Douma Posted January 15, 2023 Share Posted January 15, 2023 An unexpected result of the pandemic era has been a surge in entrepreneurial activity. Since 2020, applications to start new businesses have skyrocketed, reversing a decades-long slump. The reasons for the boom are manifold. Millions of people were suddenly laid off, giving them the time, and inclination, to start new businesses. Personal savings jumped, buoyed partly by a frothy stock market and government stimulus payments, providing would-be entrepreneurs with the means to fulfill their visions. Rock-bottom interest rates made money cheap and widely available. But the ebullient economic environment that helped foster this entrepreneurial spirit has given way to high inflation, rising interest rates and dwindling savings. That has left these nascent businesses to navigate challenging financial crosscurrents and a possible recession at a moment when they are at their most fragile. Even under normal conditions, roughly half of new businesses fail within five years. “Young businesses are inherently vulnerable,” said John Haltiwanger, an economist at the University of Maryland who studies entrepreneurship. “They’re likely to fail, and they are especially likely to fail in a recession.” In 2021, Americans filed applications to start 5.4 million new businesses, according to data from the Census Bureau. That was on top of the 4.4 million applications filed in 2020, which had been the highest by far in the more than 15 years the government had been keeping track. (Filings last year through November were running ahead of 2020 but behind 2021; figures for December will be released this week.) Data on actual business formation will not become available for several years, so it is not possible yet to measure the effects of the cooling economy on new ventures. Whether these new businesses pull through could have broad implications for the health and dynamism of the overall economy. “Innovation drives gains in productivity,” said John Dearie, president of the Center for American Entrepreneurship, an advocacy organization. “And innovation comes disproportionately from new businesses.” But he cautioned that the Federal Reserve’s monetary policy intended to tamp down the fastest price increases in decades is “ramping up the headwinds facing entrepreneurs to gale force by crushing demand and by increasing the price of money.” In interviews, entrepreneurs expressed a mix of resolve and resignation about the months ahead. Some said they had learned lessons from the pandemic’s upheaval about how to endure financial adversity that they believed had recession-proofed their business models. Others were cleareyed about needing outside funding that they feared would no longer arrive. “It’s been a bumpy ride, for sure,” said Jennifer Sutton, who started a juice and wellness bar in Park City, Utah, in 2021. She is most worried about inflation, she said, as well as the prospect of a recession that could reduce the tourism that her business depends on. She opened a second location inside a grocery store, partly because it required less start-up capital than opening another stand-alone storefront. In many ways, however, Ms. Sutton is lucky. She largely self-financed her company, High Vibes Juicery and Wellness Bar, with her family’s savings and credit card debt. https://www.google.com/amp/s/www.nytimes.com/2023/01/15/business/economy/new-business.amp.html 1 Member -> Moderator -> Super Moderator -> Supervisor -> Ex-Staff (Absent) -> Supervisor -> Administrator -> Ex-Staff -> Administrator -> Ex-Staff Link to comment Share on other sites More sharing options...
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