How Much Money do Small Business Owners Make?

Many people are curious about what the average small business owner earns. The IRSStatistics of Incomeprovides some data on the average income of sub chapter S corporations and sole proprietorships, which helps to estimate small business owners’ earnings.

In the table below, I show the income and sales of the average sub chapter S Corporation in the latest year the data are available. The figure shows that the average S corp generated about $100,000 income on about $1.5 million in sales in the last year before the Great Recession.

While the income of the average S corp was less than seven percent of its sales, there was wide variation across major industry sectors on this measure. Income only equaled about two percent of sales for sub chapter S corporations in retail, but almost 55 percent in management of companies, and almost 29 percent in mining. Similarly, wide industry differences can be seen in the average income of these businesses, ranging from only a little more than $28,000 in other services to $692,000 in management of companies. In fact, in four industry sectors– utilities, manufacturing, mining and management of companies – theaverageSub Chapter S Corporation is making its owner rich by President Obama’s standards, generating more than $250,000 in income in 2007.

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More financially successful entrepreneurs tend to form sub chapter S corporations, and less successful ones tend to run sole proprietorships. The IRS Statistics of Income data also show how well the average sole proprietorship performed.

As one would expect, the numbers are much lower than for the average sub chapter S corporation. In 2008, the average nonfarm sole proprietorship had revenues of only $58,256 and net income of only $11,696.

But, as with subchapter S corporations, the the variance across industries in income and revenue is quite large. Because there sole proprietorships are more common than S corps, the IRS provides industry numbers at a much more fine-grained level for sole proprietorships. The IRS figures show that,in 2008, the average revenue of a sole proprietorship ranged from $11,862 for unclassified establishments to $1,073,406 for coal mines, and average net income ranged from -$47,455 for coal mines to $117,685 for dentists’ offices.

Clickherefor an Excel tablethat shows average income, sales, and income as a percentage of sales for sole proprietorships in 135 industries in 2008.

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What Is the Future Outlook for Small Business?

It’s that time of year when we begin looking ahead to the coming year. In fact, with 2010 drawing to a close (can you believe it?), it’s that time when business owners begin looking ahead to the coming decade. If you want to know what the next 10 years have in store, take a closer look at a new report from Intuit.

Intuit 2020 Report: 20 Trends That Will Shape the Next Decadebuilds on more than five years of research led by the Institute for the Future and Emergent Research. It is the first in a series of reports looking at key trends affecting consumers and businesses in the coming years. Subsequent reports will drill down into specific trends and industries, but the current report presents a broad overview.

What’s the takeaway?“The coming decade will be complex, volatile and uncertain, but it will also provide many new opportunities for small businesses and their customers in the United States and abroad,”the report notes. Here are some points I found especially interesting and that have big implications for the future of innovation:

Small businesses will get ever more specialized.Customers will increasingly seek customized products and services. The rise of innovations such as cloud computing, a flexible workforce and lower-cost manufacturing options will make it easier for small businesses to seek out product and service niches.

Startup will get easier and cheaper.In response to growing niche market opportunities, lower equipment costs and better technology, it will be easier than ever to launch a business without a big investment. This means more innovation, as new ideas can be tested without much risk– and startup companies will proliferate.

Big and small firms will join forces.Collaborative partnerships with big companies will increase, as small companies bring to the table innovative practices, market agility and intimate customer knowledge. What will big firms offer small businesses? Marketing and distribution power so that they can take their innovations to broader markets.

One prediction I’m not so sure I agree with:“The Web and mobile technologies will become the great equalizer of big and small, with customers no longer knowing – or even caring – about the size of the firm that provides their goods and services.”In a niche economy where personalization is sought after, will being a small company actually be an advantage? I think consumers may, in many cases, prefer to do business with small firms provided their needs are being met.

And here’s one innovation I particularly hope to see – and I think most busy business owners wish for as well:“The hardware and software we use on a daily basis will get smarter, helping people make everyday decisions and streamline complex tasks,”the report contends. That’s especially good news given that data will become even more critical to competitiveness. Information overload isn’t going away – so smart machines to help us deal with it will be very welcome.

Be sure to check out the full report. You can also find related materials at theIntuit website.

Editor’s Note: This article was previously published atOPENForum.comunder the title:“What Does the Future Hold for Small Business?” It is republished here with permission.

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Dive In and Employ Workers With Special Needs or Disabilities

While looking for new business subjects to review, I spied an unique book.  A quick perusal of the pages informed me of a group of workers who are more likely to stay with an employer long-term, consistently exceed productivity expectations, and are innovative because they’re accustomed to adapting to situations.

Wouldn’t you like to have such employees?If so, then look no further than workers with disabilities and special needs.

Dive In: Springboard Into the Profitability, Productivity, and Potential of the Special Needs Workforceis a solid guide on hiring, retaining and working with disabled employees .  The authors, Nadine Vogel, a corporate consultant, and Cindy Brown, an award-winning writer and consultant, speak from personal experience as they explain  the contribution of this particular group to a diverse work force.Vogel has two daughters with special needs, while Brown was diagnosed with Ehlers-Danlos Syndrome.  Their research and their experience makes this book worth the read if you are considering employing someone with special needs or disabilities.

Small Book Has Big Benefits for Employees With Disabilities

The advice inDive Incomes in a compact 130 pages, but you would be hard pressed to find a more informative guide tailored for the busy business owner. Dive Inexplores the advantages that a special needs work force offers a company, such as low employee turnover and a“halo marketing” effect with customers.

“A national survey reported that 92 percent of American consumers view companies that hire people with disabilities more favorably than those that do not….And don’t forget that by hiring the special needs work force, you are also marketing to them….The U.S. Census reports that people with disabilities and their network (family and friends) represent $1 trillion in discretionary spending.”

The authors maintain the swimming theme throughout the book asDive Inexplores the challenges of and solutions for accommodating a special needs work force.  Vogel and Brown wisely apply supporting material that challenges typical misperceptions that accommodating special needs is complex and expensive.

“In a 2006 survey conducted by the Job Accommodation Network (JAN), a service of the U.S. Department of Labor’s Office of Disability Employment Policy, 46 percent of the employers surveyed reported that the accommodations needed by employees and job applicants with disabilities cost absolutely nothing…Many would-be employers cite the cost of accommodations as a barrier to employing people with disabilities.”

Vogel and Brown also suggest establishing a Reasonable Accommodation Committee (RAC) to consider accommodation requests.  That may appear over-elaborate for a small company, but the authors convey the benefits of cost management and improved personnel morale from having a central decision-making source.

Learn How to Address Misunderstandings and Open a Dialogue

Dive Indelves into workplace perceptions that can impede honest discussion regarding accommodation needs.  Although companies with 15 or more employees must provide reasonable accommodation by law, some special needs employees feel as though requesting an accommodation makes them a layoff target:

“It may be obvious that accommodation decisions should never be based on the current economic situation, but…equally as important is the perception that requests are considered in a fair and equitable manner. By centralizing your reasonable accommodation funding (and taking it out of the managers’ hands), you can help to counterbalance any fear that your employee may have.”

Quotes from corporate officers, such as senior level professionals at Starbucks, McDonald’s and Walgreens,  provide a range of thought, from hiring the best people regardless of background to understanding the value diversity has beyond a dollar.

Recommendations throughout the book have a broad context to cover situations with different needs, whether physical or psychological.  An example from an Ernst& Young executive shows how to reframe questions to keep particular needs in perspective while covering the possibilities in an emergency:

“ We don’t ask ‘Do you have a disability?’ but ‘Would you need help if there was an emergency?’ says Ms. Golden of Ernst& Young.  “This way we include people who might be claustrophobic, people with smoke-induced asthma, and women in their last month of pregnancy. They all self-register, saying that they would need help.”

Asides in Chapter 3 called“Please Do” and“Please Don’t” contain splendid reminders about behavior.  Other topics include differences between affinity groups and support groups, considerations of employees with special needs family members, and health insurance guidance for employees seeking therapies, home health care and medical equipment.

Dive Inends with a directory of additional government and nonprofit resources that can answer more specific workplace questions and concerns.

An Honest Guide to Developing Best-in-Class Practices

I liked that this book spoke to growing businesses that are beginning to hire employees as well as those that have been hiring for years. Dive Inanswers the“what ifs” well and makes the consideration of special needs employees simple and straightforward. Regardless of company size, your firm will have a terrific resource for basic training and for beginning the associated dialogue about employee behavior.

Dive Inbreaks through the misconceptions about special needs employees (and those caring for special needs family members) to show best-in-class formation of healthy business relationships.  Give it a read, and see how your business will prosper from a positive environment and increased productivity through the best care for all employees.

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Excel Tips and Tricks: Fudge Function

Every few months I download some data from my site and have to slice and dice it in Excel. This schedule is just often enough that I know what sorts of tricks are available to me, but not often enough that I know how to get them to work.

So a few times a year, I spend a day or so Googling Excel functions and formulas and plugging them into various cells until I get what I need. Someday, I’ll either be attentive enough to my data, or smart enough to write myself a note explaining what I’ve done, that this won’t be an issue.But until then, the dance continues.

Anyway, it was during one of my Excel“hunt and peck” sessions that the above cartoon came to me.

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Use Word of Mouth to Build Business By Staffing Your Store to Spread the Word

Amy’s Ice Creamsin Austin, Texas, is beloved for two things:the ice cream and the floor show.They are the ice cream equivalent of Seattle’s “flying fish.” Ice cream scoops are thrown from one worker to another and caught in cups balanced on their chins . . . while standing on one foot . . . hopping. You’ll see ice cream slingers sliding across the counters on their knees and bellies. It’s a carnival ride in there.

Finding people who are fearless and creative enough to come up with stunts like flinging ice cream balls across a room just can’t happen in the normal interview process. How exactly do you ask,“Are you a little bit nuts?”You can’t. So, at Amy’s, applicants receive a white paper bag. It must be brought back within a week turned into a creation that tells Amy’s about who they are. From this white paper bag, Amy’s finds the personalities to fill their shops.

Without the Right People, This Is Just Great Ice Cream

By using a plain white paper bag as its job application, Amy’s gets to know the creative soul lurking within the teenaged candidate standing before them. This idea began with an applicant who was given the bag instead of the boilerplate job application because Amy’s had run out of the forms. The applicant floated the bag back into the store with helium balloons; inside the bag were items about her life. She got the job. Now for all applicants, this is how Amy’s fills their shops with people who make getting ice cream like going to the circus.

Revel in“Being Real”

The Amy’s Ice Creams Web site says,“Amy’s looks at ‘going out for ice cream’ as a total sensory experience that can revitalize a less-than-stellar day.”Part of the joy of going to their ice cream shops is wondering what kind of floor show you’ll be greeted with. Getting the right people to work at Amy’s has spurred their growth from a single location in 1984 to over 14 stores today. In 1984, Amy’s sold 125,000 servings of ice cream. Now they sell well over 1 million a year, with gross annual sales exceeding $5 million.

Like many beloved companies, Amy’s Ice Creams doesn’t advertise. Word of mouth builds the business, and Amy’s redirects marketing money to community development, which fuels more word of mouth. Amy’s represents the power of the small business owner and how service and exceptional experiences can build a small business. Amy’s Ice Creams prospers because it revels in being real. Its employees revel in being their kooky, nutty selves–and people love it. This translates to Amy’s website, where the home page welcomes you with“Life is uncertain, eat dessert first!”Sound advice.

Go Try This

Get“real” in how you hire and bring people into your company

• First, define the core values of the people you want to fill your company.
• Next, determine the personality of your company. Are you serious and deliberate? Are you whimsical? (Have you thought about it?)

Next, examine your current hiring process:

• Are you deliberate about selecting people who will deliver your company’s dis­tinct personality to customers?
• How would your customers say you are doing?
• Do customers rave about how unique you are?
• Are you selecting“memory makers” or just filling slots?

Decide to be real:

• What’syourversion of a white paper bag you can use to select people who will become your company to your customers?

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Making Your Voice Heard as a Small Business Owner

Politics has been on everyone’s mind lately due to the recent midterm elections. In California, where I live, there was much debate (as always) about whether certain propositions on the ballot would actually help citizens—or were simply smokescreens for big businesses to profit. And two of the candidates, Meg Whitman and Carly Fiorina, touted their former experience as corporate CEOs as a good reason to vote for them as politicians, though neither one won.

We all know the role that big business plays in politics and the influence large corporations have on government via lobbyists and donations.But did you ever consider that your small business could have the same kind of influence?

Of course, one small company cannot hope to wield the influence of a massive global corporation. But by banding together to make our voices heard, small businesses can make a difference.Sound too intimidating?Start small. For many of us, the issues that affect our businesses the most are the ones being debated on the state or even local levels.

Making your voice heard can start as small as working to get a zoning variance so you can run a business from home. In my area, business owners have successfully lobbied to get parking meters removed so that more customers will visit their businesses, legalize sidewalk dining to attract more customers to restaurants in a beach community, and change restrictions so that local coffeehouses can feature live music at night. You may not think of these as“government” issues, but these are the little things that make a big difference in a company’s profitability—or even survival.

Local governments are hurting for money these days, which means they’re thinking more creatively and are more willing to listen to solutions proposed by business owners. Once you’ve cut your teeth on some of these local issues, consider what’s cramping your business’s style at the state level. Is it taxes? Regulations?

Recently on my blog SmallBizDaily, politician and marketing professor Amy H. Handlin shared her7 tips for successful lobbying. One of the tips that rang truest to me:Create a coalition.Handlin advises reaching out to other entrepreneurs who share your concerns, then educating more business owners about the issues so you can all be effective lobbyists for change.

You can also hook up with community organizations that share your concerns. This article onBusiness News Dailycites a business owner who joined forces with organizations from churches to the Boy Scouts to protest a transit project that would have required his business location to close. Or you can join an existing business organization that shares your attitude about political issues.

Another solution—run for office.One entrepreneur I know went so far as to run locally office this year (she didn’t win, but maybe next year).

Whether we vote red or blue, the reality is that government—large and small—affects all of our lives and businesses. Shouldn’t we have an effect on government as well? You can get more in-depth advice on successfully advocating for your goals by reading Handlin’s book titled,“Be Your Own Lobbyist: How to Give Your Small Business Big Clout with State and Local Government.”

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6 Free Banner Ad Creators for Your Small Business

If you’ve ever needed to create a simple banner ad, you might want to try one of these six online tools.  Each of these tools offers an online banner creation service, most free, but some have premium options if you want to upgrade.

As with many things that are free in life, there’s a catch: Most of these sites want your e-mail address.  You also have to put up with annoying sites or special offer popups.  But stay focused and you’ll find all of these sites offer value and a speedy result.  Whether you are pleased with the result or not is a matter of taste— but the price is hard to beat on these tools.  So let’s get started:

Bannersketchis a totally free banner creation service that amazed me with its directory of free templates. The actual service and process was pretty easy, but I could not get it to change the color of the text in the ad–thus, as you’ll see below, white text on a light background. Not very easy to read.

So, I started over and created a very plain text banner. Same problem with the font selection tool, however. If you happen to know the 6-character code for colors you like or want to visit a Web chart, you can gohere. Despite my small challenges with Bannersketch, I still recommend giving it a try.  Note: You have to provide your e-mail address to get the code, but you can click the box to opt out of the newsletter.

MyBannerMaker.comoffers a quick service for do-it-yourself types. I had my choice of animated/flash banners, plain banners (like you see below), insert-your-own-photo and more. At the end, MyBannerMaker asks you to upgrade to a paid plan, but also gives you the option to stay“free.”

I created this very simple banner in 60 seconds. Note: The default size is much larger (728×90) than this, but I had to scale it down to fit our post format.

Animation Onlinehad one of the simplest sites, but only offered 7 or 8 template choices. If you’re in a hurry and don’t mind a basic-looking banner, this site might work for you.

123-Banneris one of my favorites. They create a full flash ad.  I had options to create a plain graphics banner, skyscraper (think tall, tower-type ads, often displayed on the right side of a page), sound ads and more.  We could not get the flash ad to display here, so it is just a snapshot of the flash, but if you can close your eyes and imagine movement and cool bells and whistles, that would be good..

BannerCreator.nu— At first glance, this site looked very technical, or at least too detailed for my tired reviewer eyes. But after spending just a few moments studying their site, I grew to appreciate their approach.  Most of the options were dropdown menus or quick color selector options. After entering my text, I could hit Preview and instantly see the result. Then Download and I had my banner. No e-mail, no registration.

Google Display Network— no banner ad creator review would be complete without mentioning the behemoth of online advertising, Google.  Most small business owners think of AdWords as those simple text ads you see in your search results. But the giant has not been sleeping.  Google created a Display Ad Creator tool back in 2008, but it hasn’t really hit the mainstream (in my humble opinion).  If you use Google AdWords, you can find this tool in your dashboard.

I created the banner ad below and linked it to BizSugar.com, the social bookmarking site for small business owners and sister site toSmall Business Trends. Again, I sized it down to fit here, but I could choose any or all of the eight sizes they offer, in a matter of minutes. Google gives you tons of choices, but they also wisely show you what ads have the highest click-through rates and what’s popular.  This is a template ad, but I added the copy.  If you’ve not tried Google’s Display Ad options, you might want to check it out.

If none of these banner ad sites strike your fancy, you can always create something in Paint, Microsoft Publisher, PowerPoint or any other tool that has drawing features.  It may not be the same in quality as a professionally designed ad, but it would be free.

Or you could go in the opposite direction and get banners professionally designed.  Your own Web designer or a graphics designer most likely can create display ads for you.  Or you could try an online design service.  One such service isPointBanner.com.   Last September, Anita Campbell wrote about a positive experience with PointBanner.com. You can read thereview of PointBanner here.  PointBanner does not offer a free service, but the service is relatively fast and inexpensive.  You can get a banner ad professionally created for under $25 per ad, in roughly 2 days.  You don’t have to learn a tool or HTML color codes, and your email will be kept confidential with PointBanner.

Tell us in the comment section below what you’re using to create banner ads inexpensively.

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