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Ada to Zumbrota: A blog from the MN State Demographic Center

Get our take on key demographic trends across Minnesota in our blog, Ada to Zumbrota.



The entrepreneurial experience: Illuminating new data on business owners

10/5/2016 12:00:00 PM

Andi Egbert

Ada To Zumbrota

On September 1, 2016, the U.S. Census Bureau released data from the first Annual Survey of Entrepreneurs (ASE), reflecting responses collected in 2014 from owners of businesses with paid employees. The ASE data are available for the nation, all states, and the 50 most populous metropolitan statistical areas, including the 16-county Minneapolis-St. Paul metro area, or “MSP” metro (see map for counties included).

Business owner leans in a doorwayThe ASE is a valuable, more timely supplement to the Census Bureau’s Survey of Business Owners (SBO), conducted every five years. Both the ASE and SBO contain key data on sales and receipts, annual payroll, and employees for business owners parsed by their industry and business size, as well as the owner(s)’s gender, race/ethnicity, and veteran status. But the ASE also provides numerous new data points not found in the SBO, such as the number of years a firm has been in business. That data shows the incredible dynamism in the economy, and just how many businesses are fledgling operations. 

Among the 5.4 million U.S. firms with paid employees, 9% had been in business for less than two years. In Minnesota and its largest metro centered on the Twin Cities, the comparable figure fell to about 7% of firms. Bottom line: A somewhat smaller share of Minnesota businesses is newly formed and a greater share is more “seasoned.” Notably, young businesses as a percent of the total more than doubled for Black-owned businesses in Minnesota (15% under 2 years old) and rose to 18% for Asian-owned businesses. All together, 16% of all minority businesses in the state were less than two years old, and 13% of all the businesses established within the last two years were minority-owned (950 out of about 7,450).

But while we see evidence of burgeoning entrepreneurship among populations of color, minority-owned firms still represented only 6% of all Minnesota's businesses. Women-owned firms comprised just 18% of the total. Considering that people of color represented 15% of Minnesota's adult population and women made up 51% in 2014, by any yardstick we’ve got quite a ways to go for business owners to better reflect our community at large. 

In the MSP metro, minority-owned firms rose to 8% of the total, while women-owned firms constituted 20% (in a metro area that was 19% minority and 51% women among the adult population in 2014). As promoting entrepreneurship among people of color and women is an essential avenue for closing income disparities, we’ll be watching these annual figures closely to monitor progress for Minnesota overall and its largest metro.

Nationally, minority-owned firms represented 18% of all employer firms in 2014, while women-owned firms comprised 19%. (Of note: Minnesota is less racially diverse that the U.S. as a whole, but equally populated by women.) 

In both the MSP metro and statewide, veterans owned 8% of firms, identical to the national percentage.

In addition to telling us who owns businesses, the 49 tables from the first batch of Annual Survey of Entrepreneurs’ data are a treasure trove of insights into the minds, motivations, sacrifices, struggles and experiences of these business owners.

The data contain responses to illuminating questions such as, "Where would the owner like this business to be in five years in terms of sales or profits?” and “What was the source and amount of capital used to start or acquire this business?” The latter question reveals how many owners tapped family savings, a home equity loan, carried a balance on a personal or business credit card, secured business loans (by type), received a grant, and/or benefited from investment by a venture capitalist--to get their business dream off the ground.  

Other data reveals the location of business' customers or clients (i.e., regional, national, and outside U.S.), exports as a percent of total sales, type of employee benefits paid, share of sales that were e-commerce, and languages used to conduct transactions with customers. Statewide, about 430 firms indicated they used African languages while conducting their business—reflecting the economic presence and purchasing power of our state’s African immigrants, for example. 

Perhaps the most fascinating data to me were the responses to a question about why owners wanted to own their business—as we seldom see insights into personal attitudes and values in the Census Bureau surveys that we analyze. Exactly 50% of Minnesota business owners said “wanting to be my own boss” was “very important,” while 44% said balancing work and family was “very important” (multiple answers were allowed). 

Additional findings for Minnesota in 2014:

  • About 111,400 firms (including 8,300 that are publicly held) with 2,446,800 paid employees
  • 32% were family-owned
  • 5% reported that all or part of the business operated as a franchise
  • 62% used the personal/family savings of owner(s) to start or acquire the business
  • 58% of businesses had a website, while 42% did not
  • 5% of owners were not citizens of the U.S. at birth
  • 15% of owners were age 65+
  • 18% of owners have a high school diploma as their highest level of education
  • 28% reported that difficulty finding qualified labor negatively impacted profitability
  • 68% of firms were profitable, 16% broke even, and 16% had losses
 
Additional findings for the official Minneapolis-St. Paul metro area (16-county):

  • About 70,500 firms (including about 5,300 publicly held) with 1,696,700 paid employees
  • 27% were family-owned
  • 5% reported that all or part of the business operated as a franchise
  • 65% used the personal/family savings of owner(s) to start or acquire the business
  • 65% of businesses had a website, while 35% did not
  • 7% of owners were not citizens of the U.S. at birth
  • 14% of owners were age 65+
  • 15% of owners have a high school diploma as their highest level of education
  • 26% reported that difficulty finding qualified labor negatively impacted profitability
  • 69% of firms were profitable, 15% broke even, and 16% had losses

To further explore these data, visit American FactFinder’s Advanced Search and select the blue button labeled “Topics” at the left, followed by Dataset > 2014 Annual Survey of Entrepreneurs. 
 
 

   
 Andi-Egbert-Headshot
 











-Author and SDC
Assistant Director Andi Egbert is especially grateful for all the coffee shop owners in the Twin Cities metro.


Notes

“Minority” and "people of color" are used interchangeably and refer to individuals self-identifying as other than non-Hispanic White.

The "adult population" represents those ages 18+.


Publicly held firms were excluded from calculations about ownership by
 gender, ethnicity, race, and veteran status.  

The Annual Survey of Entrepreneurs resulted from a public-private partnership among the U.S. Census Bureau, the Ewing Marion Kauffman Foundation (known for its expertise in entrepreneurship research) and the Minority Business Development Agency. Each year's release of the Annual Survey of Entrepreneurs also contains a module focusing on different topics of great interest. The first module (released September 23, 2016) contains data regarding business innovation and research and development activities.

Included in the ASE universe are all nonfarm businesses filing Internal Revenue Service tax forms as individual proprietorships, partnerships, or any type of corporation, and with receipts of $1,000 or more. The ASE covers firms with paid employees. The ASE is conducted on a company or firm basis rather than an establishment basis. A company or firm is a business consisting of one or more domestic establishments that the reporting firm specified under its ownership or control.

The data are compiled by combining data collected on businesses and business owners in the ASE with data collected on the main economic census and administrative records.

Business ownership is defined as having 51 percent or more of the stock or equity in the business. 
Firms equally male-/female-owned, equally minority-/nonminority-owned, and equally veteran-/nonveteran-owned are counted and tabulated as separate categories.


  

Economy

Race and Ethnicity

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