Opinion; Ron Burgess
In a complete reversal from the last several years, and especially the Covid years when small businesses went out of business in a wholesale way, they are up in a huge way now. The Census Bureau reported that more than 4.4 million new businesses were created during 2020. This is the largest group of new businesses ever. That is a 51.% increase from the period 2010 to 2019.
Half a million start ups were recorded in January 2021 alone.
Salesforce, the huge CRM (Customer Relationship Management) company, surveyed new businesses to find out why so many got the entrepreneurial bug. They reported six trends :
• 57% reported a nudge from Covid due to lost jobs, working from home or reduced hours. They became creative and found ways to supplement or replace their income by looking for a side hustle that worked in their new reality.
• More than half reported being their own boss was a huge motivator.
• Many had already planned to start a business, and Covid just pushed them forward faster. Many found that the technology to work at home also facilitated the new start up as they realized new ways of doing things.
• Over half launched their companies with less than $10,000 in funding. Another 25%, half that number, just $5000. It doesn’t take a fortune to start a business if you have no office rent, employees, and cheap technology if you can sell a skill, or a product made by someone else.
• These new business think digital first. It is natural, because you need digital technology to pick up the tasks that employees used to do for you. But more than that many smart entrepreneurs find ways to deliver enhanced products and services using digital as their communication device, product delivery and office functions.
These reasons amazingly (or perhaps not so amazingly) very similar to the old reasons people started businesses. The news here is that so many have jumped at the same time. Naturally that was caused by Covid. While a huge percentage of small businesses are not fully open now, over 100,000 (by some estimates) have closed permanently. I suspect many of those have started new ones. If failure rates stay the same as the last two decades, over 80% of these will fail, but that still leaves 220,000 that may make it. A potentially interesting outcome may be that despite the millions of businesses that we lost; we may have even more gained.
Disruption in the natural economy is a natural function. One that tends to self correct as this may have. It is too early to tell, but perhaps the old conventional way of doing business finally collapsed due to technology. Too many people refused to change, the moved too slowly, and now we may just be catching up. I’m personally not too surprised, I predicted several huge changes that would happen due to the internet the Inland Empire Business Journal back in 1998; from printed newspapers, to CRM, to Internet TV. Most have come to pass, perhaps this is just the mapping up. If so this will be a very good thing.
Ron Burgess is a seasoned business consultant, business writer. He has started seven successful businesses and founder the of non-profit MicroGiants, a small business edu-mentoring and advocacy group.