NFIB

Earnings Envy
04/ 11/ 2002

Ever wonder how much other small biz owners make?

by Alan Breznick

Small business owners' earnings are surprisingly "virtually identical" to those of wage and salary workers, according to a study by NFIB and the University of Central Florida. In March 1999, the latest period studied, both groups posted a median income of almost exactly $30,000 a year.

For years, there's been no easy answer to how much the typical entrepreneur makes because of problems obtaining reliable information. The study found that the self-employed are more likely than wage and salary workers to earn both far less than the median and far more. "What it suggests is that you can make money in business but you can also lose money," says William J. Dennis Jr., a senior research fellow for the NFIB Education Foundation who co-authored the paper with Central Florida University Professor Lloyd W. Fernald Jr.

The study found that about four in 10 small firms are generally profitable over their lifespans, while three in 10 are largely unprofitable and the remaining three break even. An overwhelming 77 percent of entrepreneurs report that their business earnings neither raised nor lowered their standard of living by much.

Small business income may seem lower than it actually is because the self-employed plow much of their earnings back into their firms, the NFIB study concluded. How much isn't known, because small firms don't have to report such details to the government or investors. Plus, as the experts like to stress, there's no such thing as a typical small business. "Know that more of them make a living than get rich," says Jim Blasingame, host of the nationally syndicated radio show Small Business Advocate. "So many small business owners don't pay themselves a salary."

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This article originally appeared in the May/June 2001 issue of MyBusiness Magazine, NFIB's member magazine.

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