Approximately 75% of our users at ProjectionHub are startups, so we wanted to take a closer look at our startups and see if we could learn anything that would be helpful for other startups. Here are 5 interesting stats that we uncovered.
1. Only 16% of Business Owners are Taking a Paycheck from the Company in the First Year
I thought this was important for future entrepreneurs to know. If you are going to start a business, you can’t expect to pay yourself during the first year. If you need a paycheck each month at this point in your life, then you probably shouldn’t risk starting a new business right now.
The average monthly take home for the 16% of business owners who did take a paycheck was as follows:
- Year 1 – $2,389 per month
- Year 2 – $2,670 per month
- Year 3 – $2,866 per month
2. 94% of Startups Are Looking for Funding
I was surprised to see how few people were planning to bootstrap their startup. A whopping 94% of our users were looking for either a loan, an investment or both. I doubt this data would hold across all startups, as I am sure that many bootstrapping startups are not creating financial projections, but nevertheless this is an interesting bit of data.
- 58% of users are seeking investment
- 36% of users are seeking a loan
- The average projected investment is $342,000
- The average projected loan is $153,000 at 8.7% for 64 months
3. It Takes Service Companies 1 Week Longer to Get Paid Than Product Companies
Cash flow is king for a startup, so it is vitally important to understand how long you will have to wait to get paid by your customers. Surprisingly our service based startups estimate that it will take 33 days to get paid by their customers, while it will only take 27 days to get paid for the average product based startup.
This is certainly something to keep in mind as you project cash flows for your startup. How will you survive those 33 days while you are waiting to get paid?
4. The Average Billable Hour Rate for Service Company Startups is $111 per Hour
This stat is across the entire service industry, so I am not sure how helpful this is on its own, but we also know that the average wage per hour paid to employees of these service companies is $29.50. That means the average labor cost for a service startup is 27%. If your labor costs are over 50% now you know that you are way out of line. You probably need to increase your pricing, or decrease your labor costs.
5. 27% of Startups are Offering Both Products and Services
Finally, I thought it was interesting to note that 27% of startups are offering products and services. Our data showed that 32% of startups are service only while 41% are product only.
Hopefully these stats can be helpful as you consider jumping into entrepreneurship yourself, or as you launch and grow your own startup.
About the Author: Adam Hoeksema is the Co-Founder of ProjectionHub which is a web application that helps entrepreneurs create financial projections without the need to have a PhD in spreadsheet modeling.