SCORE

New Business Formations Background Facts

New Business Formations skyrocketed in 2020 during Covid and this new high level continues into 2021. Since 2004 the US Census Bureau has been reporting data on a monthly basis regarding Business Formation. Since 2014, see Chart I below, the monthly data has averaged 250,000 but in July of 2020 this number jumped to 551,000 and has currently stabilized in the high 480,000s/month. While it may seem counterintuitive this new off the charts activity occurred in the midst of Covid lock downs, a record level of unemployment and the deepest economic recession in the US during the modern era.

Business Applications in the USA

Chart I: Business Applications in the USA (Source US Census Bureau, fred.stlouisfed.org)

Possible Explanations 

More Free Time

Free time: The human mind is a constant motion machine perpetually reacting to stimuli, evaluating alternatives, dreaming and creating a multitude of ideas of various sorts. Many of these thoughts may be fleeting yet some are filed away in our cerebral hard drive for future reference. New product or business ideas can run hot and cold in our thoughts but may eventually receive priority under the right circumstances. Being laid off or telecommunicating may have freed up millions of hours for people to solidify and act upon those ideas for new product and business ventures.

Rising Incomes

Millions of unemployed workers received trillions of dollars in Federal and State unemployment benefits in addition to direct “stimulus” payments. In many cases these folks received more income than when they were working. Thus, a large percentage of incomes actually rose during the pandemic.

Improved Personal Balance Sheets 

Relatively little of the new found income was actually spent on new goods and services. Much of this income, however, was used to pay down debt (credit cards) and another large proportion was used to build up savings. Those fortunate enough to own stocks or homes also saw these values rise.

Summation: The historical 250,000+ per month base level Business Formations likely reflects genuine entrepreneurship, new businesses doing new things or old things in a new way. It remains to be seen whether the new 480,000+ level of business formations is sustainable. What is factual is that there is a high failure amongst business startups. Translating an idea into a successful business is not easy. Seeking out SCORE and its mentors can substantially increase the probabilities of success.

How Can SCORE Enhance Your Probabilities of Success?

SCORE, the nation’s largest network of volunteer, expert business mentors, is dedicated to helping small businesses get off the ground, grow and achieve their goals. Since 1964, it has provided education and mentorship to more than 11 million entrepreneurs. SCORE volunteers also mentor entities that are already in-business and entities looking to exit (via sale or shut down) their businesses.

SCORE is a 501(c)(3) nonprofit organization and a resource partner of the U.S. Small Business Administration (SBA). Thanks to this generous support from the SBA and because of the selfless contributions of our more than 10,000 dedicated men and women volunteers, it is able to deliver most of its offerings at no cost. There are over 300 SCORE Chapters across the US. Besides the vast expertise of the volunteers, SCORE makes available a vast library of “how to” material and useful webinars.

How to Find a Mentor? Go to the score.org website and on the homepage click on Find a Mentor. Simply fill in some pertinent information and you will be contacted by a SCORE Mentor in a few days to start your journey to business success.

About the Author(s)

Roger Young

Roger retired after 40+ years in the investment business working in New York, Texas and Colorado. He is trained in securities analysis and has managed portfolios (stocks bonds) of varying objectives/sizes. He has a BS in Economics from Wharton , a Bachelor in Foreign Trade from Thunderbird, a MBA in Finance from Michigan State and has a CFA (Chartered Financial Analyst).

SCORE Mentor, SCORE Manasota
Business Startups