Seven in 10 young job seekers who recently graduated from college or are about to do so say they would rather be their own boss than work for someone else, forgoing job security, the American Institute of CPAs reported Thursday.
Fifty-three percent of young adults in the study said they would probably start their own business someday.
“It’s not surprising that the generation currently entering the labor market is looking beyond the traditional approach of rising through the ranks in a well-defined career path,” Gregory Anton, chairman of the AICPA’s National CPA Financial Literacy Commission, said in a statement.
“Developments in technology and the internet have made it easier than ever to start a business. However, they have not necessarily made it easier to succeed.”
The research was based on an online MAVY poll conducted within the U.S. last September among 1,984 adults age 18 to 34 who had graduated from college in the past 24 months or would graduate in the next 12 months.
Join the Crowd
According to the report, millennials and Generation Z aren’t the only folks looking to launch their own business. Each month, about half a million people become new business owners, and eight in 10 survive the first year. But time is not on their side: Only about half pass the five-year hurdle, and just one in three make it to 10 years.
“I don’t know of anyone who sets out to start a business that closes in three years,” Teresa Mason, CPA member of the AICPA Private Companies Practice Section Executive Committee, said in the statement. “But the reality is, the first few years are almost always the hardest. That means every financial decision needs to be well thought out, with a clear eye to the future.”
The AICPA’s financial literacy commission offered some suggestions to help entrepreneurially minded young people set themselves up for success.
1. Start with a solid financial foundation.
Do this by paying off student loan debt, saving for retirement from the get-go and having an emergency fund. This will afford entrepreneurs “a degree of flexibility that they wouldn’t otherwise have,” Anton said.
2. Ask yourself the tough questions.
Do I have enough set aside to cover expenses during a potentially slow startup period? Do I have a Plan B in the event that my expectations aren’t realized within a reasonable time frame? “Address these scenarios proactively and have a plan in place,” said Neal Stern, CPA member of the commission.
3. Prepare for all the costs involved.
“Before going out on your own professionally, it is important to compare your current budget with your forecasted budget,” said Michael Eisenberg, CPA/PFS member of the commission. For example, if the entrepreneur’s current employer provides health care and retirement benefits and pays for out-of-pocket expenses, he or she will need to factor those expenses into what it is going to cost to fly solo.
4. Keep finances organized and build an emergency fund.
Maintain a bill-paying checking account that pays all fixed monthly bills with a due date and a consistent amount. Ensure that the account always has at least two months’ worth of money in it — ideally three or more — and set up as many as possible for auto-pay on their due date. “This not only helps eliminate late fees, but it’s an easier way to quickly see how much is left over to reinvest in your business,” said Kelley Long, CPA/PFS member of the AICPA Consumer Financial Education Advocates.
5. Take advantage of free tools and resources.
The CPA group offers these resources for starting a small business:
- The AICPA’s #CPApowered: free tools to help small businesses grow
- Experienced CPAs’ insights: risks involved; acquire financing
- Where to begin: small business checklist
- The AICPA’s 360 Degrees of Financial Literacy website: how to plan for a career change; variety of calculators