You don’t have to be a genius to see that there are notable differences between a Spanish (or Latin American) business owner and an American one. To be fair, the startup ecosystem in the United States is much better prepared for creating companies at practically every level. And this mindset, by the way, is common among Hispanics in general.
It starts with funding, which in the US is mostly in the hands of private investors willing to back an idea, and extends to the conditions for setting up a company. In Spain, starting a business comes with a built-in bureaucratic burden that can kill anyone’s desire to become an entrepreneur. We won’t get into taxes or the autónomo (Spain’s self-employed status), a figure that hardly exists in other countries, at least not in the way it is set up in Spain, with its high, compulsory social security contributions.
Instead, we’ll focus on the business owner and on an entrepreneurial mindset that is very different from what we see in the United States.
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What are the main mindset differences between Hispanic and American business owners?
1. University
In Spain, universities train students to be good at their profession, with the idea that this way they’ll end up working for a good company. Even a degree in Business Administration and Management doesn’t really teach you to be a good business owner. At best, it teaches you to be a good company executive.
In the United States, students go to universities where starting your own company is a constant topic, where they meet other future founders, and where partnerships with classmates are already forming. American universities have the perfect ecosystem to encourage entrepreneurship.
This simple difference in mindset, from the moment students enter university and in the reasons they go there at all, already shapes their future to some extent. We produce employees and civil servants, while the United States produces business owners.
2. Government support
The Spanish business owner often expects government aid in order to start a company.
In the United States there is hardly any government support for entrepreneurs. The system relies on a culture of private investors who are willing to put money into good ideas. So the American business owner neither expects nor applies for subsidies.
3. Mixing personal and business finances
The Spanish business owner has the bad habit of mixing the business’s finances with his personal finances. You often see companies that are profitable at the end of the month and still run into cash problems. If he earns more from the business, he spends more on his personal life. Few pay themselves a set salary.
The American business owner has learned this lesson. He knows that, especially in the early years, no matter how much the company makes, he’ll keep drawing the same pay and reinvest a large part of the profits in growing the business.
4. The cost of keeping up appearances
The Spanish business owner prefers to look wealthy rather than to build wealth. What’s the best way to show everyone that business is going well? Buying luxuries: a newer, fancier car, a new house, and so on. Often this rise in his standard of living ends up causing trouble for the company, because he has made the previous mistake (mixing personal and business finances). Other times he takes on loans and credit just to look even more successful.
The average American business owner tends to have a financial culture that leaves him at peace with himself, with no need to spend in order to impress. In fact, many follow the culture and philosophy of The Millionaire Next Door, a book that explains how the truly wealthy live. You’ll rarely spot them by their flashy luxuries. They buy luxuries when those luxuries are a tiny percentage of their assets.
5. The salesperson: a huge difference between Spaniards and Americans
For some reason, it pains the Spanish business owner to pay commissions to his sales reps. He sees them as a company expense that could be saved.
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The American business owner can’t wait for his salesperson to get rich, because that would mean the salesperson has made the company rich through his work. Commissions are seen as one of the best incentives for the rep to give everything for the company the following month. He’ll work hard to earn more money and, as a result, the company will earn more money.
Spain is probably one of the few countries where you see salespeople on a fixed salary with no commission, and this is a serious mistake: if a salesperson has no variable part in their pay, we end up discouraging their effort.
6. A growth mindset
The Spanish business owner starts a business, builds it up, increases sales, reaches a plateau and stays there until the business sinks or is overtaken by the competition.
The American business owner thinks in terms of scalability. He starts a company, builds it up and doesn’t stay on the plateau. If it has worked well, he’ll look for a way to replicate that success by opening another identical business and, if he can, he’ll create a franchise system to scale it. That’s why the United States manages to turn small businesses like a burger joint into a McDonald’s.
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7. Poor choices for positions of responsibility
The Spanish business owner tends to put people he trusts in positions of responsibility, regardless of whether they know how to do the job. It’s not unusual to find that a manager or team leader is the boss’s cousin or brother-in-law. As a result, the business never stops being a family firm, which limits its growth and the good ideas that could drive it.
In the United States, positions are filled on merit. Companies will always look for the best-qualified professional well ahead of friends and family. That’s another reason they manage to build empires. It all starts with surrounding yourself with capable people. Business is not a solo game. It’s a team game, and in the end the one with the best team wins.
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8. Business vs. emotions
For the Spanish business owner, the business is something emotional, sentimental and even spiritual. It’s the fruit of his effort, another child he has to feed, raise and look after. Once he has settled comfortably into it, he’ll hesitate to sell, even if the profit would be substantial.
The American business owner sees his business for what it is: a business. A money-making machine that has to turn a profit, and if there’s more profit in selling it or merging it with another company, he won’t hesitate to do so. Business is about money.
9. Diversification
The Spanish business owner usually limits himself to investing in the area he knows. So he invests in that industry, reinvests in the same industry, and if one day that industry stops working, the company goes under.
The American business owner specialises in his industry, but he knows his survival depends on moving into other fields. He often enters other industries even if he doesn’t master them, because he understands that the secret of business lies in knowing how to delegate. In other words, he’ll find professionals to help him enter other industries and diversify his investment and his business.
If his main industry collapses tomorrow, he can keep doing business in other areas.
To sum up, and to better understand the difference in mindset between a Spanish and an American business owner:
The Spanish business owner creates a delicious burger, opens his restaurant and works there until he dies or the business does.
The American business owner creates a burger that, in my view, leaves a lot to be desired, and in no time builds an empire called McDonald’s.
This is a revised and updated 2021 version of an earlier article on the differences between Hispanic and American entrepreneurs.
Featured image: John Margolies, Public domain, via Wikimedia Commons.
