Are people with university educations more successful in business? Not necessarily, according to the first survey of small business survival rates in Israel.
”Globes” has obtained the result of the survey by the Israel Small and Medium Enterprises Authority (ISMEA). The survey included a sample, divided into five groups, according to education, age, and size of the business, of 431 entrepreneurs contacting the Small Business Development Center (MATI) in 1998-2001. The survey found that the survival rate was higher among business owners without university educations. “University graduates usually lack an affinity for risk,” explained ISMEA deputy director general and Small Business Development Centers coordinator Eli Bentata.
The survey also shows that the probability of business survival rises along with the age of the entrepreneur and the size of the business.
86% of the businesses founded in 1998-2001 still exist. In the group of entrepreneurs aged 35+, with at most a high-school education, and businesses with a sales turnover of over NIS 100,000, the business survival ratio was 94.1%.
The second highest ratio, 89.6%, was for entrepreneurs with more than a high-school education or a degree, with businesses in services, industry, tourism, agriculture, or high tech.
Next, with an 80.6% business survival rate, were entrepreneurs aged 35+, with at most a high-school education, and businesses with a sales turnover of up to NIS 100,000. Next-to-last on the list, with a 76.1% business survival rate, were entrepreneurs with more than a high-school education or a degree who set up trading enterprises.
In last place, with a 65.9% business survival rate, were entrepreneurs up to age 35, with at most a high-school education.
What proportion of small businesses in Israel survive for five years? The survey shows the rate is 66%, compared with 33% in the US and 44% in France. The figures for Israel, however, relate only to small businesses that received aid from ISMEA, while the figures for the US and France are for all small businesses.
40,000 new businesses are started in Israel every year, of which 11,000 apply to ISMEA for aid.
The survey also showed that 57% of businesses had not changed the number of their employees since they were founded, 28% reported hiring more employees, and 9% reported that they had cut their staff.
46% of businesses employed no workers when they were founded, other than the owners themselves. 25% employed two workers, and 20% had 3-5 workers. Only a few employed more than five workers.
41% of the businesses that survived until the date of the survey had no employees other than the owner, 21% had two employees, 20% had 3-5 employees, and 14% had over five employees.
59% of businesses were in services, 13% in commerce, 10% in industry, 6% in high tech, 5% in tourism, 2% in agriculture, and 4% in other fields.
Before founding their business, 79.1% of the entrepreneurs were employees, 10% owned another business, and 9.7% did not work.
The most frequent reason why businesses closed down was economic 56.4%. Other reasons included the deteriorating security situation - 6.5%, taking work as an employee 6.5%, an overseas trip 4.8%, personal problems 3.2%, boredom 3.2%, lack of management know-how 1.6%, and lack of time 1.6%.
55% of the businesses surviving until the survey date had been in existence for three or more years, while 76% of those that closed down had been operating for up to three years.
Published by Globes [online] - www.globes.co.il - on December 8, 2003