Most Miami area small businesses profitable but have limited cash buffers, report shows

While the majority of Miami small businesses are profitable, many have limited cash liquidity. What’s more, small businesses in majority black, Hispanic and foreign-born communities in Miami have lower profitability and cash liquidity than businesses in majority white communities.

These were some of the findings in a new report by JPMorgan Chase Institute based on data from a sample of 52,000 businesses operating in all 178 Miami ZIP codes. The findings also included finding from a panel sample of 32,000 Miami small businesses that have been active since 2013, a period of strong economic growth for Miami’s economy.

In 2017, Miami had the 12th highest metropolitan area GDP in the country, which accounted for over 2% of the national GDP. Small businesses might have benefitted from and contributed to Miami’s economic strength, with the median profit margin of Miami small businesses being 13.9 percent. However, many small businesses had limited cash liquidity. One-third had seven or fewer days of cash liquidity, while less than half of small businesses had at least fourteen cash buffer days – or the number of days a business could withstand spending without income.

“Analyzing how community characteristics – especially in vibrant, urban communities like Miami – correlate to the financial health of small businesses within those communities is a key factor in understanding small business outcomes,” said Diana Farrell, President and CEO of the JPMorgan Chase Institute. “This report aims to identify where growth could be contributing to Miami’s economic strength.”

The new report, “Small Business Financial Outcomes in Miami Communities,” finds that:

  • Three out of four small businesses in the Miami metro area turn a profit and the median small business has 11 cash buffer days.
  • The median small business in Miami has fewer cash buffer days than the median business in JPMorgan Chase Institute’s full sample of 25 U.S. metro areas. One-third of small businesses in Miami have seven or fewer days of cash liquidity.
  • The median profit margin for Miami small businesses is 13.9 percent, which is similar to the JPMorgan Chase Institute’s broader sample of 25 U.S. metro areas.
  • Less than 10 percent of majority black, Hispanic, or foreign-born communities in Miami have businesses with profit margins over 20 percent, compared to 44 percent of majority white communities.
  • While small businesses in 60 percent of majority white communities have at least two weeks of cash liquidity, just over one-in-six majority Hispanic communities have a median of at least two weeks of cash buffer.
  • Small businesses in majority white communities are overrepresented in high-tech services, healthcare services, other professional services, and real estate. Small businesses in communities with majority non-white populations generally have a higher share of small businesses in the construction, repair & maintenance, restaurant, and retail industries.

Want to read more about small businesses in Miami-Dade? Explore the in-depth report by Florida SBDC at FIU and FIU’s Metropolitan Center titled Small Business. Big Impact.

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