NEW YORK (AP) — The majority of small business owners who work solo struggle to make their companies profitable.
That’s one of the findings of a report released last week by the Federal Reserve Bank of New York that gave a snapshot of non-employer firms, those that have no employees other than the sole proprietor and that comprise 81-percent of the more than 30 million small businesses in the U.S. The report also found that nearly two-thirds of these owners depend on their businesses as a primary source of their income, but nearly three-quarters have no more than $100,000 in annual revenue.
The report was compiled from a survey of more than 5,800 business owners across the country in the second half of 2018; they included people who have companies that produce goods and services as well as those who are freelancers and those who had jobs but ran a business to provide them with supplemental income. One out of five owners surveyed said they started or bought a business because they couldn’t find work elsewhere.
The report found that running a business is a struggle for many owners. Sixty-two percent reported having financial challenges in the preceding 12 months, with early-stage companies, or startups, the group that reported the most challenges. Nearly half said they had outstanding debt.
One of the challenges the owners face is rising costs; 53-percent reported their expenses had increased. But only a third said they were passing their costs along to clients or customers — a sign that small businesses remain under competitive pressures a decade after the end of the Great Recession.
And while nearly three-quarters hope to expand their businesses in the next 12 months, nearly 60-percent expect their revenue to grow. Not surprisingly, nearly all of early-stage companies expect their revenue to increase — new entrepreneurs are often the most optimistic of business owners.
Only one in four of the owners said they plan to hire full or part-time employees. However, that low number is to be expected given that many sole proprietors are freelancers or contract with freelancers to help complete their work.
By AP reporter Joyce Rosenberg
