1 (888) 462-3453

How the Coronavirus Is Leading to More Small Business Creation

2020 was a tough year, but there’s optimism on the horizon. As the world deals with the pandemic, we’re seeing more entrepreneurs than ever choosing to start a new business. This seems counterintuitive, as the impact from COVID has created enormous disruption and difficult economic conditions. There are significant challenges ahead. But, even among the doom and gloom, business founders are looking to the future. They’re deciding that even with the current state of the world, the time to start that new business is now.

We’ve explored the research, interviewed entrepreneurs and tapped our years of experience and insight to understand the resilience of small business owners, how they’re adapting and what they expect as we navigate the crisis.

Pre-COVID: Small Business Success Before the Pandemic

To start, it’s helpful to understand just how important small businesses are to the U.S. economy. Pre-pandemic:


Approximate number of small businesses in the U.S.


People that were employed by small businesses: 47% of the working population.


Number of new jobs added by small businesses.

of all businesses in the U.S. were small businesses.


SBA Office of Advocacy, 2020 United States Small Business Profile

The small business sector was strong and resilient heading into the pandemic, making it able to weather many of the challenges presented.

The Impact of COVID on Entrepreneurship

There’s no denying that COVID-19 has had a significant impact on businesses. Unemployment rates are up significantly, there’s been a huge shift to working from home and businesses have had to adapt fast — more than eight in ten businesses have felt an impact from the pandemic.

Fortunately, entrepreneurs are resilient. More than two-thirds of businesses have pivoted to new revenue streams, and we’re noticing more founders starting up new businesses than before.

Small Business Owners Are Becoming More Optimistic About the Future

Business-savvy founders are looking ahead, and they're forecasting brighter days. In contrast with the earliest months of the pandemic, entrepreneurs believe the economy is turning a corner, driving new business creation. There are opportunities for business owners willing to take a risk, and that’s especially true in the U.S.

  • 82 percent of small and medium business owners in the U.S. are optimistic about the future, compared to 75 percent globally.
  • 28 percent of entrepreneurs in the U.S. are “very optimistic,” compared to 14 percent globally.
  • Many small businesses are looking to put more into operations and expansion, with over a third planning to increase investments.
  • Across all businesses, the percentage of respondents expecting economic conditions to get better rose from 25 percent in March 2020 to 51 percent in October.
Area Findings
SMBs optimistic about the future 82% in the U.S., 75% globally
SMBs very optimistic about the future 28% in the U.S., 14% globally
SMBs expecting revenues to increase 53%, up from 47% in April 2020
SMBs increasing investments 35%, up from 27% in May 2020
All businesses expecting economic conditions to improve 51% in October 2020, up from 25% in March


Visa Back to Business Study
U.S. Chamber of Commerce, July 2020 Small Business Coronavirus Impact Poll
McKinsey, COVID-19: Implications for business

This optimism is due to support from local communities, more businesses entering the market and the ability to pivot to other revenue streams.

The Local Economy Is Critical to Small Business in the Pandemic

The coronavirus means that consumers are re-evaluating who they want to buy from and where they want to spend their money. That’s translating into more money in the pockets of local businesses and increased competition.

71% of SMB owners say support from their local community has been critical to their recovery efforts.
57% of Americans say that the top reason to shop local is to support the local economy.
31% of small businesses face more competition from smaller or local companies compared to six months ago.

Small businesses with a local focus are starting to see increased success. That’s due to several factors:

  • Agility and speed of reacting to changing COVID-19-related circumstances
  • Quickly adopting new pandemic safety standards
  • Trying out new business approaches like offering services over video conference or delivery and curbside pickup for shopping
  • Enhancing their online presence so customers can easily order through a website

Communities and individuals are playing a big role too:

  • Understanding what businesses are locally owned and shopping with them
  • Seeking out alternatives to national chains and online marketplaces
  • Buying gift cards, tipping better and ordering in bulk
  • Sharing information about small businesses in online and local communities

Small Businesses Are Also Pivoting to Online and Digital as a Result of the Pandemic

Together with success in their local business environment, the pandemic has driven many entrepreneurs to pivot online. Digital approaches, ecommerce websites and diversified sales channels allow businesses to prosper while maintaining social distancing and safety.

60% of U.S. small business owners have pivoted to new approaches since the start of COVID.
67% of small business owners globally have experimented with a new approach to sales, from launching ecommerce websites to changing their point of sale systems.
65% of businesses are making more sales online.
25% of businesses are making more sales online.

These moves to digital aren’t just a survival instinct; they’re driven by how consumers want to shop. Small businesses that can combine local trust with an online presence are best positioned to resist the pressures of the pandemic and thrive afterward.

A few stats:

  • More than half of consumers have tried a new retailer during the pandemic.
  • One in five consumers have used curbside pickup for the first time.
  • Ecommerce sales are likely to increase by more than 30 percent in 2020.

Incfile has seen an increase in businesses you can run from home, “whether it be an ecommerce company, whether it be ‘sell on Amazon,’ which we are seeing [become] hugely popular, [or] consulting businesses where you are able to leverage your expertise and have Zoom calls…and be able to consult over the phone...”

Mike Nunez, Incfile

What This All Means to New Business Formations

Here at Incfile, we’ve helped bring more than 250,000 businesses to life, and our own data tells us something very interesting. Although we saw a slump in business formations in March 2020, we’ve seen more businesses than ever created since then.


Businesses we helped over the summer of 2020, with 20,000 formed just in June 2020.

2020 saw the number of business formations increase by almost 50 percent.
Entrepreneurs formed 55 percent more LLCs in 2020 than in 2019.
Of all business types, we saw the greatest increase in e-commerce businesses, up 50 percent over four months.
The states that saw the biggest increases in formation between March and May were:
Michigan, up by 100 percent
Florida, up by 92 percent
Georgia, up by 90 percent
Top 5 States for Business Formation in 2020 Number of Businesses Formed
Texas 14,961
California 13,992
Florida 9,221
Georgia 8,241
New York 7,674
Top Industries for Business Formation in 2020 Number of Businesses Formed
Ecommerce 20,455
Consultant 11,348
Real Estate 11,074
Internet/Web-Based Service 8,023

Incfile internal data

So, what does the data mean? It indicates a bright future for small businesses in the U.S., especially for those who have been able to pivot and adapt to the “new normal.” Those entrepreneurs brave enough to start a business and scrappy enough to handle the challenges won’t just survive — they’ll position themselves for success, no matter what the current situation might suggest.

Starting a Business During COVID

How Entrepreneurs Have Taken This Moment to Go After Their Dream

Morgan Ralph instagram_footer_32x32

“Starting in late March and early April, a lot of my close hospitality friends and colleagues have had to press pause on our day to day livelihood and passion to serve others. I thought to myself, ‘Although we are putting so many special moments on hold during this time, who said we can’t create new, different, yet wonderful moments together in the comfort of our own home?’

In a world that feels like it is constantly changing, we are finding ourselves at home more often and appreciating spending time with the people we care the most about. This was and still is my biggest motivation to keep Boojzey Hour alive and active.”

Kelsey Pettus instagram_footer_32x32

“My one piece of advice would be to keep on trying! It can be very frustrating at the beginning trying to navigate your new business and figure out what works for you. I started my business a little over three months ago and what started out as three to four orders per week quickly turned into creating 45+ boards per week. So just know, IT’S POSSIBLE! Reach out to local social media influencers; do a lot of giveaways in the beginning to get your name out. Trust me, it pays off! Lastly, enjoy and take pride in what you’re doing; people will notice in the end!”

Alex Tran instagram_footer_32x32

“We started Urban City Cleaners in July 2020. We already owned a nail salon but saw a 70 percent dip in business due to COVID stipulations for small businesses. We had to pivot and go a different direction in order to continue earning income. Urban City Cleaners offers sanitization and commercial and residential cleaning services. 

It was an idea we had in April 2020 and became a reality in July 2020. We launched in two months with four employees and now we have 10!”

Entrepreneurship & COVID

An Infographic of Current Trends


Share it on

Easily Start Your Alabama
Corporation Today

There's A Reason More Than 800,000
Businesses Have Started With Incfile