Applications to start new U.S. businesses leaped in January, despite rising COVID-19 cases. Commerce Department data from last week indicated that new business applications surged 42.6 percent in the first month of the year, reaching a seasonally adjusted 492,133. In 2020, there were 4.3 million applications for new businesses filed with the Census Bureau, versus 3.5 million in 2019, an increase of about 23 percent year on year. The stats are from tax forms filed with the IRS.
So what gives? If things are so bad for SMBs, why are so many new players rushing onto the field?
Because according to reports, even in unusual and extreme times, founders are following the opportunities where they have sprung up: eCommerce, retail, financial and health services. They include areas where there is a lot of demand at present, and which can be run remotely. Moreover, the uptick in jobless numbers has a tendency to push the trend, as consumers suddenly without employers are increasingly deciding to work for themselves.
“Those who have the resources to be online with a high-speed internet connection, as well as some digital literacy, were able to take advantage,” said Maura Shenker, director of Temple University’s Small Business Development Center. “Especially now, service-based businesses like bookkeeping and other services that can be done online without bringing people into your home have been popular.”
Popular, but not always easy, according to entrepreneurs like Jennifer Kirby, owner of Piggyback Treats Company. Kirby makes sustainable pet food products out of her home. As she told reporters, she has essentially sacrificed her living room and kitchen to her business, and exists with basically “no personal space.”
But easy or not, enjoyable or not, business owners and entrepreneurs are feeling better about their futures in a post-pandemic world. While things were bleak at the start of the pandemic, attitudes have improved. In June, less than half of SMBs surveyed by PYMNTS said they would survive into summer 2022 — and that number was up to 54 percent by the end of the year. Interestingly, small business formation is at a multi-year high, as estimated by the Census Bureau.
And those businesses, according to PYMNTS data, will have to be ready to return fully digital, as 67 percent of Main Street SMBs expect that their firms will be either “much more” or “somewhat” more reliant on eCommerce than they were before. By comparison only, 5 percent expect to be more reliant on brick-and-mortar sales. And, of course, PYMNTS also observed that while confidence is increasing, it is not universal — 55 percent are “not at all” or only “somewhat” sure they would be able to remain open.