Life may be like a box of chocolates, but probing the financial state of American small-business owners is more like a bowl of popcorn. Each piece of information is like a kernel, seemingly insignificant on its own, but after it bursts open to reveal some new detail, it adds to your hunger for more.
Try as you might to start slow, once you hit your rhythm, it seems like you can’t process the information fast enough, certain you’ll never tire of snacking. In this case, your curiosity about the average income of small-business owners may lead you to “empty the bowl” with the most common industries for entrepreneurs, ancillary financial facts, and some of the biggest challenges entrepreneurs face.
Small Businesses Supply the Backbone
The “need to know” about salary often extends well beyond base curiosity. Who else but another entrepreneur can relate to quitting a job, as many people do, forgoing a steady paycheck and plowing every physical and emotional asset into a business? Still, if the statistics are correct, only half of all the small businesses started today will be around five years from now.
Entrepreneurs are rarely accused of being short on verve and optimism. They are a proud lot, knowing that, according to the U.S. Small Business Administration:
- They are one of nearly 30 million small businesses in the U.S. – those defined as employing 250 people or fewer.
- Nearly 300,000 of these small businesses are in the export business.
- Small businesses put nearly 60 million people to work, representing about half of the U.S. workforce.
- Companies with fewer than 100 employees boast the largest share of small-business employment.
If these kernels don’t whet your appetite, then maybe you need to shake up a bowl provided by Guidant Financial:
- U.S. small businesses still tend to be the domain of men, with 73 percent of businesses being male-owned.
- The top five small business types are business services, retail, construction/contracting, residential and commercial services, and restaurants and food services.
- Seventy-eight percent of respondents said their business was profitable. About the same percentage reported being “somewhat” or “very” happy.
Watch Those 'Kernels' Pop
It’s a fair assumption that these good feelings expressed by the more than 3,100 current and prospective small-business owners questioned by Guidant extended to salary. After using their business owner salary calculator, three leading job search sites report a similar range for the average income of small-business owners:
SmallBizGenius corroborates these salary figures from a different vantage point. It says that about 86 percent of small-business owners make less than $100,000 a year.
If you’re determined to find small-business owners making more than $250 000 a year, you need to look to manufacturing executives or those who lead holding companies, Small Business Trends advises. You have to look even harder for those making more than $1 million a year; less than 10 percent of small-business owners pocket this kind of money.
Meanwhile, SmallBizGenius rounds out the financial picture of small-business owners with other compelling facts:
- Nearly 65percent of entrepreneurs launch their business with only $10,000 in seed money.
- About 25percent of entrepreneurs launch with no financing of any type.
- Cash flow problems were the reason that 82percent of new businesses failed.
Entrepreneurs Face Myriad Challenges
While money (or the lack of it) can doom small businesses as surely as it does marriages, it's far from the only challenge that small-business owners face. Consider other reasons why small businesses fail:
- More than 40percent fail because their products or services are unoriginal or do not address customers' wants or needs.
- Twenty-three percent of small businesses fail because the wrong management team is at the helm.
- Nearly 20percent fail because they’re outmatched by their competitors.
- Seventeen percent of small businesses fail because they don't have a business model (and, presumably, a business plan).
- Fourteen percent fail because of ineffective marketing.
Even if the average small-business owner's income is less than you'd like, you can take comfort in the knowledge that 84 percent of small-business owners say they feel optimistic about the future. This makes sense because where other people might see unsurmountable challenges, entrepreneurs see a bowl of popcorn.
