consideration through the Historically Underutilized Business (HUB) program. A HUB is defined a profit-making corporation, sole proprietorship, partnership, or joint venture in which at least 51 percent of the shares or stock or other equitable securities are owned by Asian, Black, Hispanic, non-ethnic women, and service disabled veterans. The state of Texas currently has utilization goals to help foster a positive environment for minorityowned businesses.

Statewide HUB Annual Utilization Goals

• 11.2% for heavy construction other than building contracts;

• 21.1% for all building construction, including general contractors and operative builders' contracts;

• 32.9% for all special trade construction contracts;

• 23.7% for professional services contracts;

• 26.0% for all other services contracts; and

• 21.1% for commodities contracts

H.B. 5140 stands to remove all racial and ethnic groups from HUB consideration. This will significantly impact the volume of services that minority-owned businesses provide to the state.

TEXAS HOUSE BILL 5140 & MINORITY BUSINESS OWNERSHIP

At the end of Fiscal Year 2022 (ending 8/31/22) HUB companies in Texas represented:

• 16,528 companies (including all ethnicities, women, and service disabled veterans)

• 11,366 minority-owned companies

• Asian: 1,424

• Black/African American: 4,510

• Hispanic: 5,159

• Native American/Pacific Islander: 273

• Women-owned (non-ethnic): 4,866

• Ethnic women-owned companies: 4,260 (and are already counted in their respective ethnic groups)

• Service Disabled Veteran: 296

• 3,784 contracts were awarded to HUB companies

• Total dollars awarded to HUBs were $3,410,520,298 (or 11.83% of all awarded state contracts)

Comparing Texas registered HUBs to the overall size of the Texas minority owned companies and population, it is evident the State of Texas’ HUB program is missing the potential of engaging with over 120K firms that are minority-owned, pay taxes and contribute to the job creation in the state.

While not all of those firms may meet the requirements of the HUB program, there is plenty of room for growth and economic development from tax paying businesses creating jobs, buying goods and doing business in Texas.

Report Methodology

Data analyzed in this document includes Total Statewide Awards and Awards to Certified HUBs by Ethnicity/Gender and the United States Census and the American Business Survey for data years 2020 and 2018 utilizing the Census API tool. We have used the most recent publicly available data for each geographic location presented. More information on the data sources and links can be found on page 10 of this document. Data tables are shown in the Appendix for all referenced ABS and HUB data.

THE MISSED OPPORTUNITY IN TEXAS… MINORITY-OWNED BUSINESSES OVERVIEW

• What is a minority-owned employer business? The American Business Survey (ABS) classifies these businesses as having employees and as being owned, in full or in part, by Black/African American, Asian, Hispanic, American Indian and Native Alaskan, Native Hawaiian or other Pacific Islander or a combination of the above groups.

• Nationally, 19.9% of businesses are minorityowned. They account for 1.15 million businesses

• In Texas, minority-owned businesses represent 30% of all the businesses in Texas. Each of these businesses pays U.S. and state taxes, contributing to the economic development of the state.

• These 129,353 businesses also represent 11.2% of the nations minority employer businesses. Only 16,528 are HUBs – showing a significant opportunity for Texas.

• Texas’ minority-owned employer businesses paid more than $42 billion in payroll in 2020, or about 2.5% of the Texas GDP.

• Minority-owned employer businesses in Texas employed 12% of the state’s workforce and paid 7% of the state’s total payroll in 2020. Many of Texas’s working and middle class families are supported by employees that work for minority-owned employer businesses.

• Most minority-owned businesses are small businesses. 73% of minority-owned businesses made under $1 million in 2020.

• 8% of businesses (33,831) were owned by minority women in Texas in 2020.

• Minority groups saw an increase in business ownership, when compared to 2019, while the number of White-owned firms show a decrease when comparing to the 2020 ABS.

HISPANIC OWNED EMPLOYER BUSINESSES IN THE U.S. & TEXAS, 2020

● In 2020, Hispanic-owned businesses made up 6.5% of all businesses.

● During the same period, in Texas, 13.5% of businesses were Hispanic owned. Their workers represent 5% of all employees in Texas.

● Hispanic-owned employer businesses were the largest minority category in Texas for number of businesses, number of people employed and payroll dollars. Nationally, the number of Hispanicowned businesses in the U.S. grew 8.2% from 2019 to 2020.

● Hispanic owned businesses in Texas paid more than $19 billion in payroll to their employees in 2020 and employed nearly 600,000 people.

● In 2020, 40.2% of the Texas population was Hispanic but only 13.5% of the businesses in Texas are owned by Hispanics. More than 73% of those employer firms make less than $1 million a year.

● Hispanic women own just 3% of businesses in Texas, and businesses owned by Hispanic women employed more than 166,000 workers in 2020 and these businesses paid their workers $4.3 billion in payroll.

● Hispanic-owned companies were awarded 1,235 state contracts in FY 2022 totaling $1,110,212,158.

● Hispanic registered HUBs in FY 2022: 5,159

BLACK/AFRICAN AMERICAN OWNED EMPLOYER BUSINESSES IN THE U.S. & TEXAS, 2020

● In 2020 there were an estimated 10,813 Black-owned employer businesses in Texas, employing 112,182 employees and paying nearly $3.2 billion in wages to their employees.

● Black-owned businesses make up only 2.5% of the employer businesses in Texas. At the same time, Black Texans made up 12.2% of the population in the 2020 U.S. Census.

● Texas is home to more than 3,830 businesses owned by Black women, employing more than 37,000 people and paying wages of more than $1 billion.

● 77% of Black-owned businesses made less than $1 million in sales in 2020.

● Black-owned businesses were awarded 466 state contracts in FY 2022 totaling a value of $341,168,461.

● Black registered HUBs in FY 2022: 4,510

ASIAN AMERICAN OWNED EMPLOYER BUSINESSES IN THE U.S. & TEXAS, 2020

● There were an estimated 612,194 Asian-owned businesses in the U.S. in 2020 including 57,384 Texas businesses (or around 9.4% of U.S. Asian-owned businesses).

● In Texas, Asian-owned employer businesses are the second largest category, behind Hispanicowned employer businesses.

● Asian-owned employer businesses in Texas employed 537,342 people and paid more than $17.9 billion in payroll in 2020.

● There were 14,560 Asian women owned businesses in Texas in 2020, employing 115,209 employees and with paying wages of more than $3.7 billion.

● Asian American owned companies were awarded 466 state contracts in FY 2022 for a total of $380,249,518

● Asian registered HUBs in FY 2022: 1,424

BUSINESS DEMOGRAPHICS: DFW METRO, 2018

● In 2018, there were an estimated 123,219 employer businesses in the Dallas/Ft. Worth/Arlington areas. Together they employed more than 3 million people and paid more than $182 billion in wages.

● In the Dallas/Ft. Worth/Arlington Area, 25% of businesses were minority owned in 2018, employing 280,000 (9%) of the regions workers and paying an estimated $10.5 billion in payroll.

● Almost 74% of the minority-owned business in the DFW Metroplex are small businesses with sales less than $1 million dollars a year.

● In 2018, Hispanic business owners in the DFW Metroplex owned more than 8,000 businesses, employed more than 92,000 people and paid more than $3 billion in payroll.

● In 2018, Asian business owners in the DFW Metroplex owned more than 17,000 businesses, employed more than 134,000 people and paid more than $5 billion in payroll.

● Due to small sample size, Black-owned businesses could not be analyzed in the DFW area.

ABOUT THE AMERICAN BUSINESS SURVEY

PURPOSE

The Annual Business Survey (ABS) provides information on selected economic and demographic characteristics for businesses and business owners by sex, ethnicity, race, and veteran status. Further, the survey measures research and development (for microbusinesses), new business topics such as innovation and technology, as well as other business characteristics. The ABS is conducted jointly by the U.S. Census Bureau and the National Center for Science and Engineering Statistics within the National Science Foundation.

COVERAGE

Included are all nonfarm employer businesses filing the 941, 944, or 1120 tax forms. The ABS is conducted on a company or firm basis rather than an establishment basis. A company or firm is a business consisting of one or more domestic establishments that the reporting firm specified under its ownership or control.

The data are compiled by combining data collected on businesses and business owners in the ABS with data collected on the economic census and administrative records.

Business ownership is defined as having more than 50% of the stock or equity in the business and is categorized by:

• Sex: Male; female; or equally male/female

• Ethnicity: Hispanic; equally Hispanic/non-Hispanic; non-Hispanic

• Race: White; Black or African American; American Indian or Alaska Native; Asian; Native Hawaiian or Other Pacific Islander; minority; equally minority/nonminority; nonminority

• Veteran status: Veteran; equally veteran/nonveteran; nonveteran

• Publicly held and other firms not classifiable by sex, ethnicity, race, and veteran status

Firms equally male-/female-owned, equally minority-/nonminority-owned, and equally veteran/nonveteran-owned are counted and tabulated as separate categories.

LINKS

U.S. Census: https://www.census.gov

ABS: https://www.census.gov/programs-surveys/abs.html

APPENDIX

HUB CONTRACTS FY22

TEXAS HUB UTILIZATION 2022: STATEWIDE ANALYSIS OF AWARDS TO HUB BY PROCUREMENT CATEGORY

**The Analysis is based on the total # of Vendor IDs eligible to receive HUB credit (Federal statutes allow sole proprietorship entities to hold up to four VID businesses within one tax report). Total # of certified HUBS for this report period of FY 2022 is 16,479.

TEXAS HUB UTILIZATION 2022: STATEWIDE ANALYSIS OF AWARDS TO HUB BY PROCUREMENT CATEGORY

**The Analysis is based on the total # of Vendor IDs eligible to receive HUB credit (Federal statutes allow sole proprietorship entities to hold up to four VID businesses within one tax report). Total # of certified HUBS for this report period of FY 2022 is 16,479.

TEXAS HUB UTILIZATION 2022: STATEWIDE ANALYSIS OF AWARDS TO HUB BY PROCUREMENT CATEGORY

**The Analysis is based on the total # of Vendor IDs eligible to receive HUB credit (Federal statutes allow sole proprietorship entities to hold up to four VID businesses within one tax report). Total # of certified HUBS for this report period of FY 2022 is 16,479.

ABS Texas Data Tables 2020: Minority-Owned Employer Businesses

ABS Texas Data Tables 2020: Hispanic-Owned Employer Businesses

ABS Texas Data Tables 2020: Asian-Owned Employer Businesses

ABS Texas Data Tables 2020: Black/AfricanAmerican-Owned Employer Businesses

ABS Texas Data Tables 2020: American Indian & Alaskan Native & Native Hawaiian and Pacific Islander Owned Businesses in Texas

ABS Dallas/Fort Worth/Arlington Data Tables 2018: Total and Minority-Owned Employer Businesses

ABS Dallas/Fort Worth/Arlington Data Tables 2018: Hispanic and Asian-Owned Employer Businesses

ABS Dallas/Fort Worth/Arlington Data Tables 2018: Black/African-American Employer Businesses

President/CEO