Are You Starting Smart?

What’s the state of small business startups?

A new report out from LegalZoom and the Ewing Marion Kauffman Foundation, the Startup Environment Index 2012, polled over 1,400 entrepreneurs who legally formed businesses last year. Here’s some of what they found:

The most popular startup industries are low-cost. With financing harder to find and risk somewhat scary in a still-struggling economy, entrepreneurs are being smart and starting businesses in low-cost industries. The 10 most popular industries for startups included consulting; services (including home services and business services), technology, real estate and sales. Somewhat surprisingly, retail stores (yes, physical stores) and construction/contracting also made the list.

Starting low-cost is smart, since a whopping 80 percent of startup business owners in the survey used their own money to finance the launch. Five percent got loans from family or friends, 10 percent used credit cards, 4 percent used bank or home equity loans and 6 percent got money from other outside investors. Of the 60 percent of startup business owners who are facing challenges, 45 percent cite the inability to access credit as a key challenge. If you can’t get the money you need, it’s smart to pick a startup that doesn’t cost much so you can finance it yourself.

Another smart move entrepreneurs are making is taking time to plan their businesses carefully. While there’s a perception that you can’t be an entrepreneur unless you’re an impetuous risk-taker, in reality, 60 percent of those in the survey say they spent over six months planning their business idea before they launched. What’s more, 21 percent spent one to three years working on their concepts, and 14 percent spent over three years!

Moreover, these aren’t novices we’re talking about. Most of the startups had six or more years of previous work experience in the industry they chose to enter. Yet despite this, they still took the time to plan out their launches.

In an era when we sometimes get the impression that the “coolest” startups are launched on a whim based on notes jotted on a cocktail napkin, I think the fact that business owners are taking time to think about their concepts is actually really cool.

If you want to make your startup even smarter, spend some of your planning time talking your idea over with the experts at SCORE. Don’t have a SCORE mentor yet? Check out the SCORE website to get matched with your mentor and get started on the road to your startup.

Rieva Lesonsky
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