The Chances of Financial Success (and Loss) from Small Business Ownership

Abstract

The odds of forming a profitable venture are a critical issue for those weighing the risk of business entry. However, few measures exist to help potential business owners assess their chances of forming a financially successful enterprise. This research examines the probability of financial success from business ownership In terms of (1) profit, break-even, or loss during the owner's tenure, and (2) sufficient profit or loss between firm formation and termination to alter the owner's personal financial condition. The analyses rely on reports from a sample of 783 business owners who recently terminated their firms. Results indicate that 50% more small business owners operate a profitable venture during the marriage of owner and business than operate an unprofitable one. Just 17% form profitable ventures that improve the owner's overall financial standing, while 6% form unprofitable ventures that negatively affect it.