UTPA researcher studying what makes very small businesses successful

With no capital of her own, Lucia Valdez had to ask for a cash advance to complete the first sale for her home business.

But with the profits she made from that first deal, she was able to make another and another, the Mission resident said. That first deal — completed with nothing other than her word and reputation — launched OMA Industries, an import-export business that supplies replacement parts to maquiladoras.

Valdez, who worked 12 years for a similar company that closed, used her contacts from a career spent buying and selling parts to build her business, one that has stayed afloat even as others that heavily rely on the automotive industry foundered in the recession.

After pulling off that first deal, Valdez, 43, said she knew her business would make it despite struggling early on.

“It wasn’t complicated because I didn’t have the money but I knew how to make the business work,” Valdez said. “If I did it before for somebody, I knew I could do it myself with $5,000 (from the first deal) in my hand.”

A University of Texas-Pan American professor is researching what keeps businesses much, much smaller than Valdez’s alive despite also starting with limited resources.

From selling used clothing to making homemade wares for flea markets, businesses in the Rio Grande Valley often begin with little to no startup funds, said Chad Richardson, who is studying “micro-enterprises” — very small-scale businesses.

The chair of the University of Texas-Pan American’s sociology department hopes to find the secrets to their entrepreneurial success that he hopes can be used to help other micro-enterprises.

Low-income residents with no formal education start their micro-enterprises out of necessity to put food on the table or make extra income.

“There’s people who are willing to take risks because they have to take risks,” Richardson said. “They’re shut out of so many things.”

The U.S. Small Business Administration — an independent federal agency that promotes small business — gave a $100,000 grant to the Women’s Business Center in Edinburg to study micro-enterprises in the Valley. Supported in part with funding from the SBA and the Edinburg Economic Development Corp., the center provides business training and technical assistance in an effort to boost the growth of female-owned businesses.

Richardson, who will lead the study, said he wants to develop a list of successful practices used by micro-entrepreneurs and then help others to follow in their footsteps.

For every resident in a colonia or other low-income neighborhood who is successful with their business, there are just as many who fail, he said. When they are successful, it’s sometimes because they are able to use their social networks to effectively market their business.

U.S. Rep. Rubén Hinojosa, D-Mercedes, who secured the grant for the center, said a lack of capital prevents small businesses from starting up.

But residents along the border with Mexico have shown that businesses can be built simply by buying products on one side of the border and selling them on the other, he said. Those types of businesses won’t make anyone rich but can earn $500 to $1,000 a month.

Most of the micro-enterprises that Richardson will study exist off the books, making them difficult to study through traditional means, said Sylvia Zamponi, the SBA’s district director. Richardson will employ promotoras — health workers embedded in their communities — to gather data and conduct surveys for his work.

Micro-entrepreneurs with limited resources face even greater challenges than traditional small-business owners, half of whom fail, Zamponi said. When successful business owners are asked how they achieved their success, they tend to cite multiple reasons.

She hopes the research provides specific answers — such as what kind of capital or marketing plan they used — beyond just citing a deeply held desire to make it.

“They have the ganas,” a deep desire to succeed, she said. “Most of them started with nothing.”

Jared Janes covers Hidalgo County government, Edinburg and general assignments for The Monitor. He can be reached at (956) 683-4424.