Xero, a cloud-based accounting software platform for small businesses, releases “The Tipping Point: Making the Jump to Self-Made,” a report that examines the breaking point for starting a business and the catalysts that prompted people to venture out on their own.
The report, which surveyed 1,200 small business owners across the United States, found that nearly half (46%) of respondents cited a passion for entrepreneurship as their defining moment to starting a business. The other half referenced other factors, including bad bosses and leadership at previous jobs (13%) and not getting promoted or recognized for their contributions (9%).
According to the survey, one of the biggest motivators for starting a small business is that it provides greater flexibility and control when serving as your own boss (45%). Passion/purpose in work (28%) and financial reasons (15%) were also strong motivators.
Generation Z respondents are likely to be driven by values and purpose, citing passion/purpose for work (41% vs. 28% overall) as their top motivator. They are least likely to cite flexible working conditions/being their own boss (24%) compared to the other generations: Gen X (52%), Gen Y (47%), and Baby Boomers (42%).
Success bound: T-minus 5 years
More than half (58%) of the small business owners surveyed gave themselves five years or less to make it or break it. The newer businesses give themselves an even shorter timespan on average to make it as a business. Only a third of business owners surveyed have no time limit to determine success or failure.
How small business respondents define success has also changed. When they moved to branch out on their own, nearly half of small business owners (48%) defined success as achieving profitability and making more money than they were previously (34%).
Fast forward to the present, with their businesses up and running, creating a legacy (28%) has gained importance in the eyes of small business owners, particularly among the younger generation. Thirty-six percent of Gen Y and 28% of Gen Z noted creating a legacy as the most important factor, with 21% of Baby Boomers responding the same.
While the report found that small business owners are generally positive about the health of their business over the next few months, Gen Z respondents are much more optimistic than Baby Boomers.
When asked about their business outlook in summer 2021 compared to now, 33% of Gen Z believe it will be “much better” versus 9% of Baby Boomers who said the same. The newer businesses are more optimistic about their business outlook — 39% of those in operation for less than one year see the outlook improving to “much better” in summer 2021 compared to 8% of businesses in operation for more than 20 years.
Pandemic impacts on business outlooks
The survey found that COVID-19 has not negatively impacted most small business owner respondents’ desire to continue their operations. In fact, 29% say the pandemic increased their desire to run a business, particularly among younger business owners (43% of Gen Z vs. 18% of Boomers) and women (34% vs. 24% of men).
“When looking at the results, the outlook differences between newer and older businesses not only relate back to overarching perspective but also preparedness. The majority of newer businesses have been set up on technology platforms and enabled through digital means since their inception,” explains Ben Richmond, U.S. Country Manager at Xero. “They’re ready for, and in many cases, are expecting disruption, so they’ve made their foundation malleable and open to pivots.”
Other report findings include:
- Men are more likely (34% vs. 28% of women) to say risk was an obstacle to starting a business, while women (28% vs. 18% of men) are most likely to cite self-belief and self-doubt as a challenge.
- Are entrepreneurs born or bred? Business owners surveyed are split in their thinking, with a slight tilt toward the belief that entrepreneurs are bred — 57% overall. Gen Z is the only generation that leans toward being born an entrepreneur (52%).
- While most business owners say they started their business for increased flexibility and control, being the boss doesn’t equate to less stress. In fact, that was cited as the biggest misconception about starting a business (47%). Another top misconception is that starting a business will be more fun than working for someone else (25%).
View the full report here.