Before judging your own chances, look at how businesses like yours usually fare, because that record is sobering. Of US private-sector business establishments that opened in the year to March 2020, about half were still operating five years later, according to the US Bureau of Labor Statistics (BLS).¹ It is a base rate for businesses in general, not a verdict on yours.

The research gives no yes or no to “should I start a business?”, but it does suggest an order for deciding: know why you want one, read the survival odds for what they are, count what you could lose, and win paying customers while you still have an income.

Should I start a business for the money or for the freedom?

Most people who start a small business are after independence more than riches. In a US survey of people setting up a business, economists Erik Hurst and Benjamin Pugsley reported in 2011 that more than half gave non-financial reasons, such as being their own boss or a flexible schedule, while about a third wanted to generate income (respondents could give up to two answers).²

Your reason matters because it decides what success looks like and what else could deliver it. Picture two people opening the same bookkeeping practice: one wants to choose her clients and hours, the other wants to out-earn her salary. The first may count a modest, steady income as success; the second is making a financial bet, and the research on pay below speaks mostly to her.

What survival rates count, and what they miss

In both the US and the UK, a large share of new businesses stop trading within a few years. The BLS tracks each yearly cohort of new US private-sector business locations and publishes survival by industry and state.¹

In the UK, about 38 percent of businesses born in 2019 were still active in 2024, so most had stopped trading, according to the Office for National Statistics (ONS), which also reports survival by industry and region.³

Read these numbers with three caveats. First, the BLS figures come from unemployment-insurance records, which leave out self-employed workers, so they cover business locations with employees.⁴ ONS counts businesses registered for VAT or PAYE payroll tax and says a sizeable population of low-turnover businesses without employees is not on its register.⁵

Second, they record closures, not failures: an owner who retires counts the same as one who ran out of cash. Third, the latest five-year cohorts in both countries lived through the COVID-19 pandemic early on. So the US headline means about half of new business locations with employees are gone within five years, whatever the reason.

A base rate corrects the story you tell yourself about your plan. Start from the figure for businesses most like yours, then adjust only for what you can show: someone planning a café would begin with the figure for accommodation and food services, check how their state or region compares, then weigh a signed lease or catering clients lined up.

Confidence predicts little; industry experience predicts more

New owners’ confidence says little about their chances; experience in the industry is a better signal, at least for building a fast-growing firm. In a 1988 study of recent US business owners, Arnold Cooper and colleagues found that owners rated their own chances well above those of businesses like theirs; one in three put their odds at 10 out of 10, and poorly prepared owners were as optimistic as well-prepared ones. The authors pointed to two habits, talking up an option once you have chosen it and believing you control your own destiny, and suggested asking detached outsiders, such as board members or professional advisers, to judge the business.⁶

Both habits are ordinary: once you have told friends and priced equipment, doubting the plan feels like doubting yourself. In survey data from 18 countries, Philipp Koellinger and colleagues found that believing you have the skills to start a business was the factor most strongly linked, across countries, to starting one, which they read partly as overconfidence.⁷

Experience is a different signal, resting on what you have done rather than how you feel. In US Census records of employer start-ups founded from 2007 to 2009, Pierre Azoulay and colleagues found that founders with three or more years in their start-up’s industry were about twice as likely as those with none to build one of the fastest-growing firms, though that outcome is rare for everyone: roughly 2 in 1,000 founders versus 1 in 1,000.⁸

What lower pay buys you, and what it puts at risk

For the typical owner, a business has paid less than a job would, in two large US studies decades apart. Barton Hamilton’s 2000 study of US men, using survey data from the mid-1980s, found that most entrepreneurs start and stay in business despite lower starting earnings and slower earnings growth than in paid work, a median gap of about 35 percent after 10 years in business. Less able employees choosing self-employment did not explain the gap, which may understate the difference because fringe benefits were not counted; Hamilton reads it as a sign that the non-financial benefits are substantial.⁹

Later US data split the picture. In surveys from 1995 to 2012, Ross Levine and Yona Rubinstein found that the median owner of an incorporated business earned more per hour than the median salaried worker, while the median owner of an unincorporated business, the more common kind, earned less.¹⁰

In effect, the typical owner pays for independence with income. For the bookkeeper who wanted to choose her clients, that may be a fair price; for the one who wanted to out-earn her salary, it is a loss. Decide which of the two you are buying.

The risk is concentrated too. In US data covering 1989 to 1998, Tobias Moskowitz and Annette Vissing-Jørgensen found that owners held, on average, most of their private business wealth in a single company, yet average returns on private business equity were no higher than on publicly traded shares.¹¹ When your pay and your savings sit in one company, a bad year can hit both at once, so settle how much to keep outside the business before it asks for more.

Control over your work comes with heavier demands

Owning a business tends to bring more control over your work, and more pressure. A 2018 review of 144 studies by Ute Stephan found that entrepreneurs consistently reported more autonomy than employees; where studies tested it, autonomy, sometimes with other features of the work, explained most or all of the gap in work satisfaction. The review adds that their work is usually described as carrying more uncertainty, responsibility and time pressure, longer hours and fewer sources of support at work.¹²

1. More control: owners consistently report more say over what, when and how they work than employees do
2. Work satisfaction: where studies tested it, that control explained most or all of the satisfaction gap with employees
3. Lower typical pay: in Hamilton’s study of US men in the 1980s, median self-employment earnings trailed paid work
4. One basket: in 1989 to 1998 US data, owners’ private business wealth mostly sat in a single company
5. Heavier demands: more uncertainty, responsibility and time pressure, and longer hours

Both sides come from the same place: whoever decides what, when and how the work gets done also answers for whatever goes wrong. You take a Friday afternoon off because you can, then answer a client’s complaint late at night because nobody else will. Before deciding, ask people who run a similar business about their worst month as well as their best. If the control matters more to you than the pressure costs, that weighs toward starting.

Further reading

• 

  Originals: How Non-Conformists Move the World

  by Adam Grant

  Grant draws on the Raffiee and Feng study of keeping a day job while starting out, the hybrid route this article describes.

As an Amazon Associate WiserHours earns from qualifying purchases.

Starting on the side goes with staying self-employed longer

Starting on the side is linked to staying in self-employment longer. Hybrid entrepreneurship means running a new business while keeping a paid job, and a 2014 study by Joseph Raffiee and Jie Feng found that people who took that route before going full time were less likely to leave self-employment than those who went straight in. The authors argue that a salary lowers what you put at risk while the side period shows whether the idea, and the role, suit you.¹³

The study

Limited evidence

A day job first went with lower exit risk in one US cohort (Raffiee and Feng, 2014)

Using a US survey that has followed the same people since 1979, the researchers compared people who became full-time self-employed straight from a paid job with those who first ran the business alongside one. The staged group’s risk of leaving self-employment was about a third lower at any given time; the paper does not report the absolute exit rates behind that comparison. The advantage was larger for people who had run businesses before. The authors’ statistical check for selection, such as side-route founders simply starting with better ideas, suggested it was unlikely to explain the result, and they note that surviving longer is not the same as performing better.¹³

People choose their own route, so only an experiment could fully rule that out; treat this as a promising lead from one study, not proof.

A side period turns a leap into an experiment: a graphic designer with two paying weekend clients learns within months whether they come back and what they will pay, while her salary covers the rent. Aim for real customers paying a real price before giving up the income.

Five checks before you leave a salary behind

1. Write down why, and the alternatives

If another route would give you most of your one-line reason at lower risk, try that first.

2. Find the survival rate for businesses like yours

Look up the BLS or ONS figures for your industry and for your state or region, and note why yours should do better or worse.

3. Count the downside in months, not hopes

Work out the business’s monthly running costs and how many months your household could cover essentials if it earned nothing. The US Small Business Administration’s startup-cost guide suggests counting at least a year of monthly business expenses.¹⁴ A simple monthly budget gives you the household figure. Decide in advance how much of your savings you could afford to lose.

4. Sell something before you resign

Take your first paying customers while still employed, if your contract allows it: read it for terms on outside work, confidentiality, competing with your employer or ownership of what you create, and check local tax rules and any visa conditions. These rules differ by country; contract checks and side-income tax in the US and UK covers the basics.

5. Decide now what would make you stop

Write down in advance the result that would make you pause or close, such as too few paying customers after a set number of months, and share it with someone outside the business. Given how optimistic new owners tend to be, a rule set calmly in advance is harder to argue away later.

WiserHours

Your go or no-go list

• Write my reason in one line and two other ways to get it
• Look up the survival rate for my industry and area
• Know the monthly cost of running the business
• Work out how long savings would cover household essentials
• Check my contract and tax rules, then sell while still employed
• Write down my stopping rule and share it

Find this checklist online:
https://wiserhours.com/entrepreneurship/should-i-start-a-business/#checklist-should-i-start-a-business-before-you-commit

How much weight each finding can bear

Official statistics are the firmest ground here; almost everything else is observational and mostly US-based.

Free advice, mentoring and start-up loans

Public services offer free or low-cost advice, and some also lend. The grouping, most urgent first, is ours; each service is described in its own terms.

• If debts are already hard to repay, free debt advice comes before any new loan. In the US, the CFPB says credit counseling organizations, usually non-profits, give free or low-cost advice, though some services carry fees;¹⁵ in the UK, the government points to MoneyHelper for free debt advice;¹⁶ elsewhere, look for a free government or non-profit service.
• Before you borrow, sign a lease or resign: if the decision turns on your own savings, pension or debts, talk to a qualified accountant or a regulated financial adviser, and ask how they are paid. Any loan, including these public schemes, is a debt repaid with interest. In the US, the Small Business Administration’s microloan program offers loans of up to US$50,000 through non-profit community lenders, which set the terms; the SBA says rates are generally 8 to 13 percent (as of September 2026).¹⁷ In the UK, government-backed Start Up Loans of £500 to £25,000 charge a fixed 7.5 percent a year (as of September 2026) and are unsecured personal loans rather than business loans.¹⁸
• While you plan, in the US: the SBA says it and its partners, including Small Business Development Centers and SCORE, offer free or low-cost counseling and training.¹⁹ SCORE, a non-profit SBA resource partner, says its volunteer mentoring is free for the life of your business.²⁰
• While you plan, in the UK: the government lists free advice by phone, email or webchat from the Business Support Service in England (0800 998 1098), Find Business Support Scotland, the Business Wales Helpline and Invest Northern Ireland.²¹
• Elsewhere: look for your government’s small-business or enterprise agency, a public business-development office or a local chamber of commerce, and check that anyone advising you on money is regulated.

The bottom line

Your reason for starting and the size of your safety net matter more than any survival rate. The odds are sobering and the typical owner earns less than in a job, yet many people value the control enough to accept that. Where your contract allows, sell to paying customers while you still have a salary; write your stopping rule down first, and use the free advice on offer before you risk your savings.