The barriers to starting a business
The barriers to starting a business
We face so many hurdles and structural limitations.
I never saw myself as a small business owner.
I worked for a small business in high school, a local café. The owners lived and breathed their business. It seemed all-encompassing and exhausting. I also spent several years processing loans at a community bank. My ears were always open. I heard small business owners come in, talking to loan officers about how they were behind on payments. I saw the financial statements: the numbers went up and down and sometimes barely scraped by.
But that was twenty years ago. Today, there's an entire economy of one-person businesses. People can start up with almost no investment, and those who do seek outside funding have options.
Or do they? Although people might be frustrated by an employer and yearn to start their own business, there are still barriers. Barriers that shouldn't exist. I believe self-employment is less risky than a full-time job, but it's still inaccessible for many people. And these barriers prevent people from pursuing their dreams and escaping the 9–5 world.
Access to health insurance
Losing health insurance is a prevalent fear among workers. We have a fucked-up system in the U.S. where one's access to healthcare is tied to employment. Not only does it keep people from pursuing self-employment (since they'd have to source their own health insurance), but according to a poll from Gallup, one in six workers with employer-provided health insurance stays in that job out of fear of losing health benefits.
My husband has health insurance through his employer. If he didn't, self-employment might not be possible. I priced out a healthcare plan for our family through the Freelancers Union, and it was an astronomical amount. Other solopreneurs I know have been in similar situations. A study found that one in four self-employed people in the U.S. don't have health insurance, noting that self-employed workers are 10% of the U.S. labor force — and "projected to grow over the next decade." The research concluded: "Given the rise in self-employment, it is imperative to identify ways to improve health care insurance access for self-employed working-age U.S. adults."
Yet, no known solutions are on the horizon. Because the U.S. is determined to view healthcare as a privilege, not a right.
Lack of employment protections
Freelancing and contract labor, specifically, are a unique form of self-employment. They're different from the owners of the café I worked at in high school. As a freelancer, I typically supplement an internal team. My clients don't need a full-time employee or need some specialized expertise.
The U.S. Department of Labor recognizes that this is a form of employment, versus providing a service (like a lawyer or lawn care provider who are solo operators). The DOL and the Internal Revenue Service have laws to determine whether someone is an independent contractor versus an employee, so companies can't skirt employment laws and taxes by intentionally misclassifying workers.
If an employee completes work, they're paid for that work, based on the number of hours or a set salary. Contract workers don't have the same protections. I've been ghosted once, a client refused to pay once, and I've been paid weeks late twice. If I were an employee and weren't paid for work completed, I would have recourse with the DOL. The Secretary of Labor can bring suit for back wages and an equal amount in damages.
Contract workers are, by and large, on their own to recover unpaid invoices. In the case of my client who ghosted, the invoice was $400. It'd probably have cost me $150 (or more) to have an attorney send a demand letter — with no guarantees that I would be paid. I joined the National Writers Union because they have a Grievance and Contract Help department.
But the law is starting to catch up. New York City passed a Freelance Isn't Free Act in 2016, which protects a freelancer's right to be paid on time. In 2023, Illinois (where I live) passed a similar statewide law: the Freelance Workers Protection Act. Under both laws, a freelancer is entitled to the amount of the invoice, plus an equal amount in damages (so double the original invoice), for invoices paid late — the same as an employee not paid on time.
There are 76 million freelancers in the U.S. Similar laws have been proposed in other states, so I hope this movement continues to gain steam.
Lack of access to funding
Sometimes, people have bigger dreams of starting a business — the kind of dreams that take a little money to get started. There are options available, such as small business loans and venture capital funding. But there are staggering disparities among the people who actually receive money.
In the U.S., the Small Business Administration (SBA) provides loans through banks and credit unions. According to the SBA's 2023 fiscal year data, more than 70% of loans went to male-owned businesses. The SBA's flagship product is a 7(a) loan, which allows loans up to $5 million and has a capped interest rate. Of the 7(a) loans distributed in 2023, only about 16% of total dollars went to women-owned businesses.
It gets worse. Female-founded companies receive only 2% of all venture capital funding. Olivia Dreizen Howell, CEO of Fresh Starts Registry, says, "What's happening now in the VC world is going to impact generations and generations of women in business." When she co-founded her business, she sold her house and moved back in with her parents to fund her life and her company: that was the capital she could afford.
She adds:
It's disheartening that so many women want to pursue entrepreneurship and simply cannot because they need a steady income or health insurance. There are so many beautiful ideas held by women entrepreneurs that will never see the light of day because female founders aren't getting funded.
Howell points out that these barriers impact mothers, in particular. "Mothers who pursue entrepreneurship often cannot take the same risk a man or father could," she says. "They aren't allowed the same risk-taking abilities as their male counterparts in our culture."
Howell is very vocal about the lack of funding for women. She thinks it's something we should be talking about daily in the business world. "The fact that the numbers are so staggeringly disparate is alarming. If men were only receiving 2% of the capital, there'd be hell to pay, that's for sure."
If you love this newsletter and look forward to reading it every week, please consider forwarding it to a friend. You can also subscribe and access extra articles every month.
Have a work story you'd like to share? Please reach out using this form. I can retell your story while protecting your identity, share a guest post, or conduct an interview.