PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Americans and Self-Employment: How Many Take the Plunge, and Why Many Don’t

By at 17 August, 2019, 9:14 am

by Raymond J. Keating-

So, do Americans want to embrace entrepreneurship or not? Some interesting answers come courtesy of “Freshbooks Third Annual Self-Employment in America Report.”

The good news from this Freshbooks 2019 survey of 4,000 Americans is that “large numbers of American workers are thinking about abandoning their full-time jobs in favor of self-employment. In our Third Annual Self-Employment Report, we estimate this number to be a staggering 24 million people.”

Wow!

Freshbooks goes on to declare, “Such a shift, if realized will be profoundly consequential to the economy.” That’s an understatement.

And then comes the “but”: “And yet, this year’s study also finds that only a fraction of these would-be small business owners have recently taken the plunge.”

Let’s first look at some broader findings about the self-employed.

First, the average age for the self-employed is 41, which is down form 45 in the 2017 survey, and the average age at startup has declined from 38 years old in 2017 to 35 in 2018 and 34 in 2019. So, there is some evidence for entrepreneurs getting younger.

Second, the level of satisfaction for the self-employed/small business owner has risen from 71 percent in 2018 to 78 percent in 2019, which, however, was off from 83 percent in 2017.

Third, the percent of self-employed/small business owners with college degrees has declined from 64 percent in 2017 to 60 percent in 2019 and 56 percent in 2019.

Fourth, the survey offers a fascinating breakdown between those who willingly dove into the entrepreneurial waters, and those who were pushed. That is, 83 percent chose self-employment, while 17 percent were forced into self-employment due to losing a job or a business closing.

Fifth, the split between serial entrepreneurs (who have run more than one business) and those running and committed to their first business is 30 percent vs. 70 percent.

Sixth, 16 percent have chosen self-employment in a different field or industry, while 84 percent work in the same industry as they did previously.

Seventh, as for the top skills identified for self-employment/small-business success, they were:

● Communication – 54%

● Problem solving – 53%

● Time management – 48%

● Adaptability – 39%

● Creativity – 26%

The survey then reviews the breakdown regarding those considering self-employment versus those who actually took the plunge: “Last year 27 million American workers said they were considering a shift to self-employment by 2020. There’s clearly a significant mindset shift to a workforce that values flexibility over stability. However, we estimate fewer than 2 million Americans took the leap full-time in 2018.”

What were the hard and soft barriers, according to the Freshbooks survey?

In terms of hard barriers:

● 28 percent “don’t have cash to invest, or need to pay down debt”

● 21 percent “need to complete training”

● 20 percent “don’t want to give up health benefits”

As for soft barriers:

● 35 percent “worry about inconsistent income”

● 27 percent “worry about learning less”

● 27 percent “lack a complete business plan”

● 19 percent “are loyal to their current company”

● 14 percent “don’t know what they want to do.”

Freshbooks remains optimistic on the future of entrepreneurship in America, as the following conclusion was offered:

“We’ve also learned that prospective independents differ in their self-employment ‘readiness’ and the hard and soft barriers that keep them from pursuing their career aspirations. If there is one certainty though, it’s that the tools and resources needed to overcome these barriers will only become better and more accessible in the future. So we’re sticking with our prediction that self-employment is redefining the American dream. It just might take a little longer.”

Let’s hope this optimism is warranted. Among the points highlighted as positives, Freshbooks is spot on correct to note that “the tools and resources needed to overcome these barriers will only become better and more accessible in the future.” Indeed, technology has reduced and continues to reduce the barriers to entry when it comes to entrepreneurship.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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