In recent times, the entrepreneur trend in America has increased significantly. The rise of the gig economy and technological advancements have made it easier to start and run businesses from anywhere. Entrepreneurship is a great way to pursue passions beyond traditional workspace settings. People make independent decisions and potentially earn higher incomes while running their own businesses.
The latest Shopify-Gallup Entrepreneurship study in 2024 highlights several interesting observations. The study surveyed around 45000 online participants of different employment situations. The primary focus of this study was to determine the aspiration to start a business and the probable obstacles. Based on this study and our consolidated research, we identified the factors impacting the decision to become entrepreneurs. Here are the most important factors motivating Americans and preventing them from becoming their boss.
Dissatisfaction with Traditional Work Environment
Undoubtedly, working in a traditional setup comes with certain advantages. Employees are not liable for the responsibility and financial risk associated with managing a business. Yet, the income ratio of business owners and employers varies significantly. On top of that, unsurmountable workloads and non-negotiable deadlines often bind employees to work for longer hours. Overall, these factors demotivate people to stay on a conventional career path.
Desire to Become Own Boss
The Shopify-Gallup Poll observed that 62% of Americans want to be in charge of their own business. Only 35% of respondents seemed to be happy working under somebody else. The survey included people already managing their own businesses as well as people aspiring to be entrepreneurs. Despite the security of conventional employment, the majority of Americans think differently.
Ability to Take Risks
America is the land of many successful entrepreneurs, including Steve Jobs, Elon Musk, Jeff Bezos, etc. The brands these people have created are worth billions and set great examples for aspiring business owners. The potential for high rewards and personal fulfillment motivates many Americans to take risks. Thus, 52% of people already running a business or planning to do so are willing to take financial risks to some extent. The courage to take huge risks is more prominent in young aspiring entrepreneurs.
Flexibility of Work
The flexibility of the work factor is more important to women who want to start a new venture. Around 52% of American women responded flexibility is the topmost factor for their entrepreneurship decisions. Around 38% of men feel the same way. Overall, flexible work hour is the determining factor for 45% of business aspirants.
Higher Earning Potential
A Statista report from Q3 2023 saw 311,000 new businesses in America. Another report states a record-breaking number of 5.5 million applications to set up new companies were filed in 2023. It is evident from the various studies that financial gain is definitely a driving factor for most small business owners and aspirants. Entrepreneurs earn at least 16% more than the median wage in the United States. While this number might not be a lot for many, it is worth taking the risk for entrepreneurs passionate about their work.
Low Labor Costs
Almost half of American employees work in a small business venture. The small business market has generated millions of jobs in America in the last 25 years. Surprisingly, not many small businesses appoint many employees. The Forbes Small Business Statistics 2024 highlights over 80% of small businesses are run singularly. Around 16% of small ventures have less than 20 employees. Cutting labor costs gives entrepreneurs room to keep more profits for themselves.
Pursuing Innovation Dreams
Among all the reasons listed by The Gallup Study, the passion factor ranked fourth. Around 30% of business owners took the plunge because they wanted to pursue their dreams. Considering the aspiring entrepreneurs, the number goes as high as 45%. Almost half of willing business owners want to create something of their own while 36% want to make a positive impact on the world.
Prior Work Experience as the Primary Resource
Prior experience and expertise in a certain field are definitely a great advantage for people wanting to start something new. Prior knowledge of a specific thing can enable people to evaluate the pros and cons well. 60% of small business owners said that their prior knowledge of the field helped them set up their new business. Entrepreneurs can also utilize their networks and previous acquaintances to boost their business initially.
Encouragement from Close Peers
Setting up a new business is daunting, especially when the certainty of success is unmeasurable. Most people can start a business of their own only when they have significant savings from previous jobs. Around 1 out of 5 new businesses do not make it beyond 5 years. Thus, deciding to create a start-up requires huge support from close ones. Most new business ventures are not able to attract investors right from the beginning. So, it is understandable why 57% of start-up owners and 55% of aspirants think encouragement from acquaintances is important.
The survey also highlighted reasons of why Americans are unable to be their own boss.
Financial Matter Is The Primary Obstacle
About 42% of new start-ups can not survive after 5 years as they do not have financial backup. Inadequate capital and poor cash flow management can harm a business’s sustainability. Insufficient funding can prevent businesses from covering initial costs and sustaining operations until profitability. Additionally, overly optimistic financial projections may result in misallocation of resources and unpreparedness for market fluctuations.
60% of respondents in the Gallup Study said that lack of funding prevented them from starting their start-up.
Other Factors Negatively Impacting New Business Ventures
As discussed earlier, many business owners must invest their savings to headstart their ventures. Naturally, 50% of business aspirants are unsure about taking financial risks based on their personal savings. 26% of people do not feel confident that their business will succeed in the long run. Moreover, difficulty in securing loans and high interest rates also prohibit many business aspirants from taking the leap.