HBB 2-1
12/2003
ABSTRACT
THE IMPACT
OF STARTING A BUSINESS ON THE ENTREPRENEUR AND THE FAMILY
Prepared by:
Glenn Muske
Home-Based and
Micro Business Specialist
Oklahoma
Cooperative Extension Service
104 HES,
Oklahoma State University
Stillwater, OK
74078
(405) 744-9931
muske@okstate.edu
Liang, C. &
Dunn, P. (2002). The impact of starting a new venture on the
entrepreneur and their family: Expectations, reality, and
willingness to start again. Proceedings of the 2003
U. S. Association of Small
Business Entrepreneurship,
Hilton Head, SC: USASBE.
Implications for Cooperative Extension
The rate of
failure among entrepreneurs is typically quite high ranging from a
failure rate within five years of 50% to nearly 80%. And yet many
of these entrepreneurs are likely to start another business if
they fail with the first one. This study looked at
entrepreneurial expectations to study who might be more likely to
start another business. The higher the positive feelings towards
entrepreneurship and its outcomes, both financially and on the
family, were found to predict who would be more likely to start
all over again. The findings are useful in that knowing the
attitude of the business owner who fails can help the educator
provide better career guidance. These findings however can also
be reversed with the suggestion that attitude is important in
developing the successful business, reinforcing other research
that has been done.
OVERVIEW
Although
literature is available on the business owner’s expectations for his
or her start-up business, there is little similar information on if
those expectations are met and if the entrepreneur would do it
again. There is even less research on how starting a new business
can impact the family and the family’s thoughts about if starting a
business was the correct thing to do. The purpose of this
exploratory research was to look at the expectations of the
entrepreneur and the reality and also so examine these same
questions from the family’s perspective. Does starting a business
make the family better off or does it result in a loss of family
income, resources and interpersonal relations. If the business
should fail, does that learning make it easier to start the next
business and how might the family feel about that decision?
METHODS
One hundred and
thirty two retail and service firms who indicated that they would be
willing to start another business should the current business fail
were surveyed. The businesses were located in 28 states and ranged
across the United States. Rural entrepreneurs accounted for 38% of
the respondents. Just over 70% of the businesses had been started
in the last 10 years. For 72% of the businesses, annual sales did
not exceed $500,000. Seventy-five percent had less than five
employees. Most of the entrepreneurs were under 50 and had spouses
and children under 20 years of age. Forty percent of the spouses
worked outside the home and outside the business. Of those business
owners with children in the family, 40% had the children working in
the business. The largest sources of funding to start the business
were: personal savings (43%), loans (23%), family savings (14%), and
gifts (14%). Over 50% of the businesses had used some personal or
family savings to get started.
RESULTS
There were
substantial numbers of significant differences in this study
regarding who would or would not start a business again. Ninety two
percent of the entrepreneurs who would start again considered the
current business successful. Of those who would not start the
business again, 69% also considered that their current business was
a success.
When asked if
current sales were higher than expected, 64% of those who would
start again said they were while 47% of those who would not start
again also said that their current sales were higher than expected.
Forty-four percent of owners who would start again indicated that
current profits were higher than expected while 16% of those who
would not start again thought current profits were higher than
expected.
Sixty-four
percent of the entrepreneurs who would start again said that
starting the current business was harder than expected. For those
who would not start again, that number increased to 84% responding
that starting was harder than expected. Sixty-two percent of those
who would start again did not think that their initial expectations
were too high but only 35% of those who would not start again felt
that same way. They were more likely, 65%, to have felt that their
expectations were too high.
Business owners
who would start again found themselves happier (87%) as opposed to
those who would not start again (19%). They also thought that their
spouse was happier (59% to 13%). Those who would start again also
thought that they were able to spend more time with their spouse
(50% vs. 19%) and children (45% vs. 28%).
SUMMARY
Success rates of
small businesses, although often defined and measured in a variety
of ways, all suggest that only 15 to 50% of business will survive
for five years or more. Yet research has also shown that an
entrepreneur who fails is likely to start another business. This
research suggests that those who start another business are those
who have a more positive attitude towards entrepreneurship and
expectations for what the business can do for them and their
families. This understanding can help guide prospective
entrepreneurs in their career path decisions.
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