The pandemic-fueled business surge is being led by entrepreneurs; 5.4 million new businesses were formed in 2021, according to the U.S. Census Bureau. That’s up from 4.3 million in 2020 — a trend experts have attributed to the upheaval caused by the pandemic and the rapidly evolving job market.
But there’s another factor at play, according to a new survey: A notable increase in women and Black entrepreneurs launching businesses since the start of the pandemic.
A survey of new business owners by payroll and benefits platform Gusto Inc. found the share of women who launched businesses in 2020 and 2021 notably increased compared to 2019. The survey analyzed business owners on the company’s platform.
Women accounted for about 49% of new businesses formed in 2020 and 2021, compared to 28% of new businesses in 2019.
Additionally, the share of Black entrepreneurs who launched businesses also rose from 3% in 2019 to 9% in 2021, according to Gusto’s survey.
Lower barriers to entry and turmoil in the traditional job market is making the entrepreneurial leap easier to stomach, said Gusto Economist Luke Pardue.
“A lot of workers are increasingly realizing that employment itself is risky. So, a lot of people who used to think of a 9 to 5 job as a steady rock they can depend on no longer view employment that way and instead are deciding to strike out on their own,” Pardue said. “If we continue to see this economic slowdown, we might see an additional surge in new business creation.”
About 38% of the new business owners surveyed said they quit their jobs to launch a business, whether it was to seize an opportunity or because they shut down an earlier business. Another 24% started a new business because they were concerned about their finances.
Many workers also launched their own businesses in response to concerns over childcare, something we have written about extensively, and to search for what is increasingly the holy grail for people — work-life balance and flexibility.
“This Great Resignation is really a function of workers coming to this realization that they can have a personal life that their professional life fits into not the other way around. This surge in entrepreneurship reflects that,” Pardue said. “The story is all about workers now who are seizing opportunities or striking out on their own and are no longer satisfied with that 9-to-5 professional life.”
Gusto’s survey also shed light on how the types of businesses being formed have evolved over the course of the pandemic.
While 2020 seemed to be a reaction to the economic turmoil caused by the pandemic, with 38% of new businesses being in retail, leisure and hospitality compared to 28% in professional services, 2021 has flipped the script.
About 42% of 2021’s new businesses were in professional services, and just 19% are in retail, leisure, and hospitality. Another 13% are in goods-producing businesses and 26% are in nonprofits, education, and health care.
Overall, about 48% of businesses said they had already hired additional full-time employees, with the number even higher for professional service businesses (56%).
The survey also suggests many of the new businesses are embracing work flexibility, with 35% hiring either hybrid or fully remote workers.
“These businesses are being born during the pandemic during this remote work boom and these businesses are adapting to a much greater degree to remote work,” Pardue said. “If we think about these new businesses adapting more to remote work, they are going to have a leg up on these businesses that haven’t adapted as quickly. “
The survey also found:
- About 29% of these new businesses offer benefits. Of those, 67% offer flexible work schedules and 59% offer health insurance. About 69% believe they need to offer benefits in the future.
- About 73% believe establishing a strong company culture is “extremely important” or “very important.”
- About 50% say their business has done as expected, while 38% say their business has done better than expected. Only 13% say their business has done worse than expected.
- About 22% say they have taken a side job to help cover the costs of the business they started.
- The top concerns of new business owners is inflation, at 29%, followed by an ability to dedicated time and attention to their new business, at 20%, and the labor shortage at 19%. Only 7% specified an uncertainty around Covid-19.
- Just 27% say the government does enough to help entrepreneurs and small business owners.
The survey is one of many that show the current wave of new small business owners is different from those that came before it, with research from Accenture showing a more digitally-savvy business owner turning a passion into something more. And many small business owners are taking advantage of the Small Business Administration’s 504 loan program to purchase a building and shield themselves from rising rent costs.
Meanwhile, for those looking to buy or sell a small business of their own, here are some tips from experts.
Argent Place Law supports entrepreneurs like you, because entrepreneurs will save the world. By making newer, better, and cheaper goods and services, you are creating the wealth that everyone else consumes. Then by working productively and hard to sell to people across the street and around the globe, you are forging relationships across legal and cultural boundaries, bringing everyone closer together. And Argent Place Law wants to be part of that by being your Legal Business Counselors. Let us focus (so you don’t have to) on using the law to protect your ideas and manage your business relationships. You can save the world, and we can help; click link to begin!!