An Overview of the Kauffman Firm Survey: Results from the 2004-2007 Data

Abstract

The Kauffman Firm Survey (KFS) dataset provides researchers with a unique opportunity to study a panel of new businesses from startup to sustainability, with longitudinal data centering on topics such as how businesses are financed; the products, services, and innovations these businesses possess and develop in their early years of existence; and the characteristics of those who own and operate them. The current data provide an understanding of how businesses are organized and operate in their first four years of existence (2004 through 2007) and provide some indicators of survival and growth. Other measures describe the characteristics of the panel, such as the extent to which these businesses are involved in innovative activities. A series of eleven tables give a broad overview of the business and owner characteristics and firm survival over the period, as well as some new information available in the third follow-up survey. Highlights include: External debt markets remain critically important for most new firms; Only about 12 percent of firms submitted new external credit applications for debt financing in 2007; Less than 10 percent of firms owned by African Americans applied for new credit in 2007, compared with nearly 13 percent of firms owned by non-Hispanic whites; About 90 percent of firms that began operations in 2004 survived through 2005, while about 80 percent survived through 2006 and 73.4 percent through 2007. Most of the remaining firms closed either permanently or temporarily over the period, while a small number, 3.5 percent, either merged with or were sold to another business; Surviving firms with employees, which are now three years old, increased average employment from 4.6 employees in 2004 to 6.7 employees in 2007; By 2007, about 40 percent of firms had revenues greater than $100,000, compared with just 17 percent in 2004; About 60 percent of surviving firms posted profits in 2007, compared with about 40 percent posting losses; Young firms are serving local and international markets; More than a quarter of firms sold at least some of their goods or services on the Internet. Nearly a quarter of those firms had Internet sales that were more than half of their total sales, while about a third of them said Internet sales were less than 5 percent of their total sales; About 60 percent of firms felt that they had a comparative advantage in the products or services that they offered.