Sramana: How many customers do you have that are using your services?
Deborah Sweeney: We started in 1999 and have just under 500,000 customers who have used our services or incorporated with us. We have ongoing communications with 250,000 of them via newsletters, service offerings, and other communications to ensure renewed services year after year.
Sramana: What is the profile of your customer base ? How big are they ?
Deborah Sweeney: About 60% of our customers are startup businesses, which have been in existence between zero and six months and have two employees. It’s very common for a business owner who hires her first employee or two to realize that she needs to protect herself or her assets, and so she decides to incorporate at the recommendation of her accountant.
Sramana: I have done a lot of research on what I call infant entrepreneur mortality. In the United States, 600,000 companies go out of business annually. What do you see in your customer base?
Deborah Sweeney: State reports indicate there are between 2 and 2.2 million businesses that incorporate or form LLCs every year. It is difficult to assess, but if 600,000 are going out of business every year, then it would come to the point of one third going out of business. Some LLC’s may not be incorporated for business purposes; it could be someone purchasing his home and protecting it in that fashion.
With our customers it is very consistent to see a lot of dissolutions. People start businesses and think they are going to grow, but they don’t wait six months to a year to get it off the ground. We see a lot of dissolutions relative to that. Those people are more interested in protecting their trademarks or intellectual property and their lawyers or accountants told them that by incorporating they would have that protection. However, their partners don’t contribute the work or the equity that leads to success and they ultimately fail. There are a lot of people who are out of jobs and are not core entrepreneurs. They don’t know what it takes to be successful outside the corporate world. They take this as a trial and end up finding a job or they find it’s more difficult than they thought and they can’t make the commitment..
Sramana: Over the past 5 to 6 years have you seen a large uptick in Internet businesses?
Deborah Sweeney: We have seen upticks in Internet businesses and consulting businesses. I believe economic necessity is one reason; people are out of jobs. The Internet is popular because it’s easy to build a brand presence on the Internet. You don’t need to have a physical location, and it’s a lower barrier to entry. There’s increased familiarity with the Internet in general. The ease of buying a domain name and getting a web site set up facilitates this type of business. Oftentimes consulting and Internet businesses overlap. Someone sets up a domain name for her consulting business and then begins to pick up customers in other areas, and her business gradually evolves to the Internet.
Sramana: What percentage of businesses that you are dealing with are Internet businesses and consulting businesses?
Deborah Sweeney: Not all of our clients define themselves the same way. It is very difficult from a data assessment standpoint to provide an exact number. Our estimate is that 40% of the businesses that we form fall into those categories. That is a huge percentage of what we form on a regular basis. People form LLC’s for properties, and real estate agents and brokers form them for clients who are purchasing properties. There seems to be an uptick as properties become less expensive and people invest in them.