Foundation releases data about new businesses

The Ewing Marion Kauffman Foundation, Kansas City, Mo., a foundation that works to advance entrepreneurship and improve education, has released its findings regarding a study of new businesses, revealing that 37 percent of companies had no revenue during the first year of business; more than half showed a loss; and 45 percent experienced a profit.

Trying to discover how new businesses function and survive, the Kauffman Foundation tracked about 5,000 businesses founded in 2004, addressing issues such as financing, employee benefits, and sales and profits.

Of the companies in the study, almost 70 percent were owned by men. More than 81 percent were owned by whites; 9 percent by blacks; and 6 percent by Hispanics.

Most business owners provided the equity invested in their businesses themselves. The most common sources of external equity were parents at 3.4 percent and spouses at 1.6 percent. In addition, almost 44 percent of new businesses had no debt financing during the first year of business; 17 percent started with $5,000 or less, and 11 percent started with $100,000 or more.

During 2005, about 9 percent of the companies closed. Ninety-two percent of white-owned new businesses survived compared with 91 percent of Asian-owned businesses and 88 percent of black-owned businesses. Eighty-nine percent of women-owned businesses survived, which was about three points lower than businesses owned by men.

Almost 60 percent of the new businesses had no employees during their first year. Just fewer than 75 percent of businesses had one employee or less, and about 25 percent of businesses had two or more employees. Less than 4 percent of businesses had more than 10 employees. In addition, less than half of the businesses with employees offered benefits.

Date : 3/31/2008