The pandemic and its lockdowns were supposed to trigger a baby boom – that doesn’t seem to be panning out. But people are starting up new businesses at an unprecedented rate.
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According to the US Census Bureau, there have been about 3.3m new business applications filed so far this year. Last year at this time there were about 2.6m, an increase year to year of about 27%. This year’s third quarter saw a whopping 1.6m new business applications filed, an increase of 86% compared with the corresponding quarter last year. Some people say that recessions are a good time to start up a business. But in our last great recession of 2009, there were about 1.8m startups through the third quarter, which is a little bit more than half of what we’re seeing this year.
No, this recession is different. Why? Look no further than the people working from home.
Sadly, it’s the hourly workers – the ones employed at restaurants and retail, along with the owners that employ them – that are feeling the true brunt of the Covid lockdowns. But the corporate employees? Not so much. They’re getting their paychecks and their health insurance. And different from other recessions, most of their jobs seem pretty secure.
The economy grew in the third quarter by more than 33% and by all accounts the major indicators of manufacturing, retail sales, and construction are doing well. Not only that, but the corporate, white-collar employees are socking away money at savings rates not seen in years because they’re unable to take their kids to Disney, they’re not spending on lattes, lunches and accessories to and from the office and they’re not dropping $200 on a couple of scallops at that “fabulous” new restaurant in town. For those that need capital, the financing environment remains healthy with historically low interest rates and venture capital investments up 22% year over year and 30% from the second quarter of 2020.
They’ve got cash. And these corporate employees also have something else: time.
Oh sure, they’re all working incredibly hard while at home. But who’s really checking, anyway? And are they really spending all day on their jobs? Hmmm. A recent study from Stanford University of more than 16,000 workers who were working from home the past nine months found that their productivity increased 13%. Which means in an eight-hour day, they’ve got an extra hour to spend. Are they spending it on their jobs? I don’t think so. Workers are getting their daily jobs done faster, and without the limitations of working from an office, they’re finding themselves better able to spend time on their own personal pursuits, be it hobbies or … ta dah … starting up a business.
“I can get my usual work for my job done way quicker when I’m working from home,” one friend recently told me. “I’m using the extra time to work on my own business. My employer doesn’t know the difference.”
Working from home has accelerated a trend already begun by the millennial generation, who have been demanding more flexibility and independence from their employers for years. Now this generation has received what it asked for, thanks to the many governments that required offices to shut their doors. But, different from just a few years ago, this is a generation that’s just a little bit older. They now have a few years of on-the-job experience under their belts. They’ve grown up. And many are looking for entrepreneurial opportunities to cement their independence and provide financial security for their families that is within their control.
Many are looking for opportunities to cement their independence and give their families security
A 2017 study from the US Small Business Development Centers found that more than half of the millennials surveyed planned to start a business in “the next three years”. Well, it’s now 2020 and for many of these entrepreneurs, the lockdowns caused by Covid was perfect timing.
Finally, working from home has permanently changed the nature of what a startup is. For what is a “startup” anyway?
Of all these new businesses, I predict that only a small percentage are likely to turn into a full-blown, self-sustaining organization with inventory, supply chains and HR departments. No, that doesn’t mean that the rest will fail (although many will). It’s just that many entrepreneurs are finding that they can startup businesses from their homes that can either provide supplemental income for their families in addition to their day jobs.
A good number of others are learning that it doesn’t take much to launch an Amazon store or set yourself up as an independent consultant or contractor and earn a decent enough living without corporate oversight. For many that is a much better quality of life – and a life that can be led pretty much anywhere in the country. In other words, most of today’s “startups” aren’t Facebook or Uber. They’re merely side gigs or very small enterprises.
All of this – the flexibility, the productivity, the extra cash – is thanks to the corporate employees who have been working from home. It kind of makes you think what all those workers were doing all day pre-Covid, doesn’t it? Maybe they weren’t as “slammed” as they appeared to be? Because now they seem to have the time to become entrepreneurs. Good for them.