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The Chances of Financial Success (and Loss) from Small Business Ownership

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  • William J. Dennis Jr.
  • Lloyd W. Fernald Jr.

Abstract

The odds of forming a profitable venture are a critical issue for those weighing the risk of business entry. However, few measures exist to help potential business owners assess their chances of forming a financially successful enterprise. This research examines the probability of financial success from business ownership In terms of (1) profit, break-even, or loss during the owner's tenure, and (2) sufficient profit or loss between firm formation and termination to alter the owner's personal financial condition. The analyses rely on reports from a sample of 783 business owners who recently terminated their firms. Results indicate that 50% more small business owners operate a profitable venture during the marriage of owner and business than operate an unprofitable one. Just 17% form profitable ventures that improve the owner's overall financial standing, while 6% form unprofitable ventures that negatively affect it.

Suggested Citation

  • William J. Dennis Jr. & Lloyd W. Fernald Jr., 2001. "The Chances of Financial Success (and Loss) from Small Business Ownership," Entrepreneurship Theory and Practice, , vol. 26(1), pages 75-83, October.
    • Handle: RePEc:sae:entthe:v:26:y:2001:i:1:p:75-83
    DOI: 10.1177/104225870102600105
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    References listed on IDEAS

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    1. Holtz-Eakin, Douglas & Rosen, Harvey S & Weathers, Robert, 2000. "Horatio Alger Meets the Mobility Tables," Small Business Economics, Springer, vol. 14(4), pages 243-274, June.
    2. Cooper, Arnold C. & Woo, Carolyn Y. & Dunkelberg, William C., 1988. "Entrepreneurs' perceived chances for success," Journal of Business Venturing, Elsevier, vol. 3(2), pages 97-108.
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    Cited by:

    1. Shaike Marom & Robert N. Lussier, 2014. "A Business Success Versus Failure Prediction Model for Small Businesses in Israel," Business and Economic Research, Macrothink Institute, vol. 4(2), pages 63-81, December.
    2. Metzger, Georg, 2008. "Firm Closure, Financial Losses and the Consequences for an Entrepreneurial Restart," ZEW Discussion Papers 08-094, ZEW - Leibniz Centre for European Economic Research.
    3. Bluedorn, Allen C. & Martin, Gwen, 2008. "The time frames of entrepreneurs," Journal of Business Venturing, Elsevier, vol. 23(1), pages 1-20, January.

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