Mark Twain said, “The secret to getting ahead is getting started,” and new research shows a growing number of Americans are willing to take that risky plunge of starting a business.
The report by the Economic Innovation Group found that, “Over the first six months of 2023, applications to start a business likely to hire employees outpaced last year’s first half-year amount by more than seven percent.” The U.S. is headed for a near-record in annual startups.
Startups dropped off significantly during the pandemic. However, the research reveals a post-pandemic surge in new business applications that has continued into this year, fueling economic growth. “Startups and young companies—particularly those likely to hire employees—play an outsized role in job creation and wage growth.”
Nearly every major industry sector has seen growth in new business ventures in the last year. The biggest increases were in health care and social assistance, followed by accommodation and food services, retail trade and construction.
However, the report does not include closings that occurred during the same period. “It remains to be seen what share of these applications for news businesses have off-setting firm closures elsewhere in the data, as economic activity adapts to different business models or reallocates to new locations,” the report said.
The greatest growth was in southern and western states. Economic Innovation Group explained that one of the reasons is that new business likes to be where business already exists and where there are lots of workers. However, the researchers are also seeing a trend in business formation in some non-traditional areas—rural counties with low populations.
West Virginia’s top growth county for business applications was Berkeley. The eastern panhandle county saw the number of applications rise from 747 in 2019 to 1,322 in 2022. That’s an increase of 77 percent!
Several small West Virginia counties saw an even larger percent increase—Hardy County, for example, at 94 percent over the three year period—but the number of annual business applications rose from only 64 to 124.
Of course, the great unknown is how many of these new businesses will make it and become economically significant in their communities. The U.S. Chamber of Commerce, citing statistics from the Bureau of Labor Statistics, reports that 18 percent of small businesses fail within the first year and 50 percent fail after ten years.
But despite those sobering odds, the entrepreneurial spirit is alive and well. The numbers from the Economic Innovation Group offer “proof that the startup surge is real.”