The Hopes and Fears of Would-Be Small Business Owners

It’s been said that small business owners represent the heart of the American dream, and their success is crucial to the country's economy. Consider the fact that there are 28 million small businesses across the U.S., and they account for two out of every three new jobs created.¹

From millennial startups to potential female entrepreneurs, Paychex surveyed over 1,000 people about their hopes and fears in starting their own small business, and where their funding would come from. Want to know what motivates – and frightens – the future small business owners of America? Continue reading to find out.

The Highs and Lows of Small Business Ownership

For those with the necessary passion for starting and growing a new business, it’s natural to have hopes and fears along the way.

Among the most common hopes of over 1,000 would-be small business owners, money wasn’t exactly at the top of their list. Instead, more than 78 percent said their greatest hope was to be more independent in their professional lives. The opportunity to present your personal vision day in and day out can be one of the biggest advantages of owning a small business. Nearly 64 percent hoped they would love the experience of running a company, and close to 53 percent hoped to make a lot of money while doing it.

Overwhelmingly, the biggest fear for potential small business owners was that they would fail in their endeavors. While it’s fair to say small businesses can face significant growth challenges, their odds have seen an uptick within the last decade.² Over two-thirds were also concerned about not making a lot of money, and more than half were afraid of bankruptcy.  

While almost a third of respondents hoped that being a business owner would alleviate stress, over half were worried that starting a company might be too stressful to manage.

The Inspiration Behind Small Businesses

When it came to inspiration for starting a small business, over two-thirds of respondents wanted to work for themselves.

Being your own boss can certainly have its advantages. You can control your hours of operation and creative direction, and help grow the economy. Around 11 percent of participants wanted to make a lot of money, while 10 percent were concerned with leaving their mark on the world.

From independent thinkers to big money makers, 21 percent wanted to start a business in the arts and entertainment industry, and over 14 percent were interested in technology. Less than 4 percent of would-be small business owners were interested in pursuing marketing, real estate, or education.

Money Matters

Beyond an idea and a little bit of courage, there are certain logistics to consider before putting in a departure notice at your current place of employment and starting a new business.

Over 20 percent hoped to open the doors of their small business one to two years from now. Less than a quarter wanted to be ready within the next 12 months, and more than half said it would take two years or more before their business was off the ground.

However, part of the hesitation might be financially motivated. More than half of participants were the sole investors for their future small business, and nearly 14 percent anticipated the business to fund itself. While another 13 percent were going to take out a bank loan to fund their vision, less than two percent had an investor lined up to help them get the ball rolling.

While many had no funding partners whatsoever, over half would turn to their significant other, friends, or family to make their dreams a reality.

The Differences Between Male and Female Small Business Owners

When it came to would-be small business owners, women were more likely than men to start a business because they wanted to work for themselves.

Women also hoped to be more creative in their endeavors and were less fearful about going bankrupt. In fact, the number of female business owners has been increasing, and more than 9 million women-owned businesses are in place across the U.S.³ 

On the other side of the aisle, men hoped to make more money by starting a small business, but were more fearful that owning a company would take up too much of their time. Additionally, over a quarter of women would start a new business with their spouse or significant other, compared to just 14 percent of men.

Men and women said self-funding would be their top method of funding. While both are interested in the arts and entertainment as well as the hospitality and food services industries, men more often want to pursue technology, and more women would like to work in wholesale and retail.

Generational Differences Among Future Small Business Owners

Gen Xers make up the largest number of small business owners in the U.S.⁴ Compared to baby boomers and millennials, Gen Xers were the most hopeful that running a small business would make them more independent and the most motivated to work for themselves.

However, millennials had the most trepidation when asked about starting a company. Over 40 percent were concerned they wouldn’t have enough experience, while more than half were afraid of going bankrupt, and 85 percent were afraid of failure. Unlike baby boomers or Gen X business owners, millennials were the least likely to be self-funded. Their affinity for crowdfunding may lend to their ability to find financial support elsewhere.

Baby boomers were the most likely to want to start their business in the next 12 months, but were the least hopeful that their business would make them less stressed or make more money.

Education and Small Business

Respondents with a bachelor’s degree were more likely to fear that their new business would fail compared to those with some college credit but no degree.

More than 54 percent of would-be small business owners with a bachelor’s degree were concerned their business would flop. Fifty-six percent with only a high school diploma felt the same way, and over 57 percent with an associate degree aligned. Those with a master’s degree or doctorate were the least concerned of failure – with only 43 percent admitting doubt.

When it came to respondents’ hopes to make a lot of money, their education backgrounds made a slight difference. Seventy-six percent of would-be owners with a master’s degree or doctorate hoped to make a lot of money with their efforts, while nearly 85 percent of those with a bachelor’s degree were financially motivated.

Less Experienced, But Not Unqualified

Not everyone looking to start a business has firsthand knowledge of working in a particular industry, according to our respondents.

At most, 78 percent who wanted to build a business in the arts and entertainment industry were currently employed within that field. More than half who wanted to pursue small business opportunities in technology, legal, and information services were currently employed by companies in the same industries.

Of those looking to start small businesses in education, manufacturing, journalism, government, and transportation, less than a quarter were currently working in similar roles.

While some successful entrepreneurs argue that experience is critical to success, others have proven it’s not entirely necessary if you have a good idea and a willingness to learn.

Changing Sides

Working in one industry doesn’t mean you can't have a passion for another.

While many within the arts and entertainment industry looked to start a business in the same arena, those looking to leave it were primarily interested in starting food services and hospitality-based companies. Others making the same leap included men and women currently working in legal jobs, science fields, and technology.

Restaurants can be especially plagued by high failure rates⁵, but the odds may not be much worse than any other business type if would-be business owners don't do their homework first. Whatever the field entrepreneurs want to pursue, they may need to do some extra research if they don’t have firsthand knowledge of the industry.

The arts and entertainment industry also drew the eye of many outsiders. More than half of those wanting to leave their current field of work for a new small business were doing so for opportunities in the arts and entertainment industry.

Finding Support Along the Way

Not all small businesses succeed. Some eventually close their doors for good; others evolve into new opportunities, as those who lead them learn more about the industry in which they’re operating. From the hopes and dreams of becoming an independent professional to the fears of stress and funding, most would-be small business owners have the same thoughts on success and failure.

Know what you’re good at and find help for the rest. At Paychex, we provide solutions that help small- to medium-sized business owners protect what matters most—their time, money, and people. Paychex can help you manage your payroll taxes, payroll, human resources, and employee benefits, and our easy-to-use online funding, payments, and website solutions help give you the support you need to launch and build the business you’ve always hoped for. 

Methodology

2017 Paychex surveyed over 1,000 people who plan to start their own business one day.

Restaurants can be especially plagued by high failure rates⁵, but the odds may not be much worse than any other business type if would-be business owners don't do their homework first. Whatever the field entrepreneurs want to pursue, they may need to do some extra research if they don’t have firsthand knowledge of the industry.