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Starting a Firm? Build a Website

Mark Marich

A newly released study shows that new businesses have a higher propensity to use websites, email and to sell their products and services online—which makes absolute sense to anyone who has been to a Startup Weekend recently or even just thought about how get a business off the ground without a mountain of cash up front. The data from the study, “Casting a Wide Net: Online Activities of Small and News Businesses in the United States,” also show the logical correlation between that activity and the resulting positive impact on capitalization and longevity.

While adoption and use of online activities differed depending on the business type, owner characteristics, industry and other factors, the study showed that new businesses tended to implement e-business activities at higher rates than existing businesses did. In 2007, for example, young businesses were more likely than not to have a website, as compared to only about a quarter of U.S. businesses overall. Six percent of all U.S. businesses had online sales that year, while more than 25 percent of young businesses were selling online.

Some other findings pointed out by the study authors, Alicia Robb and E.J. Reedy, both of the Kauffman Foundation.

  • New businesses that used websites, email and online sales generally were starting bigger, with greater financial capitalization at birth (almost $55,000 more if a firm had a website, almost $46,000 more if the business owner had email and more than $25,000 more if the firm later reported online sales) and also higher levels of employment, especially for firms starting with a website.
  • Founders whose companies had websites at startup tended to be younger and more educated than were founders who did not have websites. They more frequently had previous entrepreneurial experience but less industry work experience, and were dedicating about eight more hours per week to the venture than were entrepreneurs whose companies launched without a website.
  • New businesses were much more likely to generate more than half of company sales online.
  • Among online sellers, a quarter of young businesses generated more than 50 percent of their revenues online, almost double the rate seen in the general business population.

The research compares data from the Kauffman Firm Survey, which follows 4,928 firms from their founding in 2004 through 2009, with recently released data from various government sources on businesses overall.

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