Poll Analysis: L.A. County Small Business Survey
Times Poll Director
The Los Angeles Times Poll conducted a small business survey primarily among minority small business owners in Los Angeles County, in addition to a separate overall sample of small business owners in the county, including white business owners.
Overview
The small business owners in L.A. county are pretty optimistic about how things are going in California and describe the business conditions of their own businesses as fairly robust, according to a new Los Angeles Times poll. However, there are sizeable minorities in each group (Asians, Latinos and blacks) and to a lesser extent whites, that think their business endeavors are on shaky ground. Why do they feel this way? It is costing them more to do business. Each minority small business group said that in the past twelve months, their sales or revenues have either remained flat or their sales or revenues have virtually decreased or increased at about the same rate, while at the same time the cost of employee wages have either remained steady or increased and the cost of supplies have significantly increased.
While white small business owners worry over the same problems as their minority counterparts -- rising cost of supplies and employee wages -- they are seeing much more of an increase in past sales and revenues. Fifty percent of white owners have increased sales and revenue, compared to just about a third each of the three minority business owner groups.
However, most business owners are more optimistic about the future--they believe their sales and revenues will increase substantially rather than decrease over the next twelve months (for Asians, more than 3 to 1; for blacks, more than 8 to 1; for Latinos, more than 4 to 1; and for whites 9 to 1). Yet, at the same time, they still think the cost of employee wages will either stay the same or increase, and the cost of supplies will still increase substantially.
With this future optimism felt by all small business owner groups, they also think the biggest opportunities facing their business today is economic growth (32% for blacks, 30% for Latinos, 24% for Asians and 38% for whites) as well as a growing market base (29% for blacks, 26% for Latinos, 18% for Asians and 28% for whites). Black and white small business owners also include in this list, technology growth, while black owners also mention customer diversity and white owners mention improved customer service. For Latinos it is technology growth.
But along with the opportunities there are also many problems that face their businesses today. What worries each group and what makes them feel optimistic is a consistent theme that runs throughout the survey. For example, Asian small business owners, still mention as their top concern competition from large companies (20%), followed by competition from local businesses (12%) and unskilled workers (10%). They've also included increased overhead (10%) and bad neighborhoods (11%) as important problems facing their business. For black small business owners, the top mention was lack of funding (25%), unskilled workers (16%), as well as competition from large companies (13%). For the Latino small business owners, competition from large companies (15%), competition from local small businesses (12%), unskilled workers (12%) and lack of funding (10%) were of prime concern. And, for the white small business owners, availability of skilled workers (14%), government restrictions (11%), competition from larger companies (10%) and attracting customers (11%) are their key concerns.
Top mentions of problems for their businesses: The small business owners were asked a series of 23 issues, such as taxes and meeting government regulations, access to capital and availability of skilled workers, and asked them to state the ones that were of importance to their business and those that were not. Each group had as their top mentions concerns about taxes and availability of skilled workers, but each group also had concerns that were relevant only to their group. For example, Asian owners were more concerned with competition from corporations and chains as well as local competition, while black owners were more worried about getting access to more capital. Blacks and Asians were also concerned about health insurance costs. White business owners believed the problem of unskilled workers was the most important problem affecting their businesses. For purposes of discussion, the individual issues are ranked by order of their importance.
For the Asian small business owner, competition from corporations and chains was the top mention, followed by local competition, federal taxes and states taxes. Two issues tied for the fifth most important problem: meeting state regulations and availability of skilled workers . For the black small business owners, access to capital was the number one concern, followed by federal taxes, availability of skilled workers, state taxes and health insurance costs. It is interesting to note that deteriorating areas is the seventh mention among black business owners, compared to it coming in ninth for Asian and white owners, and eleventh for Latino business owners. And for the Latino small business owners, the top mention was federal taxes, followed by state taxes, availability of skilled workers , health insurance costs and access to capital.
For the white small business owners, the top mention was availability of skilled workers, with federal and state taxes following very closely behind. Competition from corporations and chains were ranked fourth and access to capital rounded out the top five list.
Small Business Issues
The availability of skilled workers: This item seems to be a big issue among all the small business owners surveyed. This issue, I think, will be a growing problem, especially in minority areas--the deteriorating infrastructure, pockets of high unemployment with people who have little skills needed for businesses today. As stated in an L.A. Times article by Don Lee, (7/26/99) there is a growing discrepancy between the haves and the have nots in L.A. County. Black and Latino small business owners are more concerned about the availability of skilled workers perhaps because of the location and deteriorating areas that their businesses are in. Deteriorating areas are also a gnawing concern for black small business owners. As stated in the article, joblessness has been running much higher in some of the gateway cities, including Compton, Lynwood and Bellflower. Those cities typify the regional polarization that has widened since the economic recovery. There is also the growing availability of immigrant labor, because these workers have generally lower skill levels.
As mentioned, this is a universal problem among the three minority small business owners and their white counterparts, although in varying degrees of importance. For instance, 29% of black business owners said it was the most important issue for them and 28% said it was an important issue (for a combined 57% saying it was an important issue for them to address). Latino owners had similar views with 24% expressing that it was the most important issue and 25% saying it was an important problem (for a combined 49%) thinking it was an important problem. Although Asians thought it was an important problem (18% most important, 25% an important problem), a larger plurality (47%) didn't think it was an important problem relevant to their business, including 32% who thought it was not an important problem at all. Among white small business owners, it was the most important problem with 29% saying it is very important and 23% saying it is somewhat important (for a combined 52% who said this item is an important problem). Very few owners said this problem didn't apply to their establishment.
Access to capital: This is by far the most important issue that is facing black small business owners. Sixty-three percent of black owners said it is an important problem that they face, including 40% who say it is one of the most important issues. This finding goes along with black owners having a harder time receiving financial assistance when seeking commercial bank loans. Only a third said it is not an important issue for them. Conversely, 58% of Asian owners said it is not an important issue for their business, including 34% who said not important at all. Only a third said it is an important problem (with just 13% saying it is one of the most important). Latino business owners' results are similar on this issue to the Asian business owners. Half of the Latino owners said it is not an important problem, including 32% who said it is not important at all, while 44% said it is an important problem (with 20% saying it is one of the most important). And for white small business owners, nearly 3 out of 5 (58%) say it is not an important problem, including 43% who said not important at all, while 38% say this item is an important concern (including 18% saying very important).
Black small business owners are the most concerned about obtaining capital and they rank this issue as their number one concern. On the other hand, Asian small business owners have the least problem receiving capital than the other four groups and they rank this issue tenth in importance. Latino and white owners are somewhere in between (both rank this issue fifth in importance).
Deteriorating areas: Black small business owners thought this was more of a problem for their businesses than the other three groups. Nearly half (46%) of black owners said this was an important problem that their businesses face and ranked it as the number seventh problem in importance. Half said it was not an important problem. Asian and white owners ranked this problem ninth in importance and Latino owners ranked it 11th.
Taxes
Overall, while federal and state taxes are ranked in the top five mentions of important problems in each group, county and local taxes are further down their concerns list.
Federal taxes: Black owners are slightly more concerned with this issue than Latinos business owners but a good deal more than Asian and white business owners. Nearly three out of five black owners (59%) said federal taxes was an important problem, including 30% who said it was the one of the most important problems they face as a business owner. Nearly 2 out of five black owners say it wasn't an important issue. Roughly 3 out of 5 (56%) of Latino business owners said it was an important issue (including 23% said one of the most important), while 41% said it wasn't an issue they thought was a problem for them. Asian business owners were more divided over this issue--47% important problem, 50% not an important problem. (Only a fifth of these owners thought it was one of the most important issues facing their business, compared to 27% who said it was not a problem at all.)
To illustrate how concerned these minority business owners are about federal taxes: Among Latino small business owners, federal taxes ranked first as one of the most important problems their businesses faced; among black small business owners, it ranked second; and among Asian small business owners, it ranked third. White business owners also thought this item was of utmost importance to them. It ranked second on their list. Nearly half (46%) thought federal taxes was an important issue, including 21% who thought it was very important.
State taxes: Federal taxes are marginally more of an issue to these small business owners than state taxes, although majorities of black and Latino business owners said it was an issue for them (54%, 53% respectively). But large minorities of these groups said it was not an important problem. Asian business owners, however, felt the opposite about state taxes for their businesses. A majority of these business owners said it was not an important issue for them (55%), compared to 43% who said it was an important problem. Among Latino owners state taxes ranked second and for black and Asian owners, this issue ranked fourth. White small business owners thought this issue was almost as important as the issue of federal taxes. About half (45%) thought state taxes was an important issue.
County taxes: Each group felt less concerned about their county taxes. This issue was ranked tenth for Latinos owners, 11th for Asian owners and 12th for black owners and for whites it ranked in the last tier of problems, at 13th. At least 3 out of five of each minority business owner group and 7 in 10 white small business owners said county taxes was not an important problem for them, including 37% of Asian owners, 29% of black owners, 34% of Latino owners and 45% of white owners who said not important at all.
City taxes: The three minority small business owner groups felt as concerned about these taxes as they did about county taxes -- that it was not an important problem for their establishments. (Black owners are slightly more concerned about city taxes (39%) than Latinos (35%) or Asians (32%) or whites (22%).) It was ranked tenth among black owners, but ranked 11th among Latino owners, 12th among Asian owners and 13th among white owners.
Property taxes: The three minority small business owner groups surveyed were slightly more concerned about property taxes than they were about their county or city taxes, and almost as concerned as they were about their state or federal taxes. About half each of these groups said it is not an important problem for them, while less than two out of five each said it is an important problem. This item was ranked seventh among Asian owners, eighth among Latino owners and tenth among black owners. White owners felt the same way as their minority counterparts, they ranked it 14th.
Meeting government regulations: Although meeting county and city regulations was considered not an important problem by majorities of all small business owners, meeting state regulations was more of a divided issue among the minority small business owners than among white business owners. California is not perceived as a business friendly state and these owners seem to agree with that sentiment. It was an issue that former Governor Pete Wilson tried to solve by making it easier for companies to weave their way through state regulations. Yet, this was ranked high up as an important problem facing businesses today. Among Asian business owners, this issue was ranked fourth, among black owners it was ranked eighth, among Latino owners, it ranked sixth and among white owners, it was ranked sixth.
Health Insurance
This issue is also rated high in importance for each small business owner group. Nearly 3 out of 5 of all small business owners do not have health insurance for their employees. As you can see, this is a big problem for the work force in L.A. county and for the rest of the state. For those businesses who have health insurance, it is becoming a major issue for them. Those surveyed said their premiums have gone up dramatically and substantially (31% of Asian owners said their premiums have gone up more than 10%, as did 41% of black owners, 36% of Latino owners and 39% of white owners). Some are covering fewer employees, or they are making their employees pay more of the benefits, while many more are looking for new carriers. This issue is ranked any where from fourth to eighth place among the four minority business owner groups.
Competition and Technology
Competition from corporations and chains: This is a prime concern for Asian small business owners. More than half of Asian owners said it is an important problem that their businesses face, including a third who said it is one of the most important problems. They rank it as their number one concern. White owners rank this item fourth in importance at 39%. Black owners are divided over this issue whether it is important or not (48% important, 45% not important). But they rank this issue pretty high up on their concern list--sixth. Latino owners ranked this item seventh. They don't seem to be as concerned about competition from corporation and chains as their counterparts. Two out of five Latino owners said this item was an important problem for them, but a majority (52%) said it was not important, including a third who said not important at all.
Local competition: This also is more of a concern for Asian small business owners than for the other three business owner groups. Asian owners rank this second--48% of these business owners said it is an important problem and 49% said it was not important. More than two out of five (43%) Latino owners said it is an important problem, while 55% said it wasn't. They ranked this issue sixth in importance. White owners also ranked this issue sixth in importance. Nearly two out of five (36%) said it was an important problem, but 61% said it is not important. Blacks ranked this issue as seventh in importance--44% important, 54% not important.
Access to technology/business information: These issues were ranked at the bottom of the list for all business owner groups.
Thinking of Relocating?
Although large majorities of all small business owners said they were not thinking of relocating, there is still a sizeable group that is thinking about it. About a quarter of Asian and Latino small business owners say they are thinking of relocating their business, while more black owners (33%) and slightly more white owners (36%) are thinking of doing the same thing. When asked where they were thinking of moving their business, at least 3 out of 10 said they would stay in the same area (a larger 39% of Latino owners said they would stay in the same area), while the others mentioned areas that are scattered over other parts of the Southland and outside of California altogether. The reason for their discontent is that each minority group mentioned the high cost of doing business in their area and the current location of their business was unsafe. (Black small business owners were more inclined to say their area was unsafe, 31%, compared to Asians business owners, 19%, and Latino business owners, 18%.) Asian owners also cited they needed more space (19%), while black owners said the present location was unfriendly to business (23%), and Latinos mentioned lack of business activity (18%). White small business owners' reasons for relocating are: the location was not friendly to their business (21%) and they needed more space (14%).
Seeking Financial Assistance
White small business owners were least likely to ask for financial help (41%), while black business owners were the most likely (58%). (Nearly half of Asian business owners and 54% of Latino business owners also sought financial assistance.) A quarter of Asian business owners applied for a loan with a commercial bank and one out of 10 used a credit card for some assistance. A fifth of blacks also sought a loan with a commercial bank, while about a fifth used their credit cards, one out of eight sought credit from suppliers and one out of ten asked for a family loan. A quarter of Latino small business owners went to a commercial bank for a loan, while roughly one out of six each sought credit from their suppliers and used their credit cards for financial assistance. Only 16% of white owners sought financial assistance from a commercial bank and 12% sought credit from their suppliers.
But the four business owner groups were not equal in receiving loans they applied for. Most white owners (82%) received the loans they applied for, while more than 7 out of 10 (73%) Asian owners said they received financing they sought. More than two-thirds of Latinos (68%) and 56% of blacks were just as successful in their quest for money. Blacks, though, had the distinction of being denied financial assistance more than the other three groups (30% vs. 14% each for whites and Asians and 21% for Latinos). And that could explain the black business owners anxiety about access to capital (ranked as their number one problem), their belief that business conditions pertaining to their business establishment is slightly more shaky and the cost of supplies will skyrocket.
Exporting/Importing and the Web
Overwhelmingly, all three minority groups said they do not export their goods or services to other countries. But more Asian business owners (19%) than Latinos (11%) or blacks (7%) do some exporting. But the exporting seems to be minimal. Very few black (3%) and Latino (7%) business owners import goods or services from other countries, while a larger share of Asian small business owners (25%) do. Asians are divided over whether their ties with members of their ethnic community have given them access to businesses in other countries that they otherwise would not have, while blacks and Latinos don't believe it has helped them.
A larger share of white small business owners export their product or service outside the country (19%) than the Latino or black business owners do. The exception is the Asian small business owners who export as much as the white owners (19%).
Web site: With all the talk about businesses getting on Web sites, our study shows that it is not a huge tool yet for these business owners. About a fifth of Asian owners (23%) and Latino owners (23%) say they have a Web site. Black owners (33%) are somewhat more inclined to be on the Internet. But, white business owners (44%) are taking advantage of the Web more than their minority counterparts. And just a small group of owners said that customers can purchase merchandise or service on their Web site (8% for Asians, 7% for Latinos, 12% for blacks and 15% for whites).
Demographics
Ethnicity of owner: Virtually all black small business owners (91%) were born in the U.S., compared to almost three out of five (57%) Latino small business owners who were. On the other hand, three quarters of Asian small business owners were born outside the U.S. Of those Asians born outside the country, 44% were born in S. Korea, 16% in China, 10% in Japan, 9% in Taiwan, 3% in Vietnam, 2% in the Philippines and 1% in Cambodia. Of the small 8% of black owners who were born elsewhere, they were mostly from Jamaica and Nigeria. And of the 43% of Latino owners who were born outside the U.S., the overwhelming groups of owners came from Mexico (65%). Seven percent were born in Cuba, 5% from Argentina, 3% from El Salvador and 2% from Guatemala. While an overwhelming majority of white business owners were born in the U.S., 15% were born elsewhere.
Length of time business opened: Asian small business owners were the newest business owners. This finding is not surprising since they are the newer immigrant. Forty-one percent said they own their business 10 years or less (including 23% who own their business five years or less), compared to 49% of Latino owners who own their business 21 years or more, and a third of black owners who also own their business 21 years or more. White business owners are also somewhat newer business owners. Nearly half (45%) have been in business for ten years or less and 27% said they have been in business more than 20 years.
Racial and ethnic makeup of all employees: Not surprising, black small business owners hire mostly black employees (50%) and a mix of all groups (40%), while a huge majority of Latino small business owners hire employees of their own ethnicity (78%), while 22% say they have a diverse group of employees. These two business owner groups virtually do not have mostly Asian workers in their employ. Almost a fifth of black owners said they have mostly Latino employees, while Latino owners virtually employ no black workers. Almost two out five (39%) Asian small business owners hire mostly Asian workers, 36% hire mostly Latinos and 31% said their employees are a mix of all groups. Virtually all minority small business owners do not employ a mostly white worker population.
White small business owners said their employees are mostly white (41%) or a diverse worker population (38%). However, 28% said their employees are mostly Latino.
Primarily where do their customers come from: It appears that most of the business done by these three minority small business owners come from within their own neighborhood or from customers all over L.A. county. Asian small business owners primarily do business in their neighborhood (42%) and 25% from L.A. county, while the reverse is true for the other two groups. For black small business owners, 46% of their business is primarily from the county, while 17% come from within their neighborhood. For Latino business owners, 37% said they do business in the county, while 29% said their business is from the neighborhood. More Asian owners said they do business internationally (13%) than blacks (4%) or Latinos (4%). More Latino owners said they do business in other counties (18%) than blacks (14%) or Asians (9%) do. And more black owners said their business is primarily conducted with clients in the entire state (19%) than Latinos (15%) or Asians (10%). For white business owners, they get a diverse customer base starting with customers coming from their neighborhood, to all parts of the state and throughout the country. They even do business internationally.
Type of Business
Asian small business owners: 41% are sole proprietorships, 47% say their business is a corporation and 10% are in a partnership. If they are in a sole proprietorship, 87% are owned by men, 12% by women. If the business is a partnership or a corporation, 24% say their business is more than fifty percent women owned. And 88% say their business is more than fifty percent minority owned. Only 5% say their business is a franchise and 10% say their business is conducted from home. This group of small business owners are the newer business owners in L.A. county. Twenty-eight percent said they started their establishment between 1990 and 1999 and 29% said their business got started between 1980 and 1989.
Black small business owners: 54% are sole proprietorships, 40% say their business is a corporation and 6% say it is a partnership. If the business is a sole proprietorship, 84% say they are owned by men, 16% by women. If the business is a partnership or a corporation, 21% say their business is more than fifty percent women owned and 94% say their business is more than fifty percent minority owned. Only 3% say their business is a franchise and 19% say their business is conducted from their home. Black small business owners are relatively newcomers to the business owner scene. Seventeen percent said they started their business between 1990 and 1999, 39% became a business owner between 1980 and 1989 and 25% started out somewhere between 1970 and 1979.
Latino small business owners: 46% are sole proprietorships, 43% have corporations and 10% are in partnerships. If the business is a sole proprietorship, 87% say their business is owned by men, while 13% say it is owned by women. If the business is a corporation or partnership, only 17% say their business is more than fifty percent women owned (less than the other two minority groups), and 91% say their business is more than fifty percent minority owned. Only 2% say their business is a franchise and 13% say their business is conducted from home. Latino small business owners have been here the longest compared to the other two minority groups. Seventeen percent said they started their business between 1907 and 1959, 21% said they started their business between 1960 and 1969 and 32% began their business between 1970 and 1979.
White small business owners: 44% are sole proprietorships, 45% are corporations and 10% are partnerships. If the business is a sole proprietorship, 79% are owned by men, 20% by women. If the business is a corporation or a partnership, about a fifth (21%) say their business is more than fifty percent women owned and 7% say their business is more than fifty percent minority owned. Only 3% say their business is a franchise and 18% say they work from home. A quarter said they started their business between 1980 and 1989, a third said between 1990 and 1999. Only 7% said they started their business before 1960.
How the Poll Was Conducted
The Times Poll sampled small business owners, with an emphasis on minority-owned businesses, in Los Angeles County from May 26th through August 19th. It was a two-staged sampling process for the minority small business owners. The initial phase of the study was mailing questionnaires to 875 businesses in each minority subgroup--Asian, Latino and African American small business owners. If no response was forthcoming after a stipulated period of time, then follow-up phone interviews were conducted. The Poll completed interviews with 432 African American small business owners for a response rate of 59%, 394 Latino small business owners for a response rate of 52% and 401 Asian small business owners for a response rate of 53%. For the overall L.A. county sample, 683 small business owners were interviewed out of 1,500 randomly selected businesses contacted by phone August 4--19, including 353 white small business owners. For the overall L.A. county sample the response rate is 58%. (The base to calculate response rates had fewer small businesses in them because businesses that were no longer in business and businesses that could not be located were deleted from each of the samples.) The list were random selections of small business owners from Dun & Bradstreet's business database, which also included businesses that were identified as minority owned.
Overview
The small business owners in L.A. county are pretty optimistic about how things are going in California and describe the business conditions of their own businesses as fairly robust, according to a new Los Angeles Times poll. However, there are sizeable minorities in each group (Asians, Latinos and blacks) and to a lesser extent whites, that think their business endeavors are on shaky ground. Why do they feel this way? It is costing them more to do business. Each minority small business group said that in the past twelve months, their sales or revenues have either remained flat or their sales or revenues have virtually decreased or increased at about the same rate, while at the same time the cost of employee wages have either remained steady or increased and the cost of supplies have significantly increased.
While white small business owners worry over the same problems as their minority counterparts -- rising cost of supplies and employee wages -- they are seeing much more of an increase in past sales and revenues. Fifty percent of white owners have increased sales and revenue, compared to just about a third each of the three minority business owner groups.
However, most business owners are more optimistic about the future--they believe their sales and revenues will increase substantially rather than decrease over the next twelve months (for Asians, more than 3 to 1; for blacks, more than 8 to 1; for Latinos, more than 4 to 1; and for whites 9 to 1). Yet, at the same time, they still think the cost of employee wages will either stay the same or increase, and the cost of supplies will still increase substantially.
With this future optimism felt by all small business owner groups, they also think the biggest opportunities facing their business today is economic growth (32% for blacks, 30% for Latinos, 24% for Asians and 38% for whites) as well as a growing market base (29% for blacks, 26% for Latinos, 18% for Asians and 28% for whites). Black and white small business owners also include in this list, technology growth, while black owners also mention customer diversity and white owners mention improved customer service. For Latinos it is technology growth.
But along with the opportunities there are also many problems that face their businesses today. What worries each group and what makes them feel optimistic is a consistent theme that runs throughout the survey. For example, Asian small business owners, still mention as their top concern competition from large companies (20%), followed by competition from local businesses (12%) and unskilled workers (10%). They've also included increased overhead (10%) and bad neighborhoods (11%) as important problems facing their business. For black small business owners, the top mention was lack of funding (25%), unskilled workers (16%), as well as competition from large companies (13%). For the Latino small business owners, competition from large companies (15%), competition from local small businesses (12%), unskilled workers (12%) and lack of funding (10%) were of prime concern. And, for the white small business owners, availability of skilled workers (14%), government restrictions (11%), competition from larger companies (10%) and attracting customers (11%) are their key concerns.
Top mentions of problems for their businesses: The small business owners were asked a series of 23 issues, such as taxes and meeting government regulations, access to capital and availability of skilled workers, and asked them to state the ones that were of importance to their business and those that were not. Each group had as their top mentions concerns about taxes and availability of skilled workers, but each group also had concerns that were relevant only to their group. For example, Asian owners were more concerned with competition from corporations and chains as well as local competition, while black owners were more worried about getting access to more capital. Blacks and Asians were also concerned about health insurance costs. White business owners believed the problem of unskilled workers was the most important problem affecting their businesses. For purposes of discussion, the individual issues are ranked by order of their importance.
For the Asian small business owner, competition from corporations and chains was the top mention, followed by local competition, federal taxes and states taxes. Two issues tied for the fifth most important problem: meeting state regulations and availability of skilled workers . For the black small business owners, access to capital was the number one concern, followed by federal taxes, availability of skilled workers, state taxes and health insurance costs. It is interesting to note that deteriorating areas is the seventh mention among black business owners, compared to it coming in ninth for Asian and white owners, and eleventh for Latino business owners. And for the Latino small business owners, the top mention was federal taxes, followed by state taxes, availability of skilled workers , health insurance costs and access to capital.
For the white small business owners, the top mention was availability of skilled workers, with federal and state taxes following very closely behind. Competition from corporations and chains were ranked fourth and access to capital rounded out the top five list.
Small Business Issues
The availability of skilled workers: This item seems to be a big issue among all the small business owners surveyed. This issue, I think, will be a growing problem, especially in minority areas--the deteriorating infrastructure, pockets of high unemployment with people who have little skills needed for businesses today. As stated in an L.A. Times article by Don Lee, (7/26/99) there is a growing discrepancy between the haves and the have nots in L.A. County. Black and Latino small business owners are more concerned about the availability of skilled workers perhaps because of the location and deteriorating areas that their businesses are in. Deteriorating areas are also a gnawing concern for black small business owners. As stated in the article, joblessness has been running much higher in some of the gateway cities, including Compton, Lynwood and Bellflower. Those cities typify the regional polarization that has widened since the economic recovery. There is also the growing availability of immigrant labor, because these workers have generally lower skill levels.
As mentioned, this is a universal problem among the three minority small business owners and their white counterparts, although in varying degrees of importance. For instance, 29% of black business owners said it was the most important issue for them and 28% said it was an important issue (for a combined 57% saying it was an important issue for them to address). Latino owners had similar views with 24% expressing that it was the most important issue and 25% saying it was an important problem (for a combined 49%) thinking it was an important problem. Although Asians thought it was an important problem (18% most important, 25% an important problem), a larger plurality (47%) didn't think it was an important problem relevant to their business, including 32% who thought it was not an important problem at all. Among white small business owners, it was the most important problem with 29% saying it is very important and 23% saying it is somewhat important (for a combined 52% who said this item is an important problem). Very few owners said this problem didn't apply to their establishment.
Access to capital: This is by far the most important issue that is facing black small business owners. Sixty-three percent of black owners said it is an important problem that they face, including 40% who say it is one of the most important issues. This finding goes along with black owners having a harder time receiving financial assistance when seeking commercial bank loans. Only a third said it is not an important issue for them. Conversely, 58% of Asian owners said it is not an important issue for their business, including 34% who said not important at all. Only a third said it is an important problem (with just 13% saying it is one of the most important). Latino business owners' results are similar on this issue to the Asian business owners. Half of the Latino owners said it is not an important problem, including 32% who said it is not important at all, while 44% said it is an important problem (with 20% saying it is one of the most important). And for white small business owners, nearly 3 out of 5 (58%) say it is not an important problem, including 43% who said not important at all, while 38% say this item is an important concern (including 18% saying very important).
Black small business owners are the most concerned about obtaining capital and they rank this issue as their number one concern. On the other hand, Asian small business owners have the least problem receiving capital than the other four groups and they rank this issue tenth in importance. Latino and white owners are somewhere in between (both rank this issue fifth in importance).
Deteriorating areas: Black small business owners thought this was more of a problem for their businesses than the other three groups. Nearly half (46%) of black owners said this was an important problem that their businesses face and ranked it as the number seventh problem in importance. Half said it was not an important problem. Asian and white owners ranked this problem ninth in importance and Latino owners ranked it 11th.
Taxes
Overall, while federal and state taxes are ranked in the top five mentions of important problems in each group, county and local taxes are further down their concerns list.
Federal taxes: Black owners are slightly more concerned with this issue than Latinos business owners but a good deal more than Asian and white business owners. Nearly three out of five black owners (59%) said federal taxes was an important problem, including 30% who said it was the one of the most important problems they face as a business owner. Nearly 2 out of five black owners say it wasn't an important issue. Roughly 3 out of 5 (56%) of Latino business owners said it was an important issue (including 23% said one of the most important), while 41% said it wasn't an issue they thought was a problem for them. Asian business owners were more divided over this issue--47% important problem, 50% not an important problem. (Only a fifth of these owners thought it was one of the most important issues facing their business, compared to 27% who said it was not a problem at all.)
To illustrate how concerned these minority business owners are about federal taxes: Among Latino small business owners, federal taxes ranked first as one of the most important problems their businesses faced; among black small business owners, it ranked second; and among Asian small business owners, it ranked third. White business owners also thought this item was of utmost importance to them. It ranked second on their list. Nearly half (46%) thought federal taxes was an important issue, including 21% who thought it was very important.
State taxes: Federal taxes are marginally more of an issue to these small business owners than state taxes, although majorities of black and Latino business owners said it was an issue for them (54%, 53% respectively). But large minorities of these groups said it was not an important problem. Asian business owners, however, felt the opposite about state taxes for their businesses. A majority of these business owners said it was not an important issue for them (55%), compared to 43% who said it was an important problem. Among Latino owners state taxes ranked second and for black and Asian owners, this issue ranked fourth. White small business owners thought this issue was almost as important as the issue of federal taxes. About half (45%) thought state taxes was an important issue.
County taxes: Each group felt less concerned about their county taxes. This issue was ranked tenth for Latinos owners, 11th for Asian owners and 12th for black owners and for whites it ranked in the last tier of problems, at 13th. At least 3 out of five of each minority business owner group and 7 in 10 white small business owners said county taxes was not an important problem for them, including 37% of Asian owners, 29% of black owners, 34% of Latino owners and 45% of white owners who said not important at all.
City taxes: The three minority small business owner groups felt as concerned about these taxes as they did about county taxes -- that it was not an important problem for their establishments. (Black owners are slightly more concerned about city taxes (39%) than Latinos (35%) or Asians (32%) or whites (22%).) It was ranked tenth among black owners, but ranked 11th among Latino owners, 12th among Asian owners and 13th among white owners.
Property taxes: The three minority small business owner groups surveyed were slightly more concerned about property taxes than they were about their county or city taxes, and almost as concerned as they were about their state or federal taxes. About half each of these groups said it is not an important problem for them, while less than two out of five each said it is an important problem. This item was ranked seventh among Asian owners, eighth among Latino owners and tenth among black owners. White owners felt the same way as their minority counterparts, they ranked it 14th.
Meeting government regulations: Although meeting county and city regulations was considered not an important problem by majorities of all small business owners, meeting state regulations was more of a divided issue among the minority small business owners than among white business owners. California is not perceived as a business friendly state and these owners seem to agree with that sentiment. It was an issue that former Governor Pete Wilson tried to solve by making it easier for companies to weave their way through state regulations. Yet, this was ranked high up as an important problem facing businesses today. Among Asian business owners, this issue was ranked fourth, among black owners it was ranked eighth, among Latino owners, it ranked sixth and among white owners, it was ranked sixth.
Health Insurance
This issue is also rated high in importance for each small business owner group. Nearly 3 out of 5 of all small business owners do not have health insurance for their employees. As you can see, this is a big problem for the work force in L.A. county and for the rest of the state. For those businesses who have health insurance, it is becoming a major issue for them. Those surveyed said their premiums have gone up dramatically and substantially (31% of Asian owners said their premiums have gone up more than 10%, as did 41% of black owners, 36% of Latino owners and 39% of white owners). Some are covering fewer employees, or they are making their employees pay more of the benefits, while many more are looking for new carriers. This issue is ranked any where from fourth to eighth place among the four minority business owner groups.
Competition and Technology
Competition from corporations and chains: This is a prime concern for Asian small business owners. More than half of Asian owners said it is an important problem that their businesses face, including a third who said it is one of the most important problems. They rank it as their number one concern. White owners rank this item fourth in importance at 39%. Black owners are divided over this issue whether it is important or not (48% important, 45% not important). But they rank this issue pretty high up on their concern list--sixth. Latino owners ranked this item seventh. They don't seem to be as concerned about competition from corporation and chains as their counterparts. Two out of five Latino owners said this item was an important problem for them, but a majority (52%) said it was not important, including a third who said not important at all.
Local competition: This also is more of a concern for Asian small business owners than for the other three business owner groups. Asian owners rank this second--48% of these business owners said it is an important problem and 49% said it was not important. More than two out of five (43%) Latino owners said it is an important problem, while 55% said it wasn't. They ranked this issue sixth in importance. White owners also ranked this issue sixth in importance. Nearly two out of five (36%) said it was an important problem, but 61% said it is not important. Blacks ranked this issue as seventh in importance--44% important, 54% not important.
Access to technology/business information: These issues were ranked at the bottom of the list for all business owner groups.
Thinking of Relocating?
Although large majorities of all small business owners said they were not thinking of relocating, there is still a sizeable group that is thinking about it. About a quarter of Asian and Latino small business owners say they are thinking of relocating their business, while more black owners (33%) and slightly more white owners (36%) are thinking of doing the same thing. When asked where they were thinking of moving their business, at least 3 out of 10 said they would stay in the same area (a larger 39% of Latino owners said they would stay in the same area), while the others mentioned areas that are scattered over other parts of the Southland and outside of California altogether. The reason for their discontent is that each minority group mentioned the high cost of doing business in their area and the current location of their business was unsafe. (Black small business owners were more inclined to say their area was unsafe, 31%, compared to Asians business owners, 19%, and Latino business owners, 18%.) Asian owners also cited they needed more space (19%), while black owners said the present location was unfriendly to business (23%), and Latinos mentioned lack of business activity (18%). White small business owners' reasons for relocating are: the location was not friendly to their business (21%) and they needed more space (14%).
Seeking Financial Assistance
White small business owners were least likely to ask for financial help (41%), while black business owners were the most likely (58%). (Nearly half of Asian business owners and 54% of Latino business owners also sought financial assistance.) A quarter of Asian business owners applied for a loan with a commercial bank and one out of 10 used a credit card for some assistance. A fifth of blacks also sought a loan with a commercial bank, while about a fifth used their credit cards, one out of eight sought credit from suppliers and one out of ten asked for a family loan. A quarter of Latino small business owners went to a commercial bank for a loan, while roughly one out of six each sought credit from their suppliers and used their credit cards for financial assistance. Only 16% of white owners sought financial assistance from a commercial bank and 12% sought credit from their suppliers.
But the four business owner groups were not equal in receiving loans they applied for. Most white owners (82%) received the loans they applied for, while more than 7 out of 10 (73%) Asian owners said they received financing they sought. More than two-thirds of Latinos (68%) and 56% of blacks were just as successful in their quest for money. Blacks, though, had the distinction of being denied financial assistance more than the other three groups (30% vs. 14% each for whites and Asians and 21% for Latinos). And that could explain the black business owners anxiety about access to capital (ranked as their number one problem), their belief that business conditions pertaining to their business establishment is slightly more shaky and the cost of supplies will skyrocket.
Exporting/Importing and the Web
Overwhelmingly, all three minority groups said they do not export their goods or services to other countries. But more Asian business owners (19%) than Latinos (11%) or blacks (7%) do some exporting. But the exporting seems to be minimal. Very few black (3%) and Latino (7%) business owners import goods or services from other countries, while a larger share of Asian small business owners (25%) do. Asians are divided over whether their ties with members of their ethnic community have given them access to businesses in other countries that they otherwise would not have, while blacks and Latinos don't believe it has helped them.
A larger share of white small business owners export their product or service outside the country (19%) than the Latino or black business owners do. The exception is the Asian small business owners who export as much as the white owners (19%).
Web site: With all the talk about businesses getting on Web sites, our study shows that it is not a huge tool yet for these business owners. About a fifth of Asian owners (23%) and Latino owners (23%) say they have a Web site. Black owners (33%) are somewhat more inclined to be on the Internet. But, white business owners (44%) are taking advantage of the Web more than their minority counterparts. And just a small group of owners said that customers can purchase merchandise or service on their Web site (8% for Asians, 7% for Latinos, 12% for blacks and 15% for whites).
Demographics
Ethnicity of owner: Virtually all black small business owners (91%) were born in the U.S., compared to almost three out of five (57%) Latino small business owners who were. On the other hand, three quarters of Asian small business owners were born outside the U.S. Of those Asians born outside the country, 44% were born in S. Korea, 16% in China, 10% in Japan, 9% in Taiwan, 3% in Vietnam, 2% in the Philippines and 1% in Cambodia. Of the small 8% of black owners who were born elsewhere, they were mostly from Jamaica and Nigeria. And of the 43% of Latino owners who were born outside the U.S., the overwhelming groups of owners came from Mexico (65%). Seven percent were born in Cuba, 5% from Argentina, 3% from El Salvador and 2% from Guatemala. While an overwhelming majority of white business owners were born in the U.S., 15% were born elsewhere.
Length of time business opened: Asian small business owners were the newest business owners. This finding is not surprising since they are the newer immigrant. Forty-one percent said they own their business 10 years or less (including 23% who own their business five years or less), compared to 49% of Latino owners who own their business 21 years or more, and a third of black owners who also own their business 21 years or more. White business owners are also somewhat newer business owners. Nearly half (45%) have been in business for ten years or less and 27% said they have been in business more than 20 years.
Racial and ethnic makeup of all employees: Not surprising, black small business owners hire mostly black employees (50%) and a mix of all groups (40%), while a huge majority of Latino small business owners hire employees of their own ethnicity (78%), while 22% say they have a diverse group of employees. These two business owner groups virtually do not have mostly Asian workers in their employ. Almost a fifth of black owners said they have mostly Latino employees, while Latino owners virtually employ no black workers. Almost two out five (39%) Asian small business owners hire mostly Asian workers, 36% hire mostly Latinos and 31% said their employees are a mix of all groups. Virtually all minority small business owners do not employ a mostly white worker population.
White small business owners said their employees are mostly white (41%) or a diverse worker population (38%). However, 28% said their employees are mostly Latino.
Primarily where do their customers come from: It appears that most of the business done by these three minority small business owners come from within their own neighborhood or from customers all over L.A. county. Asian small business owners primarily do business in their neighborhood (42%) and 25% from L.A. county, while the reverse is true for the other two groups. For black small business owners, 46% of their business is primarily from the county, while 17% come from within their neighborhood. For Latino business owners, 37% said they do business in the county, while 29% said their business is from the neighborhood. More Asian owners said they do business internationally (13%) than blacks (4%) or Latinos (4%). More Latino owners said they do business in other counties (18%) than blacks (14%) or Asians (9%) do. And more black owners said their business is primarily conducted with clients in the entire state (19%) than Latinos (15%) or Asians (10%). For white business owners, they get a diverse customer base starting with customers coming from their neighborhood, to all parts of the state and throughout the country. They even do business internationally.
Type of Business
Asian small business owners: 41% are sole proprietorships, 47% say their business is a corporation and 10% are in a partnership. If they are in a sole proprietorship, 87% are owned by men, 12% by women. If the business is a partnership or a corporation, 24% say their business is more than fifty percent women owned. And 88% say their business is more than fifty percent minority owned. Only 5% say their business is a franchise and 10% say their business is conducted from home. This group of small business owners are the newer business owners in L.A. county. Twenty-eight percent said they started their establishment between 1990 and 1999 and 29% said their business got started between 1980 and 1989.
Black small business owners: 54% are sole proprietorships, 40% say their business is a corporation and 6% say it is a partnership. If the business is a sole proprietorship, 84% say they are owned by men, 16% by women. If the business is a partnership or a corporation, 21% say their business is more than fifty percent women owned and 94% say their business is more than fifty percent minority owned. Only 3% say their business is a franchise and 19% say their business is conducted from their home. Black small business owners are relatively newcomers to the business owner scene. Seventeen percent said they started their business between 1990 and 1999, 39% became a business owner between 1980 and 1989 and 25% started out somewhere between 1970 and 1979.
Latino small business owners: 46% are sole proprietorships, 43% have corporations and 10% are in partnerships. If the business is a sole proprietorship, 87% say their business is owned by men, while 13% say it is owned by women. If the business is a corporation or partnership, only 17% say their business is more than fifty percent women owned (less than the other two minority groups), and 91% say their business is more than fifty percent minority owned. Only 2% say their business is a franchise and 13% say their business is conducted from home. Latino small business owners have been here the longest compared to the other two minority groups. Seventeen percent said they started their business between 1907 and 1959, 21% said they started their business between 1960 and 1969 and 32% began their business between 1970 and 1979.
White small business owners: 44% are sole proprietorships, 45% are corporations and 10% are partnerships. If the business is a sole proprietorship, 79% are owned by men, 20% by women. If the business is a corporation or a partnership, about a fifth (21%) say their business is more than fifty percent women owned and 7% say their business is more than fifty percent minority owned. Only 3% say their business is a franchise and 18% say they work from home. A quarter said they started their business between 1980 and 1989, a third said between 1990 and 1999. Only 7% said they started their business before 1960.
How the Poll Was Conducted
The Times Poll sampled small business owners, with an emphasis on minority-owned businesses, in Los Angeles County from May 26th through August 19th. It was a two-staged sampling process for the minority small business owners. The initial phase of the study was mailing questionnaires to 875 businesses in each minority subgroup--Asian, Latino and African American small business owners. If no response was forthcoming after a stipulated period of time, then follow-up phone interviews were conducted. The Poll completed interviews with 432 African American small business owners for a response rate of 59%, 394 Latino small business owners for a response rate of 52% and 401 Asian small business owners for a response rate of 53%. For the overall L.A. county sample, 683 small business owners were interviewed out of 1,500 randomly selected businesses contacted by phone August 4--19, including 353 white small business owners. For the overall L.A. county sample the response rate is 58%. (The base to calculate response rates had fewer small businesses in them because businesses that were no longer in business and businesses that could not be located were deleted from each of the samples.) The list were random selections of small business owners from Dun & Bradstreet's business database, which also included businesses that were identified as minority owned.
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