2010 Survey of Consumer Finance

Traci Mach and Arthur Kennickell at the Federal Reserve Board of Governors were nice enough to share with me a memo documenting the final questions that will be used on the 2010 Survey of Consumer Finance related to their expanded coverage of households with members who business owners. I've posted before on this topic, specifically pointing to a 2008 paper that Traci and Arthur did on this subject and a more recent report after visiting Traci and Arthur which is what actually led to this memo. Their memo is a nice complement to conference presentation from 2008 and gives us insight into some areas where their cognitive testing of the questions led to changes in proposed questions. 

While their memo speaks for itself, this is a blog and as such I can't resist sharing some of my reactions:

  1. Equity shares. Traci and Arthur highlight how difficult it is to determine equity allocations among different owners of a business, particularly when there are multiple owners within a household. We experienced similar difficulties when designing the Kauffman Firm Survey. Most business surveys don't get into equity financing, choosing to stay in the easier to ask about debt financing. While I think the approach put forth for the SCF makes sense and what we did in the Kauffman Firm Survey works well, equity is something which is often less delineated than most of us would expect. Who owns what, exactly, may not be fully articulated.
  2. Sales vs. income. Traci and Arthur discuss their surprise in how difficult it was for some small businesses to answer sales vs. income questions. This doesn't surprise me at all and is what has made me leery of business questions which try to be too simplistic. It's also a reminder to entrepreneurship scholars conducting their own survey work that they should be careful to ensure good definitions, clear questions, and keep things simple and detailed to ensure the responses they get are on the intended subjects.
  3. Collateralization and net worth of business. I've never seen a survey that asked about actual collateral used on loans or net worth of a business. I'll be very curious to see if they can get good responses here. I would be much more comfortable with getting some sort of administrative source of data for the collateralization question rather than a survey response but there are not great sources available here. I saw one source which Dun and Bradstreet reportedly sells but it was unclear to me on review if the source was reliable. And on the net worth of the business, this could be a potentially great question if answerable. I know we've been requested to add something similar to the Kauffman Firm Survey in the past but the whole idea of asking respondents a current value of their business if sold seems quite difficult conceptually.
  4. Really of use? There are some questions included here I just doubt will be useful, specifically about the sources of start-up capital and current year financing. Given the amount of space that the SCF has here, I know why the questions are as short as they are but really what use will the data be to know that the business owners used a certain source of capital without any info on amounts?

The SCF has tried admirably to expand into covering more on business ownership but the U.S. needs a separate survey focused on business financing to adequately address this complicated but important topic.

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