Entrepreneur Statistics Misleading?

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Is there a difference between the self employed and entrepreneurs? According to a study released by the New America Foundation, the answer is, yes. The study suggests that the amount of small businesses forming in America is actually falling although statistics show that new business formations are on the rise. This is because the data doesn’t take in to account America’s rising population. Although the number of business formations has risen, the number is lower when analyzed as a percentage of the population.

According to the report, the share of self employed Americans has dropped 20 percent from 1991 through 2010. But why is this the case? As a result of the Great Recession, entrepreneurs have found it more difficult to receive funding but according to the report, even these numbers may be skewed because of basic terminology.

Some of the largest businesses, like Boeing, and Lockheed Martin rely heavily on government contracts for their annual revenues. Although these companies would survive, without the United States government, they would be much smaller.

In the small business community, the same thing takes place. Walmart, for example, no longer runs their own warehouses. Instead, they contract with a company whose sole client is Walmart. If the contract was not renewed, that small business would no longer exist.

What about the self employed individual with one client? The authors of the study argue that a self employed individual with one client may be self employed in the eyes of the government, but they function more like an employee.

An entrepreneur, by contrast, is interested in growth. Their business doesn’t exist to serve one customer, but instead, as many customers as the business can handle. They would likely have plans to develop additional products and services as their company grows and evolves.

While the amount of small businesses may be growing by the numbers, according to the study, the amount of entrepreneurs is declining.

Implications for You

If you’re planning to open your own business, it’s vitally important to diversify. If you plan to serve only one or two clients, what will you do if those clients no longer contract with you? Constantly look for ways to grow.

If the authors of this study are correct and there is a difference between self employed individuals and entrepreneurs, think more like an entrepreneur. Don’t put your financial and career success in the hands of only one company.