The year 2020 was a year of unprecedented circumstances for all — especially for small business owners. You might have held back on kickstarting your entrepreneurial journey last year. Is 2021 the year for you to finally take the dive?
Here are some statistics on starting a business you should consider.
Is 2021 the Year to Start a Business? An Overview of Small Business Applications
Startups are key pillars of the U.S. economy. Each year, American entrepreneurs launch businesses that drive job growth, innovation, and efficiency. We analyzed small business applications and other market indicators over the past year and discovered that the pandemic has steered more Americans towards entrepreneurship.
The year 2020 witnessed a surge in new business activity with nearly 4.5 million new business applications recorded — a whopping 24.3 percent increase from 2019. This trend was also reflected in Kauffman Foundation's Annual Report on Early-Stage Entrepreneurship, which shows the rate of entrepreneurship at a record high of 0.38 percent, which means that out of every 100,000 Americans, 380 were starting a business.
What's exciting is that this trend hasn’t slowed down. According to the U.S. Census Bureau, 480,440 and 513,483 new business applications were filed in May and June 2021 — a giant 57 percent jump over 2020.
These are definitely positive figures. Let’s take a deeper look into high-growth markets, examine a few trends impacting small businesses and understand what this implies for anyone looking to start a business this year.
Booming Sectors: Which Are the High-Growth Industries?
Starting a business can be daunting and complex, and the pandemic created even more unique circumstances. However, that doesn't mean it's impossible to enter the market. Here're the industries where business is booming — it could help identify lucrative markets for your startup.
Yelp's Economic Average data reports 516,786 new businesses entered the market in the last year. The spike was across all business sectors, especially those related to home services, restaurants and food, automotive, fitness, professional services and retail.
The U.S. Department of Labor predicts forestry, individual and family services, home health services and professional services (technical or scientific consulting) as the fastest-growing markets between 2019–2029.
So what does this mean?
These industries can be a good place to start your business journey, due to their high growth and demand. For example, as more Americans are spending time at home, there's an increased need for delivery-based business models and home repair services (electricians, carpet installation, home appliance repair, junk removal, etc.). The high growth in home services and professional services also means it's the right time to enter the market as a real estate agent or architect.
Professional services are also in demand — you could look into consulting or freelancing in your field of expertise (taxes, web design, app development, marketing, etc.).
Top 5 States to Start a Business in 2021
Deciding the location of your business continues to be important, despite the rise of remote work and virtual interactions. Location impacts your business's ability to be found by customers, the amount of competition it faces, growth plans and laws and regulations it could be subjected to. Let's look at states that recorded the highest number of new business filings — it's a good indicator of places that have "business-friendly" systems.
A year-on-year comparison of new business activity between February 2020 and February 2021 showed startup activity increasing in 49 states. We'd like to highlight Mississippi and Louisiana, which witnessed a 103 percent and 88.2 percent increase in new business applications, making them prime areas to watch out for in 2021.
State Processing Times for New Business Applications
How has this flood of new business filings impacted processing times? Will it take a day or a week before you can officially kick off your venture?
While on average, processing times across states remain between 5–12 business days, certain states are experiencing slight delays for filings sent in via mail. Florida and California have a five and seven-day backlog in processing new business applications sent in by mail. Arizona has a backlog of 10 working days; Nevada's processing time for mail-in applications is at 12 days, though it processes online applications within the same day.
Therefore, we highly recommend filing your paperwork online so there's no delay in getting your business started.
Trends Impacting Small Businesses
Business Is Virtual
One of the main shifts in the small business landscape is the acceptance that remote work is the new normal. Forty-seven percent of small business owners are interacting with clients, partners and vendors virtually. Instances of fitness instructors offering online sessions or jewelers showcasing their products via Zoom appointments are here to stay. An increasing number of owners are adopting digitalization using these key small business tools.
This, coupled with the rise in digital talent platforms like Upwork, Fiverr and Catalant, has made it easier for entrepreneurs to start and grow their business rapidly.
Decreased Barriers to Entry
The World Bank rates the U.S. as 91.6 out of 100 for the ease of starting a business, and thanks to technology and digitalization, it's gotten even easier to launch your business. It's no longer necessary to have a brick-and-mortar façade or a huge saving account to enter the small business market. According to the Small Business Administration, the cost of starting a home-based business is $2,000 to $5,000. With many businesses still running deep discounts on inventory holdovers from last year, you might even get any material required for your startup at a steal.
Customers Supporting Small Businesses
Support for small, local businesses is at an all-time high. With limited means of traveling (though it's opening up), people are buying from people they know. A Salesforce Consumer Study revealed that 56 percent of customers are spending more on small businesses and 67 percent are committed to spending even more to support them post-pandemic.
Overall, there's a sense of optimism and buoyant energy in the small business landscape. Even though the pandemic isn't over, economic indicators like increased new business filings, decreased barriers to entry, high consumer support and digitalization make 2021 an exciting time to start a business.
If you decide that you're ready to don the entrepreneurial hat this year, Incfile has all the resources you'd need to start a thriving company. Our Start a Business Guide will walk you through all the steps you need to take to be on your way to forming a business in 2021.
Swara Ahluwalia is a freelance content writer with experience in the technical, B2B and SaaS domain. She also has curated content for various lifestyle brands. In her downtime, you will most likely find Swara training for her next marathon or spending time with her two daughters.