Networks encourage crucial information sharing and mutual advice, according to “The Humboldt County Entrepreneur Annual Survey: Identifying Key Determinants of Small Business Success.”
The preliminary finding will be one part of a baseline of county business characteristics developed from the ongoing annual assessments.
Humboldt State Economics Professor Erick Eschker said the new survey supports evidence turned up separately in neighboring Mendocino County. A report last summer showed that in the last five years, Mendocino businesses that reported more years with a positive profit tended to be those more connected to other businesses.
“There is a large and growing literature that speaks to the importance of information gathering and receiving advice,” Eschker says. “Businesses that have more resources for information are at an advantage.” Eschker and Jessica Lamb, also of HSU’s Department of Economics, wrote the report summarizing the survey’s results. Lamb graduated in May and now works with a consulting company in San Francisco.
Eschker says the initial survey has already produced something of a surprise—Humboldt County’s first-time business owners appear to be more successful than their peers who have longer entrepreneurial experience.
That finding is preliminary as well, but if it proves out in future surveys, then economists ultimately may be able to explain why. “We found that during the past year, first-time entrepreneurs increased the number of employees on-site more than entrepreneurs with business success,” Eschker says. “However, this raw correlation doesn’t take into account, for example, the fact that first-time entrepreneurs may be found more often in certain industries. We look forward to collecting data in future surveys that can tell us if this result persists, and perhaps give an explanation why.”
Because the main purpose of the first survey was to determine a baseline of business characteristics, the initial findings are abridged. Future surveys will explore other presumed correlates of success, such as rising profits, expanding hires, and business survival. “We are working with the County Workforce Investment Board to find sources of funding for the next three years,” Eschker said. Future assessments would take account of such factors as owner demographics, start-up costs, initial profits, years of experience, and perceptions of growth, among others.
Eventually, the survey results should be useful guides to developing policies favorable to small businesses and aiming economic development services with greater precision at targets of entrepreneurial opportunity.
The first survey was conducted entirely by mail, producing a 33% return rate from 266 completed surveys. Among the findings:
- 86% of the respondents identified themselves as white;
- males comprised 55%, females 45% of entrepreneurs who responded;
- entrepreneurs born 1970-1979 posted the highest numbers, nearly 70; those born 1950-59 were second highest with just above 50;
- 54, or 20%, of the businesses reported a profit;
- personal savings dominated the source of business funding over the past year;
- profitable Humboldt County businesses have an average of 1.98 employees, versus 3.98 for all respondents;
- sources of business advice are mainly friends, other business owners, family, and the Internet, in that order;
- 54% of businesses advertise and ‘word-of-mouth’ advertising was often cited as a reason for business growth in the past year.
The initial survey produced an exceptional response rate of one in three of those contacted, holding promise for future research. “This may be due to business owners being more willing to share information for academic purposes, or perhaps it was the monetary enticement we included,” Eschker added. “And our students were also very persistent! The hope is to establish a rapport with the businesses so that they will continue to provide survey responses in the future. And if they go out of business, we’d like to understand why they did and what could have helped them to succeed.”
In addition to Eschker and Lamb, the survey’s contributors included HSU Professor of Psychology Gregg Gold and four psychology graduate students: Esperanza Alcazar, Jenna Barry, Erik Federas, and Jessica Robinson. They directed the survey’s design and the organization of student surveyors.
The survey analysis and results are posted at www.humboldt.edu/economics.