November 27, 2014

Why Haven’t You Started a Business Yet?

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The majority of Americans would rather work for themselves than for other people. A 2009 survey by the Gallup Organization of 1,010 randomly selected Americans over the age of 15 showed that 55 percent of Americans would prefer self-employment, versus 36 percent who would rather work for others.

The big draw of self-employment appears to be personal freedom. The majority (51 percent) of Americans who would prefer self-employment say that they would favor it because working for oneself offers “personal independence, interesting tasks and self-fulfillment.”

Making money is not a major reason why Americans favor self employment. While many Europeans reported that they would prefer self-employment because of the greater potential earnings it offers, only seven percent of Americans who preferred self-employment gave that as the reason.

Nor is the desire to pursue a particular business opportunity what explains why a majority of Americans favor self-employment. The Gallup survey revealed that only two percent of Americans who would prefer to work for themselves said that they preferred self-employment because it would offer them the chance to realize a business opportunity.

While Americans express a stronger desire to work for themselves than people in many other countries, their preference for self-employment appears to be weakening. The Gallup survey indicated that the share of Americans who would prefer self-employment fell from 69 percent in 2000 to 55 percent in 2009.

More Americans want to become self-employed than think it is feasible to do so. The Gallup survey revealed that only 41 percent of Americans – 14 percentage points fewer than the share that would prefer to be self-employed – believe it would be feasible to go into business for themselves in the next five years.

But the barriers that many observers claim deter people from going into business for themselves don’t seem to be the ones holding back those desireous of self-employment. Only two percent of those who felt that becoming self-employed in the next five years was infeasible cited administrative and regulatory barriers as the obstacle. Moreover, only 12 percent of those who said they were held back from being self-employed identified a lack of finances as the obstacle, only two percent cited an absence of ideas, only four percent pointed to a skill deficiency, and only four percent said the magnitude of the risk was to blame.

18 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

18 Reactions

  1. This is VERY interesting and gives great insight into the American society and its views on entrepreneurship. This does leave me a bit curious though… if none of the “traditional” barriers have a strong showing as to why people do not go into business for themselves, what IS the key barrier? Fear? (of failure, of not knowing what to do, of having competition, etc.)

  2. Great job with this post, Scott.

    You wrote that, “Making money is not a major reason why Americans favor self employment.”

    I found that to be absolutely true with almost all of the people that I’ve worked with over the years that wanted to buy a franchise-type of business.

    It’s not always about the money.

    The Franchise King®

  3. Brian – People place a high value on “security”, so I think many people will take the known drudgery of a job because of it’s security. Many people also stay in jobs because it provides benefits like health insurance. If you have a preexisting condition it can be very hard/expensive to get insurance.

  4. From one Shane to another I can’t figure it out either, BUT not everyone is the right person for the job! Gotta have GUTS for the risk reward part. Great post!

  5. Robert – very true and yet our society the past decade has taught us that a 9 to 5 “traditional” job no longer equals security. I do get the benefits side of it, but realizing that the average person will spend around 9.5 actual years of your life (over a 40 year career) literally at “work” you’d sure as heck better love what you’re doing!

    Good points though!

  6. Scott, you ask an interesting question about why more Americans aren’t starting their own businesses. I work with the Campaign for Free Enterprise, a project of the U.S. Chamber of Commerce. Your article shows that a majority of Americans desire to become entrepreneurs, but many choose not to pursue this route. We believe low consumer confidence is a big part of their reluctance, but add to that excessive regulation and an overly complex tax code, and it’s enough to make any prospective entrepreneur think again. That is why we advocate reducing burdensome regulations and lowering taxes to help entrepreneurs do what they do best — grow and create jobs. Once Americans know that the economy is growing, hopefully more will pursue their dreams of starting their own companies.

    -Hilary,

  7. Do you think it have become easier or harder to start your own business in America, say between 1968 and 2011? How much red tape is nowadays, compared with 40 years ago?

    Have you heard about a the new form of business called “business employment”? From an employment company called “Uppdragshuset.nu”:

    “With a business employment you work via a business employment company, Uppdragshuset. We are a flexible organisation, tailor-made for those who want the freedom of being self-employed without having to start their own company registered for corporation taxation. Uppdragshuset is simply a staffing company in reverse.”

    I think that this kind of business form could be attractive for the North American market. What do you think?

  8. I’d be careful Martin. In the US… this sounds a bit like a shell corporation and and those tend to attract more focused scrutiny from federal regulators… especially centering around taxes.

    Surprisingly, it’s not difficult at all to “start a business.” Depending on your city, county, and state laws you can have a sole proprietorship (which establishes a “legal entity/business”) within 24 hours. My first business was started this way. Cost me $150 and a few pitstops around town to the various agencies to set it up and get my business license.

    Even then to get say and LLC or the like took me 5 business days and $400 using an online service such as Legalzoom. (Not promoting them, but I used their service as a part of a review/test of using online “legal” services for some written resources I was developing.) No issues to date with their service.

    So it’s not really hard at all!

  9. Brian Hamlett,

    Thanks for the heads-up. A “business employment” It is not a shell corporation at all. It is a new type of business. You could find different types of this form around Europe, but I am not sure if you have it on the North American market. You have to find the clients and do the work, but your are “employed” at a company that is helping you with the bookkeeping, sending the invoice, take care of the insurance, etc. They take a cut of the invoice, circa 10%, for doing the administration. It was a lot of discussion between labor unions, the Swedish Social Insurance Administration, tax authority and the supporters of this new type of business form, before it was introduced as an alternative on the labor / employment market.

    I have sole proprietorship (it is called sole trader company in British English, that is why I registered the domain name: EGO Sole Trader), but you should know about the implications on having your own company tied to you as private person. I don’t think you have a similar business identity like a LLC in Scandinavia.

  10. Thanks for the clarification! No, as far as I know we do not have a “business employment” as a business type. Has some familiar benefits that sounds like outsourcing only going a step further.

    I wonder what implications, concerns, or government regulations would be targeted around operating this type of business in the US.

    Anyone have any thoughts?

  11. Martin,

    Sounds like the “Business Employment” model is similar to a franchise model, with the company taking 10%.

    Do these “almost-kind-of-employees” have any risk?

    The Franchise King®

  12. Brian: Yes, you could say that it is type of outsourcing / virtual assistant service, but you “belong” to the business employment company during the time you work with your own clients. It would great to hear comments and thoughts on the potential introduction to the North American market.

    Joel: I don’t really know about any obvious risks with this model, but it is a bit hard to explain it! ;) I think that this kind of alternative business service provider has a great challenge in marketing itself and its services. I have talked to Uppdragshuset.nu about the great potential of using social media and how they could educate potential new customers, partners and business community at large.

    For more information: http://uppdragshuset.nu/english.html

  13. If the question is why don’t more people open businesses then I think you have to look to different data than that presented in this poll. When you ask a “prefer” question as opposed to an “are you” or “will you” question you’re telling the respondent to let reality take a break and just answer with what you would prefer.

    For example I would prefer world peace but I’m not doing anything to actively promote it.

    So it’s not surprising that 55% of Americans “prefer” to be self employed and that most of them are motivated by “personal independence, interesting tasks and self-fulfillment.”

    That 2% that believe self employment would allow them to take advantage of a specific business opportunity are far more likely to open a business than the 55% that just like to dream about the perceived benefits of the lifestyle.

    Self employment is not for the squeamish. Most small businesses fail within 2 years. However it is a nice “personal dream” for many…just like winning the lottery.

  14. This is a very interesting article. I especially found it interesting that compared to Europeans, Americans are not interested in making more money. I think the main reason people don’t go into business for themselves is that they are afraid. It is easier to continue dreaming than to go out and work to fulfill your dream.

  15. I really like this article. I find it interesting and a little surprising that making money is not a major reason why Americans favor self employment.

    This article really makes me wonder what additional factors are deterring people from starting their own businesses?

    Great article.

  16. “Only two percent of those who felt that becoming self-employed in the next five years was infeasible cited administrative and regulatory barriers as the obstacle.”

    Given that quote, it seems as though the Chamber of Commerce “Campaign for Free Enterprise” is pretty out of touch with the needs and desires of actual working Americans, which is about in line with what I’ve found when dealing with the Chamber as a small business owner myself.

    Since the Chamber also sponsors workshops teaching corporations how to outsource jobs to China, I’m not very surprised by any of this.

    Definitely better to go it alone or work with one of the competing organizations (the Green Chamber of Commerce, for example) than let the Chamber use you as a patsy for their machinations.

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