SMALL BUSINESS INSIDER
by Raymond J. Keating –
For those of us who track the economy and understand the central role that entrepreneurship plays in innovation and growth, it’s always instructive to find out what drives people to start up their own businesses, as well as how they fund these startups.
The Small Business & Entrepreneurship Council’s information-packed survey of entrepreneurs who started businesses during the pandemic provides valuable information on these fronts.
Motivation for Starting a Business
As for the “whys” for entrepreneurship, these recent, pandemic entrepreneurs highlighted similar reasons as entrepreneurs have for a long time:
● 63 percent wanted to be their own bosses
● 46 percent sought more flexibility and control (i.e., independence)
● 21 percent needed to supplement their incomes
● 17 percent lost their jobs and 7 percent had spouses who lost jobs
At least a chunk of those last two might be entrepreneurs who were pushed into the waters of entrepreneurship.
Opportunity or Necessity?
On this question, 37 percent of these entrepreneurs started their new ventures when seeing an opportunity, with 9 percent saying they were compelled out of necessity, and 45 percent said it was a combination of opportunity and necessity.
Full-Time Entrepreneur or Side Gig?
In terms of whether the business is a full-time endeavor for these entrepreneurs:
● 74 percent of these small business owners said their new enterprise was their sole employment
● 10 percent were taking another job to support their business
● 16 percent said that the new venture was a side gig in addition to their regular jobs
While I admire all types of entrepreneurs, that 10 percent who took another job to support their entrepreneurial ventures rank as a fascinating and committed group.
Startup Capital
As for how these new entrepreneurs funded their startups:
● 76 percent dipped into their personal savings
● 32 percent used credit cards
● 22 percent received funding from family and friends
● 15 percent turned to bank loans
● 10 percent had partner contributions
● 10 percent got small business loans
● 3 percent accessed angel investors
● 1 percent were crowd funded.
These results line up with history, particularly with startup funding coming from personal savings, credit cards, and family and friends.
Interestingly, 17 percent started up their businesses with less than $10,000; 19 percent between $10,000 and $25,000; and 16 percent $26,000 to $50,000. So, 52 percent of these entrepreneurs were able to start up their businesses with less than $51,000.
Finally, entrepreneurship is hard. It if wasn’t, as the old saying goes, then everyone would do it. Do these entrepreneurs recommend entrepreneurship to others? Largely, yes, with 57 percent encouraging others to start their own businesses. That’s good news for the future of entrepreneurship.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.