Businesses that want to beat the talent shortage will have to compete against a daunting rival in coming years: Self-employment.
“When workers have this option, they are able to demand more of their employers,” says Luke Pardue, an economist with Gusto, which runs payroll and provides benefits for 200,000 small businesses.
Many of those who started businesses in 2021 got inspired by new business opportunities, with 25% of founders who launched last year citing this motive, according to recent research by Gusto in its New Business Owner Survey. 36% of entrepreneurs said they started their business after voluntarily quitting their job.
As many Americans look to make the most of opportunities they’ve uncovered, new business creation is … [+]
“The barriers to starting a business have never been lower,” says Pardue. “If you were starting a bakery or restaurant, you’d have to find a space to rent. That’s disappeared overnight. People can start a hair salon in their garage or a retail shop that makes jewelry in their living room.”
The research provides an interesting window to the future of entrepreneurship in the post-pandemic environment. Here are some key trends:
Women and entrepreneurs of color are flocking to entrepreneurship. Founders of new businesses were much likely to be Black, Hispanic, and female in 2020 and 2021 than in 2019. In 2019, 28% of new business owners were women, versus 49% in 2021. And in 2019, Black or African American entrepreneurs made up less than 3% of entrepreneurs; by 2021 that share had tripled to 9%.
“If there’s one thing the pandemic showed is that its prior operating system didn’t work for a large portion of America, particularly women and workers of color who had other demands in their lives,” says Pardue.
Professional services are hot: 42% of new businesses launched in 2021 were in professional services—and 48% of entrepreneurs who quit their job started firms in this sector.
The childcare shortage is playing a role. 28% of women with children at home started a business because of their childcare needs.
Access to capital remains a challenge: While 11% of all new business owners were able to finance their startups with private business loan, only 8% of Hispanic entrepreneurs and 6% of Black entrepreneurs received this funding. The private loan approval rate for Hispanic entrepreneurs was less than half that of white entrepreneurs. Against this backdrop, one-third of Black entrepreneurs and one-quarter of Hispanic entrepreneurs took a side job in order to cover business expenses.
LGBT-owned businesses are thriving. Gusto estimates there are 1.4 million LGBT-owned businesses bringing in $1.7 trillion each year.
With entrepreneurship beckoning so many Americans—5.4 million registered new businesses in 2021 alone—this increasingly popular employment option is likely to shape the return-to-the-office debate for years to come. The debate will be moot if workers simply refuse to interview for jobs and create their own work instead.
“A company may want to see me back in the office—but I can break out on my own, work when I want, and not be subject to the return to office mandate,” notes Pardue. “If there’s one overarching theme, it is the pandemic has caused a collision between workers’ need to have flexibility and the needs of the system to work on a 9-to-5 schedule and have people going into the office.
“That’s one of the reasons we have 11 million job openings we’ve never seen before,” he adds. “Entrepreneurship has been a great outlet for the economy, creating jobs and economic opportunity while satisfying these former employees’ needs for work.”