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What immigrants mean for small businesses?

Published onSep 05, 2023
What immigrants mean for small businesses?

While it is widely acknowledged that offering sanctuary to immigrants fleeing their homes is a moral imperative, the economic benefits that immigrants bring with them are often overlooked. The decision to leave one's homeland is a profound and challenging one, as it involves uprooting from a familiar place where individuals have invested years of their lives. Among these immigrants are lawyers, doctors, engineers, and entrepreneurs, who are forced to abandon their professional pursuits and belongings, carrying only essentials in a small bag as they seek safety elsewhere. The reasons that compel immigrants to leave their homes range from violence and persecution to climate-related disasters. Despite the hardships they face, immigrants can have a significant impact on small businesses. They may become founders of small businesses, contribute to the workforce that sustains small businesses, and even become new customers for existing small businesses.

Immigrants have the potential to become new entrepreneurs in their host countries. Although a universally accepted definition of “entrepreneur” is lacking, a closely aligned description could be a startup founder who initiates and sustains a business, actively participating from its inception, and achieving top initial earning. Considering this definition, it may take several years for an immigrant to fully embody the essence of an entrepreneur, as they must overcome various challenges. These challenges encompass language acquisition, acclimating to a new environment, establishing networks, acquiring necessary skills, and, more importantly, accessing capital. Unfortunately, female immigrants face disproportionate hurdles as they navigate their way in a new environment. One of the most challenging aspects lies in accessing capital, as many newcomers lack an established credit history. Despite these obstacles, research indicates that immigrants are displaying commendable dept repayment rates comparable to those of their native-born counterparts.  

Immigrants, though comprising only approximately 13% of the U.S. population, represent a significant 27.5% of the country's entrepreneurs. Small businesses run by immigrants possess a unique characteristic of blending innovation and diversity within local communities. Many immigrants bring with them a history of entrepreneurship from their home-country. Unfortunately, due to violence or climate disasters, they were compelled to abandon everything, but not their ideas and experiences. These entrepreneurial immigrants infuse cross-cultural perspectives that, if absent, would leave the U.S. public less exposed to diverse perspectives. They often introduce novel products and services that reflect their cultural heritage, thereby enriching the local economy and offering distinctive experiences to customers. One statistic shows that businesses run by immigrants generated a total of 1.3 trillion dollars in sales and provided employment for 8 million American workers. In 2017 alone, immigrants contributed 405 billion dollars in taxes, and if they were considered a separate country, their contribution would have surpassed Denmark's GDP. In terms of success, small businesses founded by immigrants who arrived in the U.S. before the age of 18 exhibit a higher growth rate compared to those who immigrated as adults.

Different research indicates that immigrants have shown significant interest in critical industries such as housing, medical, and technology. For instance, an Argentinian immigrant founded Vercel, a technology firm valued at $2.5 billion, employing over 400 people. Immigrants also represent “36.8% of employer businesses in accommodation and food services,” and 46% of non-employer businesses in transportation and warehousing.

Many small businesses run by immigrants are in a family business format where each family member contributes their unique skills to ensure the business’s success. This model is reminiscent of renowned big brands like Tyson Foods, Chick-Fil-A, and Publix, which originated as family-run small businesses and have since expanded nationwide and even globally. Small family-owned businesses offer not only economic advantages but also foster social connection within communities that share similar cultures and customs. In many instances, immigrants were already accomplished business people in their home countries. However, due to forced immigration, they were compelled to leave everything behind and relocate to a new country. Although they have to start afresh, they brought valuable business experience and knowledge that can be harnessed in their new home with sufficient support.

Additionally, given the significant proportion of immigrants in the U.S. labor market, some of the U.S. industries including food, construction, technology, and retail, depend significantly on the immigrant workforce. Immigrants often possess distinctive skills that can be of great benefit to small businesses. Additionally, their cross-cultural experiences and language proficiencies enrich the operations of these businesses. It is worth noting that many immigrants have achieved success in their respective home countries, and they can effectively leverage these skills to contribute to the growth of the small business they are employed in.

Finally, immigrants can serve as new potential customers for existing small businesses. For small businesses aiming to expand, immigrant communities offer opportunities as new consumer markets. Presently, the United States is home to over 45 million immigrants, creating a substantial demand for goods and services that astute small businesses can cater to. Business owners who share a cultural background with local immigrant groups often possess an advantage in comprehending and effectively marketing to these customers. They may offer products specific to the immigrants' country of origin or incorporate cultural elements into their offerings. As immigrant populations continue to grow and diversify, small businesses can identify and cater to emerging needs. The key to succeeding in these markets is recognizing the collective spending power of immigrants and genuinely embracing their presence in the local business landscape.

In conclusion, immigrant communities are of immense value to small businesses due to their entrepreneurial characteristics, significant contributions to the workforce, and consumption of goods produced by these businesses, all of which greatly foster the U.S. economy.

Aimal Faayez is a rising 3L at Wake Forest University. In addition to pursuing his J.D., Aimal also holds an LL.M. in business law from Wake Forest University. This summer, he worked as legal intern at the World Bank Group. Following graduation, Aimal plans to embark on his career in mergers and acquisitions.


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