More Americans are turning their brainstorms into businesses.
The total entrepreneurial activity rate—which measures the rate of new and existing business ownership—hit 16.5% in 2021, up from 15.4% in 2020, the Global Entrepreneurship Monitor 2021/2022 Report by Babson College and a consortium of academic institutions found.
More than half of the entrepreneurs are starting businesses in professional services and technology, the report found. Other hot areas are finance, real estate and business services (28%), and education, government, social and consumer services (21%).
Most established business owners in the report are solo operators or owners of tiny businesses with five employees or fewer.
“What we know about entrepreneurship is you can get started with very few resources,” says Donna Kelley, a professor of entrepreneurship at Babson College. “You can use what you have.”
Many of the entrepreneurs are optimistic. 43% of entrepreneurs with established businesses said they expected to see more growth than the year before. 52% of entrepreneurs said the pandemic alerted them to new avenues to pursue in their businesses.
And if the report is any indicator, the future of our economy and careers will be one that’s very much driven by entrepreneurship. Some key findings:
· The youngest generation of workers is diving into entrepreneurship. 19% of 18-to-24-year-olds are involved in entrepreneurship, and 20% had high entrepreneurial intentions. “There is a lot more visibility around entrepreneurship, and there are a lot more educational programs,” says Kelley. However, their business closure rates are high—6.2%.
· Women are gravitating to entrepreneurial careers. 78% of women believe it is a good career choice, compared to 75% of men. However only 58% of women believe it is easy to start a business, compared to 69% of men. Interestingly, women’s fear of failure, usually higher than men’s, has dipped. 43.4% of women reported fear of failure, versus 41.8% of men.
· Black Americans are embracing entrepreneurship. 81% of Black Americans say entrepreneurship is a good career choice; 32% are entrepreneurs—about 2.5x the rate for white counterparts. 23% of Black Americans have entrepreneurial intentions.
· They’re focused on their impact. 68% of entrepreneurs say they prioritize the social and environmental impact of their businesses. 49% said they have acted in the past year to minimize the impact of their business on the environment, and 50% said they’ve taken action to maximize their social results.
· They’re going digital. In addition to the one-third of business owners who already used digital technologies in their businesses, another one fourth adopted or enhanced these technologies.
However, there was also an uptick in business closures. The 4.3% closure rate was the highest in the GEM report’s 23-year history.
“It may be that Covid accelerated the closure of businesses that were not doing well and not able to adapt to a changed environment,” Kelley says.
Black and Hispanic business owners, who have historically faced barriers in accessing capital, have had to close their business at a higher rate (6.2%) than white people (3.2%).
However, closure does not always mean failure, particularly in the post-pandemic environment, where people are rethinking their life’s priorities. Sometimes people opt to close businesses to take a job, pursue another business or change their lifestyle. “It’s more than just financial,” Kelley says.