Entrepreneurs Expect Modest Startup Costs For Most New Ventures

Entrepreneurs project modest startup costs for most new ventures, according to a study released today by the Office of Advocacy. Solo entrepreneurs expect median startup costs of $6,000, while the median cost expected by team ventures is $20,000. More than 80 percent of the entrepreneurs studied expected to cover their startup costs without bank loans, although on average they had saved only $2,000 towards that goal.

"Not all new ventures require large infusions of capital," said Dr. Chad Moutray, Advocacy’s Chief Economist . "Everyday ordinary Americans strike out on their own to grab their piece of the American Dream. It doesn’t take a lot of savings to participate in the ownership society, just a good idea and lots of hard work and perseverance," he said. His remarks came at the report’s release during the annual meeting of the Collegiate Entrepreneurs Organization in Chicago.

The study also showed that optimism about their business potential underlies the entrepreneurs’ activities. On average, solo entrepreneurs believe they will have business income of $90,000 in the fifth year of their venture, while team ventures expect an income of $125,000 in the fifth year. The higher team venture projected income makes it more likely that such ventures will result in new job generation.

Expected Costs of Startup Ventures, conducted by Blade Consulting with funding from the Office of Advocacy, used data from more than 800 nascent entrepreneurs – individuals who are in the process of starting a business – gathered over a two-year period. The data are contained in the ongoing Panel Study of Entrepreneurial Dynamics (PSED), supported by the E.M. Kauffman Foundation.

The Office of Advocacy, the "small business watchdog" of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.

For more information and the complete text of the study, visit the Office of Advocacy website at http://www.gov/advo

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