Earnings after failed startup: what records show.
Earnings after failed startup closures vary by country, but they follow a pattern in decades of records. In the United States, people who returned to salaried work had comparable lifetime earnings. Also, staying in your own field seems to protect your pay.
Earnings after failed startup in the United States.
Gustavo Manso, a Berkeley economist, used a survey following more than 12,000 Americans since 1979. In a 2016 paper, he argued earlier research made entrepreneurship look worse than it is. Berkeley's summary said people who went back to salaried jobs had comparable lifetime earnings. It also reported that 52 per cent of ventures lasted less than two years.
What Denmark, Portugal and Norway found.
In Denmark, Kaiser and Malchow-Møller found in 2011 that self-employment was usually followed by lower hourly wages. However, the gap disappeared for people who returned to the same sector. So going back to a job after self employment in your own field looked very different.
In Portugal, former owners entered companies at higher levels and moved up faster. Meanwhile, research in Norway in 2016 found a former entrepreneur salary was higher, on average, than matched employees earned.
The harsher result from Belgium.
In Belgium, former entrepreneurs earned 27 per cent less than matched workers five years after returning. But about 60 per cent of that gap came from working fewer hours. The researchers read those hours as the owners' own choice, while 40 per cent came from lower wage rates.
Check your earnings after failed startup risk tonight.
Write whether your business idea sits in the field you already work in, or in a new one.
If it is a new field, list what you would return to and how long that road might be.
From the book.
Think about what that means for you specifically. If your business idea sits in the field you already work in, the Danish and Portuguese findings suggest that your experience doesn't evaporate when the business does, and that the road back into paid work may be shorter than you fear. If your idea takes you into a field you know nothing about, the road back is likely to be longer, because the evidence points to switching sectors, not to failing, as the costly part. Neither of those is a reason to start or not to start. Both are things you can know about your own situation tonight. So check yours.
I Want to Start a Business but I'm a Coward, chapter 6: What happened to the people it happened to
Questions about earnings after failed startup.
How do earnings after failed startup closures compare with staying employed?
It depends on the country. In the US, people returning to salaried jobs had comparable lifetime earnings.
Why does staying in your own field matter?
Because the evidence points to switching sectors, not failing, as the costly part.
Did former owners in Belgium earn less?
Yes, 27 per cent less after five years, though about 60 per cent of that came from working fewer hours.
Read the whole chapter.
This lesson covers one section of chapter 6, “What happened to the people it happened to”. The book goes further, with the full evidence, the stories and every exercise.
Lessons in this chapter.
- 01 Worst case scenario business failure: the real shape.
- 02 Earnings after failed startup: what records show.
- 03 Hidden costs of startup failure: what it cost me.
- 04 Starting again after a failed business: two stories.
- 05 Grief after business failure: the harder evidence.
- 06 Talk to someone who closed a business: the interview.
- 07 Startup failure post mortems: when nobody will talk.