While the economic downturn has caused substantial hardships for many people, one unexpected trend has emerged from the crisis – a rise in the number of entrepreneurs in the U.S. The trend is a pronounced departure from previous economic downturns, when small business formation declined or grew only slightly.
The report states that there were more than 1.5 million new-business applications in the third quarter of 2020, nearly twice as many applications as the same period in 2019. While many are single-person companies or part-time businesses, the number of businesses with the possibility of hiring employees, called high-propensity-business applications, rose by more than 50 percent over 2019 numbers.
Reversing a Decades-Long Slump
The New York Times reports that the rise in entrepreneurs reverses a decades-long slump in the formation of new business in the U.S. The newspaper cites a report from the Peterson Institute for International Economics (PIIE) that found that the number of business startups grew by 24 percent last year, from 3.5 million in 2019 to 4.4 million in 2020.
The PIIE offers three possible hypotheses to explain the jump in entrepreneurship. The first is customer preferences have changed as a result of COVID-19, creating opportunities for new businesses. Another possible cause is businesses emerge in economies with administrative processes that support business development. According to PIIE, the U.S. has one of the fastest processes in the world.
A third possible reason is the economic downturn and the massive loss of jobs resulting from it left some people with no other choice but to form their own companies, referred to as entrepreneurship by necessity.
Many of the new businesses are in the retail and warehousing sectors, with an increase in healthcare startups as well.
A Glimmer of Good News
Survival rates for these new businesses is uncertain. The PIIE report states, “Tough times in doing business during a likely protracted COVID-19 recovery will dampen survival rates among startups. However, some of the entrepreneurship by necessity in the past is now absorbed by the gig economy (working for Lyft, DoorDash, and others). These jobs will remain after COVID-19 too, as vaccinations will increase demand for such services. And the changing nature of some sectors suggests that new firms may become market leaders quickly.”
Time will tell if the new rise in entrepreneurship will result in prosperous and long-term companies that provide employment opportunities for others. Yet it’s a hopeful sign and could signify a lasting change in the business environment.
To quote the McKinsey & Company report, “We’ll take good news where we can get it, and the positive trend in entrepreneurship could bode well for job growth and economic activity once recovery takes hold.”
About Miller’s Landing, Denver’s Newest Mixed-Use Development
Miller’s Landing is the Denver area’s best place to locate a business, from new entrepreneurs to global corporations. Miller’s Landing is a new 65-acre multi-use development in Castle Rock, CO. We’re creating a dynamic development that includes a pedestrian-friendly town center complete with prime locations for retail, restaurants and entertainment venues supported by attractive multifamily housing options and modern office spaces.
Unlike other developments, Miller’s Landing offers large swaths of open spaces with stunning views of the Colorado Front Range. Miller’s Landing also has easy access to downtown and outstanding outdoor recreation opportunities via walking and bicycling paths.
The unique mix of business, entertainment, recreation and housing options at Miller’s Landing make it the top spot to locate a corporate headquarters, a satellite office or a new business in the Denver area.
About Castle Rock, Colorado
Castle Rock is a popular and growing community in the south Denver metropolitan area. Located on the I-25 corridor, it offers small-town charm, close proximity to Denver to the north and Colorado Springs to the south, access to good jobs, an abundance of outdoor recreation options and easy access to the mountains.
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Miller’s Landing is the Denver area’s most exciting urban mixed-use commercial development. From dynamic career opportunities to entertainment, community gatherings and individual adventures, Miller’s Landing is an exciting place to live, start your business, explore the future and make lasting memories. Learn more.