UNEARTHING POWER OF UNDERGROUND ECONOMY
PayPal study puts median revenue of ‘5-9’ers’ cohort at $2.5 billion
We like to think that we have an inclusive economy when it comes to entrepreneurship. But according to a new PayPal Emerging Entrepreneurship study, there are an estimated 2.5 million Canadians (nine per cent of the adult population in Canada) who are unaccounted for on the business landscape.
The online survey was conducted by Barraza & Associates on behalf of PayPal Canada and surveyed single business owners whose business was secondary to their main job.
Dubbed by PayPal as the “59’ers,” these are people who are running a side business in addition to working a full-time job. It’s a growing community of makers, creators, freelancers and service providers – half of whom started their businesses within the last three years.
Over the past 12 months alone, median revenue from these ventures hit $2.5 billion, a sizable sum that is not accounted for in most small business studies.
“Looking at the bigger picture, the notion there are these 2.5 million Canadians astounds me,” said entrepreneur Arlene Dickinson, who joined a roundtable discussion that included a diverse group of 5-9’ers.
“We always talk about 1.2 million small businesses generating eight million jobs. But here’s another (community) underneath who are also contributing to our economy in a meaningful way. That took me back because we tend to characterize business by revenue and employees versus their value to the economy.”
For Dickinson, the 5-9’ers, in fact, represent a new wave of business. “At the end of the day, this is B2I – business to individual. These people are all focused on individualizing the experiences for their customers.”
While the numbers are enlightening, it was the issues facing the 5-9’er community that took centre stage during the discussion — access to capital being one. Logistics costs standing in the way of expansion was another. But one particular statistic stood out that proved to be a key discussion point.
Women represent 66 per cent of that community, according to the study. Yet reported revenues for female 5-9’ers is 71 per cent lower than for males.
“That was the biggest surprise and disappointment for me,” Dickinson said. “I’m not surprised more women are doing it. I’m surprised at the revenue they are driving.”
Paul Parisi, president of PayPal Canada, said he was equally taken aback by those numbers, noting that they are worth further exploration. “That is possibly a concerning aspect. We need to understand if this is by choice, in that they are consciously choosing to ‘dabble’ rather than going full-blown on the business, or is it because they are facing similar issues found in the conventional workplace?”
Dickinson speculated that women tend to go into “softer” industries that are not as scalable. “It’s often a passion project.”
Attitudes also matter, she added. “On Dragons’ Den, a guy would come in and say I have $100,000 in sales and a million dollars in debt — and ask for $6 million for 50 per cent of their company. A woman would come in saying I only have $2 million in sales and no debt and ask for $50,000. I like to think that is changing now.”
Shelley Jones, founder of dignify, a Calgary-based business that sells throws and homewares from Bangladesh, said when she started her online business, “I can’t tell you how many people asked if it was franchise, or if I did parties. The assumption is that that is what you are doing if you are a woman at home and starting a side business. I don’t think anyone ever asks my male peers those questions.”
Underestimating the value of your services could also be a factor.
“Women tend to undervalue and undercharge,” said Alethea Robinson of See Girl Work, an online community for entrepreneurially minded women.
“I remember when I went to send my first invoice I nearly had a panic attack about asking for money. I didn’t have that problem with my day job. I expected to get paid. For some reason it was different.”
Parisi notes that as a first study of its kind in Canada, this disparity is part of a number of areas that are worth exploring further.
“A large portion of these 5-9’ers want to make this their full-time career. But they can’t right now because they are not generating enough revenue. There are a number of expenses they face when expanding their business, such cross-country shipping costs, cross-border fees or translation for different markets. Now that we understand more about their needs and the barriers they face, we can explore creative partnerships that can help.”
The notion there are these 2.5 million Canadians astounds me ... here’s another (group) ... also contributing to our economy in a meaningful way.