What Will Entrepreneurial Success (and Struggle)
Look Like in 2017?
It's an interesting time to be an entrepreneur. As of 2015, Pew Research reported, 3 in 10 U.S. jobs were held by self-employed entrepreneurs and the workers they hired, making entrepreneurship a major driver of the economy. Startup culture supplies high-profile role models who've taken their ideas and turned them into massively successful companies—which strive to retain and scale their entrepreneurial ethos as they grow. And as digital marketing becomes more and more accessible, entrepreneurs can potentially reach a vast audience on a small-and-scrappy budget.
There's also evidence that today's entrepreneurs are especially serious about their businesses: per Pew, "The share of workers who are self-employed and have incorporated businesses rose from 2.9% in 1990 to 3.7% in 2014, and the share of workers who are unincorporated fell." For many entrepreneurs, running their own business isn't an experiment or a transitional phase; they're laying the groundwork for something permanent.
On the other hand, those who aren't incorporating and growing are often struggling. The Small Business Administration has reported that a third of new businesses fail within their first two years, and half don't make it past Year 5. And other would-be entrepreneurs may be sitting things out because they can't get started in the first place: 2016 U.S. Census data finds new business creation heading toward a 40-year low.
It's Drip's goal to make marketing automation accessible to every business, so we're deeply invested in the success of entrepreneurs at all stages of growth. And while we get thousands of interesting data points from talking to our customers, we also wondered what might be revealed by a broader view of the state of entrepreneurship heading into 2017.
That's why we're proud to announce our first annual Entrepreneurship Report. What follows is a snapshot of U.S. entrepreneurs' success and struggles right now, as suggested by a panel of nearly 2,000 company founders.
If you're an entrepreneur, consider this report competitive intelligence on what's working for your peers, how your business compares, and which opportunities for growth you may be overlooking. This is, first and foremost, for you.
Of course, these findings should also be highly interesting to B2B marketers and other professionals serving business owners. The report is also an up-to-date look at the motivations and challenges facing this population, and should highlight opportunities for attracting and serving them more effectively.
Our survey questions address three main topics:
- Growth: What approaches are U.S. entrepreneurs taking to grow their businesses today—and are those approaches working?
- Challenges: Where are entrepreneurs struggling, and how can they overcome the barriers they face?
- Motivations: What underlying goals and values drive entrepreneurs to keep going in the face of those challenges?
While assessing the answers to these questions, we'll also point out opportunities for success that entrepreneurs in 2017 will be uniquely positioned to seize.
In July 2016, Drip commissioned a survey of 1,884 U.S. internet users who identified themselves as entrepreneurs or company founders. The respondents were selected while viewing websites on the Google Consumer Surveys publisher platform. Not all respondents answered every question, but we were able to collect at least 900 responses for each question.
The survey sample skewed slightly younger, more female, and more Midwestern than the U.S. population as a whole, but was otherwise demographically similar.
We screened respondents by asking about their current work situation. Because we were also curious whether entrepreneurs' perspectives would change the longer they'd been in business, we asked those who identified themselves as entrepreneurs or company founders how long they'd been in business.
How long have you been running your business?
- 43.5% of the panel had been running their business for 5 years or less.
- 55.5% of the panel had been running their business for over 5 years.
From this mix of new and established entrepreneurs, we gleaned insights that both support and challenge conventional views about entrepreneurship.
I. How Will Entrepreneurs Achieve Growth in 2017?
Key Insight: Half of today's entrepreneurs still rely on their customers, not their marketing, to grow.
To determine how entrepreneurs can grow tomorrow, we began by investigating how they grow today. Our first question to our panel was simple: how do you get the majority of your new customers?
How do you get the majority of your new customers?
Even in our digitally driven age, it's hard to beat the power of an organic, person-to-person recommendation. Referrals and word of mouth remain the bread and butter of half of U.S. business owners.
But while no other single customer acquisition channel comes close to matching the power of word-of-mouth for our respondents, most U.S. entrepreneurs aren't ignoring digital marketing entirely. That became clear when we asked specifically about digital channels.
Key Insight: Digital marketing and automation are still secret weapons for entrepreneurs who know how to use them.
How important is digital marketing (such as your website, online advertising, social media, etc.) to your business?
We found that a substantial majority (71.6%) of entrepreneurs do use some form of digital marketing—but there's an interesting all-or-nothing divide in the degree to which they use it. While 28.4% of respondents say they aren't doing anything at all to market their business online, 33.5% find digital marketing to be either highly important or indispensable to their business's success.
The fence-sitters—those who are trying digital marketing but unsure whether it's effective—are the smallest group, at 12.1%. That's especially notable when compared to Leadpages' 2016 Small Business Marketing Trends Report, which found 48.5% of small-business owners uncertain about the success of their marketing overall.
These results suggest that once you get serious about digital marketing, you're likely to see returns—as long as you're able to track whether your campaigns are effective. (Note that 12.5% of entrepreneurs actually aren't sure where most of their new customers are coming from, suggesting a need for better tracking and attribution.) Given the success they're already having with referrals and word-of-mouth marketing, today's entrepreneurs likely have enormous potential for growth if they can leverage and scale these time-tested acquisition methods through avenues such as social media, online reviews, and online referral programs.
The youngest class of entrepreneurs may recognize the power of these digital channels more fully: only 29.6% of respondents under age 24 lean primarily on word of mouth to get new customers. Whether by necessity or inclination, young entrepreneurs in 2017 are likely to hone their digital marketing savvy at the same time they're building their businesses. For others, digital marketing remains something of a secret weapon in-the-know entrepreneurs can deploy to gain a competitive edge.
The digital/word-of-mouth split appeared again when we asked respondents to write in their own favorite marketing tool or tactic:
What's your favorite marketing tool or tactic?
Here again, word of mouth captured the top slot, with 8.6% of write-in answers. But almost as popular was Facebook (6.7%), the only other specifically named platform to garner more than 2% of the write-in vote. Another 6.5% of respondents listed online marketing in general as a favorite tactic, compared to just 3.1% for any offline advertising medium.
Also noteworthy here is the sheer diversity of write-in answers. While different tactics work in different industries, entrepreneurs who keep searching for new and effective marketing tools are likely to be rewarded with something few other businesses have discovered yet.
One of those discoveries may be marketing automation.
How important is automation to your operations and your marketing?
On a scale of 1 to 5, where 1 means "I don't use any automation" and 5 means "my whole business depends on automation."
While a slight majority of entrepreneurs reported using at least minimal automation to run their operations or their marketing, almost as many aren't using automation at all. Only 21.9% rated automation as either very important or essential to their business, compared to 41.1% using no automation.
In automation as well as digital marketing, the youngest entrepreneurs have the edge. Entrepreneurs under age 24 gave the importance of automation an average rating of 2.8 (on an ascending scale of 1 to 5), compared to 2.35 for respondents ages 25–54 and 2.2 for those over 55. But across the age spectrum, there seems to be a significant untapped opportunity for entrepreneurs to expand and stabilize their businesses via marketing automation.
II. Where Do Today's Entrepreneurs Struggle?
Key Insight: Today's entrepreneurs see room for growth in cutting business costs, finding more time, and getting more customers.
When small businesses aren't growing fast enough, where do their owners pin the blame? We asked respondents to choose from several of the most common entrepreneurial challenges—but the responses were somewhat more eclectic than we'd anticipated.
What's the biggest barrier to growth for your business?
Among our respondents, 28.8% didn't see business costs, lack of time, customer acquisition or retention, or marketing as a major barrier. As for the rest, business costs topped the list, followed closely by time and getting enough new customers.
Interestingly enough, today's entrepreneurs do not necessarily think of customer acquisition as a marketing problem: only 10.1% chose "figuring out how to market successfully" as their primary challenge, compared to 17.6% who chose "getting enough new customers." Shifting the way they approach the problem and devoting serious attention to their marketing is one way this larger group of entrepreneurs might break down the customer-acquisition barrier. Those who are also strapped for cash and time will be especially well served by affordable marketing automation tools.
Similarly, there may be unrealized growth potential in improving customer retention, selected by only 6.9% of respondents as a top concern. If entrepreneurs can find automated ways to encourage repeat purchases, contract renewals, and upsells, they can reap more value from the time and money they're spending on customer acquisition.
And what about those 28.8% of entrepreneurs who chose "none of the above?" While some of them are likely facing a different and more particular barrier, others may simply not feel that their growth is constrained by any external force: they're growing as fast as they desire.
Those lucky entrepreneurs may be the same ones who reported achieving almost immediate success in another survey question:
How long did it take you to feel like your business was a success?
We found that Year 1 is a tough time for most entrepreneurs: while 20.4% are confident or lucky enough to feel successful almost immediately after launching their business, almost no one else (9.5% of respondents) reported reaching their benchmark for success in under a year.
Things begin to stabilize a few years in, but many U.S. entrepreneurs continue to feel that they're in a precarious position. 21.3% of respondents said they don't feel confident that their business is going to make it, including 15.2% of entrepreneurs who've already been in business for more than 5 years.
In the face of widespread uncertainty, what inspires entrepreneurs to forge ahead with the frequently challenging path of business ownership? And what makes them feel that they've succeeded? We looked for clues in a set of questions about how entrepreneurs view and value the work they're doing.
III. What Motivates Entrepreneurs to Keep Going?
Key Insight: Entrepreneurs today are focused on building wealth, delivering excellent products and services—and the future.
Not all entrepreneurs set out to change the world. Many are motivated by very a simple goal: achieving a good life and economic security for their families and themselves.
What goal most motivates you to keep going with your business?
More abstract concerns—making a difference in the world and making a name for oneself—were chosen significantly less often, while helping customers fell in the middle.
B2B marketers and product designers seeking to reach this demographic should consider these motivations in their messaging. Products that promise—and deliver—economic benefits above all else are likely to do well in this market. So should time-saving innovations that allow entrepreneurs to spend more time with the families they're working to support.
That's especially true when serving entrepreneurs in the 35–44 age bracket. Unsurprisingly, the demographic likeliest to have children at home chose "building a better life for my family" more often (33.6%) than any other segment.
Of course, even if customer happiness isn't the number-one motivator for most entrepreneurs, every entrepreneur is in the business of delivering value to customers. As independent businesses compete for customers with national companies and their peers, how do they differentiate themselves?
Which contributes most to your customers' happiness?
Today's entrepreneurs seem to strongly believe that there's no substitute for quality: a third named quality of goods and services as the top factor that keeps their customers happy. Another 26.3% say it's their customer service.
Comparatively few entrepreneurs aim to win customers based on more relative factors such as uniqueness, price, or convenience. Instead, most are sticking to the fundamentals, and, if competition's on their mind, they're pulling ahead by trying to deliver value and service better than anyone else.
While building wealth and creating excellent products and services are at the top of most entrepreneurs' minds, a final question suggests there's another factor driving them forward: the sheer love of entrepreneurship and building something for themselves.
We asked "What would you do differently if you were starting your business all over again?" in the hopes of gathering some valuable lessons learned. Instead, we discovered something quite different.
What would you do differently if you were starting your business all over again?
Only one answer here claimed a double-digit share of the responses: nothing. If you gave U.S. entrepreneurs a chance to start their businesses all over again, a third of them wouldn't change a thing.
Those who did pinpoint an area they could have improved often gave somewhat idiosyncratic answers relating to things like location, staffing, or details of their specific industry. Still, a handful of universal lessons learned were cited by multiple respondents. If you're starting a business in 2017, our panel might advise you to start yesterday (3.1% said they regret not starting sooner), watch your savings (1.3% wished they'd saved more money), find a good partner or assistant (1.1% said they hadn't hired enough help), and pay attention to your marketing (1% regretted not doing more marketing).
And finally, take courage: only 2.1% of respondents said they'd choose not to start a business if they were given a do-over.
Opportunities for Entrepreneurs in 2017 and Beyond
By and large, today's entrepreneurs appear to have the drive and the confidence to succeed in growing their businesses. If anything's missing, it may simply be the tools and strategies to push back against time and financial pressures and keep expanding their customer base.
Our survey results suggest several ways for entrepreneurs to supplement their inherent strengths with new tactics for growth. We predict that 2017's most successful entrepreneurs will:
- Choose marketing channels with trackable metrics: Our data indicate that traditional offline advertising is not a highly effective means of acquiring customers as we head into 2017, perhaps because its effects are typically so hard to track. Meanwhile, most entrepreneurs who are jumping into digital marketing report that it's working well for them. When it's time to move beyond person-to-person marketing, entrepreneurs will be best served by choosing channels—such as email marketing, paid media, and landing pages—that provide clear success metrics and customer attribution data.
- Recognize that faster growth often requires better marketing: If you have a customer acquisition problem, you almost certainly have a marketing problem. Yet relatively few entrepreneurs see it that way, according to our survey. It may require a slight mindset shift to move from the spontaneous, organic growth that comes from referrals and word of mouth to the accelerated growth that's possible with strategic marketing campaigns.
- Explore email marketing automation to convert and retain more customers without significant budget or staffing changes: Of course, entrepreneurs don't have unlimited time and money to spend on their marketing. That's why we'd recommend investing in affordable automation solutions that business owners can deploy in house without special technical resources. With always-on email campaigns that respond to what contacts are doing online, entrepreneurs can close more leads and support more customers around the clock—often with the staff they already have.
Picking up the missing pieces in their marketing efforts will help entrepreneurs capitalize on the positive word of mouth and value creation that are already working in their favor. By investing in the tools and tactics needed to move quickly, these businesses can expect to see strong growth in the year to come.