Many Americans dream of quitting their job and becoming their own boss. Whether the goal is to live the laptop lifestyle or turn a creative pursuit into a full-time business, entrepreneurship offers flexibility and excitement, but it is not without risks. While the potential upside of starting a successful business is appealing, it often takes years for a new firm to become profitable, and many entrepreneurs do not earn as much as they did in their previous jobs. According to data from the U.S. Census Bureau, the median annual income for full-time entrepreneurs is $50,000, which is the same as the median income for all full-time workers.
At a more granular level, full-time entrepreneurs (defined here as self-employed workers in their own incorporated or unincorporated businesses) tend to report higher incomes than full-time employees at for-profit businesses. However, the typical full-time entrepreneur makes less than both full-time employees of non-profit organizations and full-time government workers. Interestingly, Census data shows that federal employees enjoy the highest median income at $65,000 per year, followed by non-profit employees at just under $53,000.
While nationally the median income for entrepreneurs is the same as the median income for all workers, there are big differences at the state and city level. At the high end, entrepreneurs in Rhode Island and North Dakota have median incomes that are 28.3 and 20.0 percent higher, respectively, than the median income of all workers. On the low end, entrepreneurs in Vermont and Delaware have median incomes that are 18.8 and 16.7 percent lower, respectively, than that of all workers.
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To determine the metropolitan areas with the most successful entrepreneurs, researchers at ZenBusiness analyzed data from the U.S Census Bureau. The researchers ranked metros according to the income premium for entrepreneurs, which is defined as the percentage difference between the median income for full-time entrepreneurs and the median income for all full-time workers.
To improve relevance, only metropolitan areas with at least 100,000 people were included in the analysis. Additionally, metro areas were grouped into the following cohorts based on population size:
- Small metros: 100,000-350,000
- Midsize metros: 350,000-1,000,000
- Large metros: more than 1,000,000
Here are the top 15 small, midsize, and large metropolitan areas with the most successful entrepreneurs.
Large Metros With the Most Successful Entrepreneurs
15. Milwaukee-Waukesha-West Allis, WI
- Income premium for entrepreneurs: 7.8%
- Median income for full-time entrepreneurs: $55,000
- Median income for all full-time workers: $51,000
- Percentage of workers that are entrepreneurs: 6.8%
14. San Diego-Carlsbad, CA
- Income premium for entrepreneurs: 8.0%
- Median income for full-time entrepreneurs: $57,000
- Median income for all full-time workers: $52,800
- Percentage of workers that are entrepreneurs: 11.0%
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13. Chicago-Naperville-Elgin, IL-IN-WI
- Income premium for entrepreneurs: 9.1%
- Median income for full-time entrepreneurs: $60,000
- Median income for all full-time workers: $55,000
- Percentage of workers that are entrepreneurs: 8.6%
12. Portland-Vancouver-Hillsboro, OR-WA
- Income premium for entrepreneurs: 9.1%
- Median income for full-time entrepreneurs: $60,000
- Median income for all full-time workers: $55,000
- Percentage of workers that are entrepreneurs: 11.4%
11. Cincinnati, OH-KY-IN
- Income premium for entrepreneurs: 10.0%
- Median income for full-time entrepreneurs: $55,000
- Median income for all full-time workers: $50,000
- Percentage of workers that are entrepreneurs: 7.0%
10. Austin-Round Rock, TX
- Income premium for entrepreneurs: 11.1%
- Median income for full-time entrepreneurs: $60,000
- Median income for all full-time workers: $54,000
- Percentage of workers that are entrepreneurs: 10.7%
9. Birmingham-Hoover, AL
- Income premium for entrepreneurs: 12.0%
- Median income for full-time entrepreneurs: $56,000
- Median income for all full-time workers: $50,000
- Percentage of workers that are entrepreneurs: 7.9%
8. Providence-Warwick, RI-MA
- Income premium for entrepreneurs: 13.2%
- Median income for full-time entrepreneurs: $60,000
- Median income for all full-time workers: $53,000
- Percentage of workers that are entrepreneurs: 7.6%
7. Orlando-Kissimmee-Sanford, FL
- Income premium for entrepreneurs: 13.7%
- Median income for full-time entrepreneurs: $45,500
- Median income for all full-time workers: $40,030
- Percentage of workers that are entrepreneurs: 9.6%
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6. Oklahoma City, OK
- Income premium for entrepreneurs: 14.3%
- Median income for full-time entrepreneurs: $48,000
- Median income for all full-time workers: $42,000
- Percentage of workers that are entrepreneurs: 9.8%
5. San Antonio-New Braunfels, TX
- Income premium for entrepreneurs: 14.3%
- Median income for full-time entrepreneurs: $48,000
- Median income for all full-time workers: $42,000
- Percentage of workers that are entrepreneurs: 8.6%
4. Memphis, TN-MS-AR
- Income premium for entrepreneurs: 16.3%
- Median income for full-time entrepreneurs: $50,000
- Median income for all full-time workers: $43,000
- Percentage of workers that are entrepreneurs: 6.7%
3. Las Vegas-Henderson-Paradise, NV
- Income premium for entrepreneurs: 19.0%
- Median income for full-time entrepreneurs: $50,000
- Median income for all full-time workers: $42,000
- Percentage of workers that are entrepreneurs: 9.1%
2. Denver-Aurora-Lakewood, CO
- Income premium for entrepreneurs: 20.0%
- Median income for full-time entrepreneurs: $66,000
- Median income for all full-time workers: $55,000
- Percentage of workers that are entrepreneurs: 10.2%
1. Salt Lake City, UT
- Income premium for entrepreneurs: 24.5%
- Median income for full-time entrepreneurs: $60,000
- Median income for all full-time workers: $48,200
- Percentage of workers that are entrepreneurs: 8.9%
Methodology & Detailed Findings
Data on the income premium for entrepreneurs, median income for full-time entrepreneurs, median income for all full-time workers, and the percentage of workers that are entrepreneurs is from the 2018 American Community Survey Public Use Microdata Sample (ACS PUMS) dataset. The income premium for entrepreneurs was calculated as the percentage difference between the median income for full-time entrepreneurs and that of all full-time workers.
Only metropolitan areas with at least 100,000 people were included in the analysis. Additionally, metro areas were grouped into the following cohorts based on population size:
- Small metros: 100,000-350,000
- Midsize metros: 350,000-1,000,000
- Large metros: more than 1,000,000
Nationally, there are over 15 million entrepreneurs who account for nearly 10 percent of workers. The metropolitan areas with the most successful entrepreneurs tend to have a lower percentage of workers that are entrepreneurs as well as a higher median income for full-time entrepreneurs when compared to the national level. Nationally, the median income for both full-time entrepreneurs and all full-time workers is $50,000 annually. Among metros with the most successful entrepreneurs, the average median entrepreneur income is over $55,000 while the average median income for all workers is less than $49,000.
At the national level, not only does median income differ across classes of workers, but trends in median income differ as well. Employees of non-profit organizations and for-profit businesses experienced the largest increases in inflation-adjusted median income from 2012 to 2018, at 7.3 percent and 5.0 percent, respectively. The real median incomes of other classes of workers, including entrepreneurs and government employees showed no statistically significant change.
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When it comes to compliance, costs, and other factors, these are popular states for forming an LLC.
