Even though small businesses are looking at the future optimistically, the number of self-employed small business owners is declining. As of August there were 14.5 million people who were self-employed, a decrease of 2.1 million from the most recent peak in December 2006.
The number of “incorporated” self-employed individuals, the same ones that incorporate in order to gain legal protection as well as other benefits, started to decline back in 2008. One month ago 5.1 million people were in this category, a decrease of 726,000 from August 2008.
According to Scott Shane, Professor of Entrepreneurial Studies at Case Western Reserve University, this decline is “troubling”. This particular category, which typically represents businesses that hire more employees than “unincorporated” self-employed businesses, was actually showing prosperous growth before the recession hit according to Shane.
The 9.4 million unincorporated self-employed number has hardly changed since last spring as it is balancing at its lowest level in the past 25 years according to BLS Economist Steven Hipple. There are many contributing factors that coincide with this drop-off such as financial issues, vocational moves and psychological worries.
People who are receiving unemployment benefits are also worried about trading in a steady check for the particularly risky world of self employment, which has the potential to bring in big bucks, but also has the potential to drain what little money you may have left.
Even if you think you have a business idea that seems highly profitable, you still have to factor in a cost-benefit analysis to see if losing the benefits of a steady job working for somebody else is worth the risk. If that wasn’t enough to deter some, other people who already run their own business are also worried.
A little more than half of the people who are self-employed with little to no employees under them have an overall lack of confidence in the future of their businesses. Take this and compare it to the 36% of small-business owners who feel the same way as of a 2011 mid-year report and the numbers speak for themselves.
Source: USA Today – Fewer people choose to be self-employed
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