A new research survey from the North Carolina Secretary of State’s office shows that access to capital, the current economic conditions, and taxes, are the greatest challenges to new businesses reaching self-sufficiency.
The survey of more than 6,500 entrepreneurs in North Carolina estimates tens of thousands of new jobs could be created in North Carolina with a small increase in the number of businesses becoming self-sufficient, defined as reaching $50,000 in annual revenue.
At Tuesday’s Council of State meeting, Secretary of State Elaine Marshall announced the research collaboration between the NCSOS office and Fayetteville State University. The project was aimed at pinpointing how the state can grow advisory services to guide small business owners to the information and resources they need to become successful.
“North Carolina’s economy is one of the strongest in the United States, but not everyone is sharing in that success,” Marshall said in a press release. “Our historical data shows we have a small window of time to help our new business creators, so it’s crucial we take steps early to help assure they are connected to the business resources giving them the best opportunities for success.”
In North Carolina, new business owners must register a business by completing Articles of Organization with the North Carolina Secretary of State’s office, making it one of the first stops for new business owners.
Studying responses from 6,546 corporations, limited liability companies, and similar limited liability formations active as of May 20, 2023, and formed within the last ten years, researchers found that companies claim self-sufficiency when they generate revenues of $50,000 or more. Most entrepreneurs with less than $50,000 in revenue do not work full-time in the business.
Approximately 45% of the businesses identified as “aspirational,” meaning they do not yet meet the self-sufficient threshold but expect to do so. The report concludes that if just 5% of aspirational businesses become self-sufficient, it would create 24,550 new jobs.
Marshall cautioned, however, that historical data shows there is only a small window of time to help new business creators.
“Historical data shows us that while we outpaced the national average for business survivability, we still have about 25% of businesses that cease in three years and that goes to 50% within seven years,” Marshall said. “The national average for three years is 33%, and seven years is 53%, so we’re below that, but we still have just a short window of time to help. As a part of this survey, entrepreneurs reported access to capital, current economic conditions, taxes, and the ability to locate and access services as the greatest challenges to self-sufficiency.”
The study has three main recommendations:
- Investing in entrepreneurial support organizations and educational programs that can help and promote credit readiness services. The survey shows that it may not be a specific lack of funding resources that is hindering the business, but primarily insufficient credit readiness instead.
- Strengthen referral networks to community development financial institutions or CDFI’s who frequently approve higher risk loans.
- Entrepreneurs would benefit from a comprehensive online searchable directory where they can identify existing resources such as training, mentoring, networking, and financing with a single easy navigation location. The directory would also have enhanced promotional and outreach resources to make it well-known in entrepreneurial networks.
Marshall pointed out that the NCSOS office launched Rural RISE NC last year, which stands for Resources for Innovators, Startups, and Entrepreneurs. It helps connect newly formed businesses to important local, state, and federal business resources through a searchable database.
