Women are more likely to create new businesses, and the Xers take the lead when it comes to the generational perspective on today’s entrepreneurs, according to a new survey from Sage North America, a provider of business management software and services to small and medium-sized businesses.
Conducted during March 2015, the State of the Startup Survey provides deep insight into the motivation, business practices and performance of 524 new business startups in the U.S. and Canada. The study also canvased senior executives in firms who routinely counsel, invest in and generally nurture startups, such as accountants, investors and attorneys.
“Comprising half the workforce and most of the companies around the world, small businesses are the heartbeat of the North American economy,” said Connie Certusi, executive vice president, Small Business Solutions, Sage North America. “Sage wanted to dive deeply into how small business startups work, what makes the very best small businesses succeed, and best practices that will help other new businesses.”
The Entrepreneurial Journey
Most State of the Startup survey respondents have no prior startup experience, and money is not their primary motivating factor. Fifty-nine percent of respondents wanted to be their own boss, 48 percent were following a passion they wanted to turn into a business, and 39 percent were driven by a “burning desire to work for myself.”
Women are more likely to found startups than men (57 percent versus 43 percent), and contradicting conventional wisdom about the conflict woman face when it comes to business and family, most women (55 percent) reported a “great” work-life balance.
Gen X-ers make up the highest percentage of startup founders (55 percent), while Boomers are 31 percent more likely to say it was “somewhat” to “extremely easy” to start their business than Millennials.
The most striking difference among generations was their engagement with marketing functions, especially social. Boomers are 2.4 times less likely than Millennials to use social media marketing tactics.
The top three challenges experienced by startup founders are growing revenue (46 percent), acquiring customers (42 percent) and securing capital (41 percent).
Secrets to Success
In order to discover the secrets of why some startups thrive while others struggle, Sage grouped the startup founders into tiers based on their companies’ performance against a key set of business metrics.
The top-tier startups are more profitable, growing faster and more aggressively hiring. In fact, 91 percent reported they have met their initial business goals, compared to just 12 percent of the bottom tier.
These successful entrepreneurs can teach new founders several lessons:
- Find a partner. Top-tier startups were 59 percent more likely than the bottom tier to have more than one founder.
- Don’t skip the business plan. Successful founders were 78 percent more likely than the bottom tier to have created a formal business plan before launching their new business.
- Recruit professional advisors. The best startups lean on the wisdom and experience of trusted advisors such as accountants and mentors.
- Embrace the latest marketing techniques. Today’s top entrepreneurs are masters of websites, social media, forums and the latest marketing tactics.
- Balance! Unexpectedly, the most successful entrepreneurs were 58 percent more likely than the bottom tier to report a “great” balance between work and life.
“Nurturers” reported that two of five startups eventually fail. They say the top three mistakes made by founders are taking on too much debt, not conducting adequate market research and an inability to control costs. They advise focusing on marketing, business networking and market research to enhance their chance of success.
According to the nurturers, new businesses most often struggle with growing revenue, adding customers and producing accurate financials. Thirty-six percent of advisors don’t trust the financials they receive from entrepreneurs; 79 percent suggest that new businesses buy commercial accounting software and use an accountant.
The founders and nurturers provided best practices that can guide any new business or entrepreneur:
- No experience? No problem! Don’t let a lack of experience starting a business or running a team at a large company discourage you and prevent you from trying.
- Don’t wing it; have a plan. Create a formal business plan to help you set strategies and goals and secure financing.
- Do your research. Conduct a thorough market analysis of target customers, competitors and current trends.
- Hire a trusted advisor. Determine where you need advice and who can provide it to you.
- Network. Attend events and workshops to increase your knowledge, discuss new concepts and exchange ideas.
- Break the rules. Forge your own path, take the road less traveled, and do it your way. Sometimes you need to break the rules to grow and succeed.
In March 2015, Sage commissioned two in-depth studies on new businesses. Strop Insights canvassed 524 new business startups in North America and interviewed founders who had launched their companies within the past five years. ReRez Research spoke with 102 senior executives who work at firms who routinely counsel, invest in and generally nurture startups. These nurturers are all based in the U.S. The survey has a 95 percent confidence of error +/- 4.28 percent.