Most Entrepreneurs Looking for More Than a Side Hustle
While the Internet and gig economy have made it relatively easy for almost anyone to launch their own side hustles, those looking to start robust businesses of their own tend to have higher expectations in mind than just making a bit of extra money on the side, according to a new survey.
SCORE, a network of volunteer business mentors, conducted a study of new small businesses, defined as those in their first year of operations, to gain insight into why entrepreneurs hang out their own shingles and what their long-term expectations are. As part of the study, 1,000 new small business owners representing all 50 states and Washington, D.C. completed a survey.
Most of those surveyed had high hopes for their business when starting out, as 68% intended that their company be their sole, primary source of income, rather than a side gig that might lead to something more.
The budding entrepreneurs responding to the survey tended to build businesses that followed their prior career trajectory, rather than starting companies based on a new idea. In fact, respondents had, on average, 11.5 years of experience in their business’s area of industry, the research found.
While stories of self-made business owners who turned a layoff into a business opportunity may be appealing, that type of entrepreneurial effort is actually quite rare, the research found. Only 14.6% of respondents launched a company because of unemployment or underemployment.
Instead, the biggest driver of entrepreneurship was a passion for a product or service, cited by 40.2% of respondents. Other reasons for starting a business included wanting the flexibility of self-employment (16%), recognizing a gap in the marketplace and wanting to fill it (15%) and wanting to be one’s own boss (13.9%).
Though entrepreneurs may start off bullish about their prospects, statistics show that building a successful business is often easier said than done — according to the Small Business Administration, one-third of small businesses with employees don’t survive two years.
To gauge how new business owners handled challenging times, SCORE researchers asked them what motivated them when they struggled during their first year. The largest percentage (66.2%) said their family and friends were their biggest source of support. That was followed by 43.1% who said their business plan gave them the confidence they needed, and 42.9% who said a business mentor helped them to push through the rough patch.
The good news is most respondents saw progress in their first year, with 89% saying they had “at least some paying customers” by the 12-month mark. And the most effective marketing techniques for reaching those customers were networking and social media, the study found.
Becoming a business owner can be rewarding, but it’s important to understand the risks. Being prepared and arming yourself with as much information as possible can help you to succeed. For example, make sure you know the typical costs startup businesses incur.
Also, consider whether the timing is right — you might not have the necessary resources to start a business right now, or the current economic environment might not be favorable. And if you decide business ownership is for you, consider whether you will bootstrap your business with your own funds or whether it makes more sense to apply for a loan.
