When Olly Smith was in his 20s, he set a goal: He wanted to start his own business by the time he was 40.
Fast-forward to last year: The 40-year-old Smith wasn't running a company. Instead he was working remotely as a restaurant consultant from his home in upstate New York. When his employer asked him to return to the office in July, while new cases of COVID-19 fluctuated between 50,000 and 70,000 a day in the US, Smith remembered his entrepreneurial dreams.
"My personal health was being decided by somebody else. I didn't like that," said Smith, who quit his job last summer to open the gourmet-food shop Westerlind Pantry, just one year after his target.
Smith is part of a growing cohort of people who quit their jobs during the pandemic, a trend that peaked at 4 million in April, according to the US Bureau of Labor Statistics. Last year, Americans launched 4.4 million businesses, a 24% increase from a year earlier, according to the think tank Peterson Institute for International Economics. A flurry of startups also launched during the Great Recession, such as Airbnb, Square, and Uber.
"The best time to start a business is on the heels of a recession," Scott Galloway, a professor of marketing at New York University's Stern School of Business, wrote in a recent Medium post. He added: "There are factors that make this the best time to start a business in more than a decade."
Galloway also predicted the US would see more new businesses in the second half of this year than in any six-month period in the past 30 or 40 years, he wrote on Twitter.
Changes in how we work and shop removed some startup barriers
Launching a food shop during a pandemic might sound intimidating, but Smith was surprised to find that his startup costs were relatively low.
Before the pandemic, entrepreneurs might have explored opening a brick-and-mortar storefront, but today many are launching fully online so they can work remotely and avoid the high costs of commercial real estate.
Instead of hiring a developer to build their websites, entrepreneurs can use platforms like Squarespace or set up digital stores on e-commerce sites like Shopify, Ross Buhrdorf, the CEO of the business-formation service ZenBusiness, said, calling this the increased "digitization of microbusinesses."
An increase in saving and spending helps new businesses
While many small businesses suffered financially last year, and entrepreneurs struggled to get emergency aid, money accumulated in other corners of the economy.
Personal savings — the percentage of people's income left after taxes and spending — jumped to a record 32.2% in April, according to the Bureau of Labor Statistics, and reached a total of more than $2.3 trillion last year.
"This means there are folks sitting on money who may be willing to lend to their friends and family who are starting new businesses," said Deepak Hegde, an associate professor at NYU's Stern School of Business. "It also means there are consumers who create demand for these businesses."
Additionally, venture-capital investors poured a record $156.2 billion into US startups last year, according to data by PitchBook and the National Venture Capital Association. In the first quarter of this year alone, investors deployed $69 billion to companies, a 92% increase from the same period last year.
Workers are looking for jobs that fit their needs
The pandemic also forced many people, like Smith, to reexamine their careers through lenses like job security, work-life balance, and personal passion. Sixty-six percent of unemployed people in a Pew Research Center survey said they "seriously considered" changing their field of work.
This means companies are competing for talent, which gives a fighting chance to small businesses that create workplaces matching the needs of employees today.
"The pandemic caused a shift in the way people think about their lives and work," said Luke Pardue, an economist at the small-business payroll and benefits platform Gusto. "They are more concerned about having control over their work environment, the times they work, and the work they do."
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