It’s hard to be excited when talking about today’s coronavirus pandemic, when millions of Americans have been infected and over 200,000 have died. However, our research shows the coronavirus pandemic has been a massive boon to entrepreneurship. And this could help our economy both recover and thrive for years to come.
The coronavirus really took hold in the United States in March 2020. On March 3rd, U.S. officials approved widespread testing. Soon after, on March 13th, President Trump declared a national emergency. From March to May, the US lost 23.1 million jobs. Fortunately, by the end of September, 11.6 million of these jobs have been recouped, although this still left 12.6 million Americans without jobs.
But while jobs have suffered, new business starts have skyrocketed. According to raw data we analyzed from the US Census concerning new business applications in Q2 (April/May/June) of 2020, when the pandemic was taking hold of our country and turning things upside down, new business starts remained steady.
Specifically, as seen below, 931,310 new businesses were started in Q2, up modestly from 917,680 in Q2 2018 and 910,070 in Q2 2019.
But the more interesting story started in Q3 (July/August/September). Specifically, in Q3 of 2020, we saw more new businesses started in the United States than in any quarter in history. In fact, we had 1,385,980 new businesses started during the quarter. This represents a 49% increase from Q2. Furthermore, since new business starts in Q3 are traditionally less than in Q1 and Q2, we saw a massive increase in growth versus previous years’ Q3 results as seen in the chart below. The previous record for new business starts in Q3 was in 2018 when 829,170 were formed. That record was shattered by 67%!
And when you look at just the core summer months of July and August, we saw even greater growth in new businesses started. In fact, according to Growthink president Dave Lavinsky, “this summer saw nearly the equivalent of 2 summers’ growth in new business starts.”
So what’s happening?
According to Lavinsky, we are witnessing a few interesting events. “First, we are seeing unemployed workers starting their own businesses. Realizing they need to be responsible for their own financial destinies, these entrepreneurs are opting out of the traditional workforce to start their own companies. Secondly, we are seeing virtual employees launching their own businesses.”
With regards to the latter trend, Lavinsky says “I think the mindset for many has become ‘if I’m going to ditch the office, why not ditch the boss too?’ And many new work-from-home employees have now gained one to three hours per day as their commutes have been eliminated. Some have been using this time to develop their business plans and launch their own companies.”
So what can we expect from the 1.4 million businesses launched in the post coronavirus quarter? Well, based on historical figures, 50% of these businesses should survive five or more years and in aggregate, they should provide 4.8 million jobs! “The coronavirus pandemic has provided a long-term, multi-billion dollar economic stimulus package that didn’t cost Congress a dime,” said Lavinsky.”