Business Startups Surging, Probably Not Why You Think

As regular readers know, I like to write about what interests me most each week, especially in the Blog. Today, we’ll look at business start-ups that are surging, but probably not for the reasons you might think.

Americans are starting up new businesses at an unprecedented rate this year – and many of them from home. According to the latest figures released by the US Census Bureau last month, more than 492,000 start-up applications were filed in January alone, an increase of nearly 75% from the same period last year – and the pace reportedly continued in February.

At that rate, we could see nearly 6 million new businesses started in 2021, a record, up from 4.3 million applications in 2020 and 3.5 million in 2019, an increase of about 23% year over year. The stats are from tax forms filed with the IRS.

So, who is starting all these new businesses? The answer may surprise you… or maybe not. Most of these start-ups involve “e-commerce,” retail, financial and health services, which can be run from home. Many factors are driving this trend, but perhaps the biggest is that so many people have recently been working from home – or more significant – are unemployed.

In short, more Americans are starting new businesses because they are out of a job and have no other choice but to generate an income that can support their families. The jobless not only need the extra income, but they also have more time, freedom, and flexibility to become entrepreneurs.

Another factor: Employees suddenly having to work from home have more time on their hands to try freelancing. Unlike the Great Recession of 2008-09, banks weren’t squeezed and didn’t stop lending. And the values of homes rose, giving entrepreneurs a key asset to borrow against to fund their ventures.

The retail sector is seeing the biggest jump in startups. Retail applications in 2020 ran more than 50% higher than a year earlier. The biggest growth came from retailers selling goods online or for direct delivery rather than in stores – perhaps not surprising given the changes the pandemic has wrought. It’s these shifts that open up the possibilities for new businesses.

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