Overworked and feeling the pain of inflation, Americans are turning to a time-honored capitalist tradition: starting their own businesses.
People in the United States launched about 5 million companies last year, according to a new survey of 1,600 entrepreneurs from Gusto, an HR and payroll platform. Although down slightly from 2021, Justow said, since the pandemic hit three years ago, Americans have created 15 million new businesses, compared to 10 million in the three years before the health crisis. Early in the pandemic, many people started new businesses out of necessity Amidst a surge in layoffs and business closures.
“I couldn’t even take a lunch break.”
Among those new business owners is Kiana Smith, 28, of Greensboro, North Carolina, who started a mobile dog grooming business last year after working at a pet salon.
The salon would “overbook me, so I’d have to answer the phone with a dog on the counter,” recalls Smith. “I wanted to give the dog that undivided attention, but I couldn’t even give myself the time and attention—I couldn’t even take a lunch break.”
Kiana Smith
After saving some money, Smith said she jumped in last year and started Pretty Dog Clean, buying a trailer and turning it into a mobile dog grooming station. She now drives to clients’ homes for appointments, and said she makes more money than she used to at the salon while also having more flexibility in her schedule to pick up her kids, ages 6 and 8, from school.
Kiana Smith
“For the most part, the pandemic has made this a good business because people would rather stay home,” she told CBS MoneyWatch. “I get bookings every day, people call every day, and I’m like, ‘It works.'”
Why start a business
Justow’s research has shown one clear shift in the influx of new companies since the pandemic: more women. About 47% of new businesses last year were started by women, compared to 29% in 2019, before the pandemic hit. People of color are also starting more businesses — 27% last year compared to 23% in 2019.
“We’ve seen women and people of color lead this initiative since the pandemic,” said Gusto economist Luke Pardue. Women are “motivated by resilience”, in part because school disruptions continue to be an issue for families.
Pardew noted that the desire to generate extra income amid the highest inflation rate in 40 years has also led more people to form companies, including a side business. Justow found that about 41% of people who started a business last year said they were motivated by a desire for financial stability or a desire to supplement their family’s income, compared to 24% the year before.
About half of the people who set up new businesses last year worked full time in their new gigs, indicating that 2.5 million people have already been pulled from the nation’s broader pool of employment. Pardo noted that because many of these new firms are hiring, it increases competition for workers.
boost the economy
Among them are Zero Cho and Alexander Lee, who met while working on the trading app Robinhood and started their new business, called Iago, last year. Inspired by their own experiences learning languages through immersion — like watching movies and TV shows — they created a Chrome extension to learn Japanese via Netflix, YouTube, or Disney+ shows.
“The job market was tough,” Zhou noted, but added that people were interested in their project and were able to hire contractors.
The couple is currently working to raise additional cash for their business, but have noticed that the Silicon Valley bank collapse earlier this month has made the climate more conservative. They said the company plans to expand into more languages, such as Korean, which has grown in popularity thanks to K-pop and K-Drams.
Pardo said the trend toward new business creation could bode well for the economy in the long term.
“It’s an incredibly encouraging trend to see this renewal of entrepreneurship in the economy,” he noted. “They are innovating, and thus it will raise our standard of living.”
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