Get All Access for $5/mo

What Would-Be Entrepreneurs Fear Most About Starting Up An unstable income is almost always guaranteed when just starting your business, but research shows it's one of the top fears that keeps Americans from becoming entrepreneurs.

By Scott Shane Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Shutterstock

While a majority of Americans prefer to be self-employed, relatively few actually take the plunge. What's stopping them?

According to a 2012 survey conducted for the European Commission by TNS Custom Research, 51 percent of Americans would rather be self-employed and 44 percent think it would be possible for them to go into business for themselves within the next five years -- a figure that has increased 8 percentage points since 2009.

But despite the relatively large number of Americans who want to be in business for themselves and believe it feasible in the near future, relatively few would-be entrepreneurs actually take the initiative. Bureau of Labor Statistics data indicate that only about 6 percent of the adult population is self-employed, making the fraction of Americans who would prefer self-employment to wage employment about eight times as large as the share of Americans actually working for themselves.

Related: Why Americans Love Small Business

Why are so few would-be entrepreneurs starting businesses?

While a number of those surveyed have no intention of becoming entrepreneurs any more than they might act out their preference to play professional basketball or be a runway model rather than continue their day job, a surprising number have legitimately considered founding their own company and not followed through. One third of the people who told TNS they wanted to start a business said they gave up on the idea after having thought about it or taken steps to get the company going.

A number of those who wanted to start-up but didn't, faced real obstacles that kept them from going into business for themselves -- 4 percent could not come up with a business idea, 15 percent didn't have enough capital, 8 percent said they lacked the necessary skills and 2 percent said administrative barriers held them back.

Related: 10 Questions to Ask Before Quitting Your Job to Start a Business

Most people, however, didn't go into business for themselves because they were afraid of what would happen if they didn't succeed. When asked to identify what would-be entrepreneurs most feared about starting a business, the top responses were a fear of going bankrupt (38 percent) and a fear of irregular income (37 percent), which amount to a significantly larger sum than those who feared personal failure and losing job security.

But while the largest number of would-be entrepreneurs often stop themselves from starting a business because of the financial risks that self-employment entails, making money isn't the reason most Americans prefer to be entrepreneurs in the first place. Only 9 percent of respondents said they preferred self-employment because it offered a greater potential for making money than working for others. Instead, a majority -- 54 percent -- said they preferred to be entrepreneurs because of the independence self-employment affords, and a third said they would prefer it for the freedom to decide when and where to work.

In the end, money still plays an important role in influencing whether or not people go into business for themselves. While the opportunity to make money doesn't draw many Americans to entrepreneurship, the fear of going broke keeps them from taking the plunge.

Related: Train Your Brain to Overcome Fear

Scott Shane

Professor at Case Western Reserve University

Scott Shane is the A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University. His books include Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by (Yale University Press, 2008) and Finding Fertile Ground: Identifying Extraordinary Opportunities for New Businesses (Pearson Prentice Hall, 2005).

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Starting a Business

How to Find the Right Programmers: A Brief Guideline for Startup Founders

For startup founders under a plethora of challenges like timing, investors and changing market demand, it is extremely hard to hire programmers who can deliver.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Franchise

How California's New Disclosure Law Could Affect Franchise Sales Nationwide

The bipartisan legislation introduces new registration and pre-sale disclosure requirements for third-party franchise sellers, including brokers, broker networks and franchise sales organizations.

Side Hustle

This 20-Year-Old Student Started a Side Hustle With $400 — and It Earned $150,000 Over the Summer

Jacob Shaidle launched his barbecue cleaning business Shaidle Cleaning in 2021 when he was just 15.

Marketing

Ad Fatigue is Real — Why Trust and Influencers Are Shaping the Future of Cybersecurity Marketing

With the rapid evolution of cyber threats, businesses are becoming increasingly careful when choosing cybersecurity providers. Therefore, cybersecurity companies must center their marketing strategies around trust, not ads.