One reason entrepreneurs found companies is because they desire the autonomy and flexibility that self-employment provides. While a majority of entrepreneurs consider their ventures their sole career, other entrepreneurs consider their business as supplemental income. Supplemental entrepreneurs can often secure some of the same advantages of full-time entrepreneurship, like the ability to use one’s creativity or set one’s own hours, without the economic risk of full-time entrepreneurship.
Supplemental income, according to a 2013 Kauffman Foundation/LegalZoom survey, is when “the entrepreneur maintains a primary wage/salary job but opens a small business on the side to bring in additional income in his or her spare time.”
Supplemental entrepreneurship comes with many advantages, including autonomy, lower stakes, and the flexibility to scale depending on customer response.
Photo courtesy of Charles & Hudson via Flickr.
Supplemental entrepreneurs range in their dependence on their businesses. In the Kauffman/LegalZoom survey, 40 percent of respondents identified as being supplemental entrepreneurs.
However, the entrepreneurs fluctuated in their reliance on the income:
Supplemental entrepreneurs’ motivations might counter our assumptions.
For example, Etsy is an online marketplace with a focus on handmade and vintage items. As this website tends to attract artistic types—both buyers and sellers—it would make sense that creativity might be a primary goal of the entrepreneurs selling their goods on the website.
However, a large majority of Etsy sellers (68 percent) cite having a supplemental income for their self and family as a motivation for starting an Etsy shop.
Etsy prides itself on its ability to help supplemental entrepreneurs find a way to market their goods. Etsy also offers flexibility to its sellers by providing a space where they can determine whether their Etsy shop is a part-time or full-time commitment.
Nearly half of Etsy sellers are independent workers (including being self-employed, working part-time, working as temporary employees, or selling their goods full-time). While 45 percent of the U.S. population is made up of full-time employees, only 26 percent of Etsy sellers are full-time employees.
Conversely, only 18 percent of Etsy sellers list selling their creative goods as their full-time occupation.
Generating supplemental income can prove especially beneficial to low- and moderate-income entrepreneurs and act as a primary motivation to engage in entrepreneurship.
One study indicates that 38 percent of nascent entrepreneurs, defined as “those who are actively involved in the creation of new business ventures,” live in low-and moderate-income (LMI) households.
However, there are some specific challenges for those starting a business as a low-or moderate-income person, including lack of startup capital.
Understanding the specific challenges of LMI households, Etsy prides itself on helping low-and moderate-income secure supplemental income by lowering startup costs.
The median household income for Etsy workers is $44,900, which is 10.2 percent lower than the national average and identifies many Etsy sellers as having a low or moderate income.
Unlike for many entrepreneurs, however, startup capital is less likely to be a barrier for Etsy sellers. Thirty-five percent of Etsy sellers reported that they did not have any startup costs to begin their businesses, compared to 21 percent of small business owners surveyed in the 2007 SBO survey.
In addition to providing a platform for supplemental entrepreneurs, especially LMI entrepreneurs, Etsy also has begun a “Craft Entrepreneurship” program geared towards creating more supplemental entrepreneurs.
With the mission to “empower creative people in underserved communities to create pathways to entrepreneurship,” the program includes hands-on education about how to apply crafting skills to earn supplemental income.
The program partners with nonprofit organizations to guide participants through the curriculum, which features lessons on a variety of topics, including basic accounting, marketing, and other areas to help emerging entrepreneurs.
Entrepreneurship is an attractive option for many people because of the autonomy and flexibility it can provide.
For others, entrepreneurship can provide a supplemental income that can prove life-changing by providing greater financial security, especially for low-and middle-income entrepreneurs. In addition, supplemental entrepreneurs can experiment with their companies to decide whether their companies have the ability to scale.
How Can I Measure Entrepreneurial Activity in My Region? Introducing the New Kauffman Index of Entrepreneurship
Underutilized Resource in Understanding College Readiness