Gender, Age, and Small Business Financial Outcomes

Abstract

The small business sector makes substantial contributions to overall US economic growth and dynamism. That dynamism is driven by the people who start businesses and grow them, including women who now comprise 36 percent of business owners, up from just 4.6 percent in 1972, and the business owners aged 35-54 who start and own the majority of firms. The JPMorgan Chase Institute analyzed differences in small business financial performance by owner age and gender in order to provide insight into small business outcomes including survival, cash liquidity, revenues, and revenue growth. The report leverages high-frequency, de-identified financial data from a sample of 1.3 million small operating businesses that use Chase Business Banking deposit accounts. We analyzed the 3.1 billion transactions associated with these accounts with a specific focus on gender and age as they relate to prevalence, firm size, cash flow, growth, longevity, and other factors. Our analysis uncovers four key findings illustrating how small business financial performance varies by owner gender and age. First, we observe that young and female small business owners are well-represented among firms that grow organically, but underrepresented among firms with external financing. Second, firms with founders 55 and older are the most likely to survive but are the least likely to have employees. A typical firm founded by a 30-year-old has an 11.1 percent predicted probability of exiting after its first year, whereas one founded by a 60-year-old has an 8.2 percent probability of doing so. Third, female-owned firms start with revenue levels 34 percent lower than male-owned firms and have slower revenue growth. The median first-year revenue is about $50,000 for female-owned small businesses, while male-owned small businesses generate $75,000 in first-year revenue. Fourth, first-year revenues by owner age and gender vary by metropolitan area. New female-owned businesses have 46 percent of the revenues of new male-owned businesses in San Antonio, but 85 percent of the revenues of male-owned businesses in Miami. Taken together, our findings indicate that gender and age differences among small business owners result in substantially different trajectories.

JEL Classification: L25, M13, J14, J16