As a small business owner and consultant for over 10 years, I‘ve helped countless entrepreneurs turn their ideas into thriving companies. And if you‘re thinking of taking the leap in 2024, the latest new business creation statistics have some important insights.
New Businesses Skyrocketed the Past Two Years
The pandemic unexpectedly catalyzed America‘s entrepreneurial spirit to record heights. Let‘s look at the numbers:
- 5.4 million new business applications in 2021 alone per the Census Bureau, shattering the previous record of 4.4 million set just a year before
- Over 1.4 million new business starts in just Q1 2022
- There are now over 30 million small businesses across all industries, making up 99.9% of all companies
So what‘s driving this unprecedented growth? There are likely several factors:
- Pandemic layoffs led many to take the leap into entrepreneurship
- With remote work normalized, more have the flexibility to start side hustles or new companies
- Passion for an idea and desire to "be your own boss" cannot be discounted
But it takes more than passion to beat the daunting odds stacked against most startups.
Most Starters are Gen Xers, Men – But Diversity is Improving
- Gen Xers (age 41-56) lead with 46.5% of new starts
- Baby Boomers (age 57-75) second at 45.5%
- Shockingly only 7% are Millennials (age 26-40)
- Men dominate with 77.5% of new businesses vs. 23.4% women
- White/Caucasians own 84.7% with other groups in single digits
While the gender and racial gaps persist, we are seeing encouraging diversity growth in some startup hubs like Atlanta, Miami and Charlotte. Minority and women-led startups should continue this trajectory as entrepreneurial resources improve.
With $63K Average Income, Profitability Still Elusive
The typical small business owner earns about $63,560 annually from their venture, but most fall somewhere between $30-140K depending on the industry. With decent potential reward but high risk, why do 20% still jump in?
- 70% are home-based businesses started with < $5K
- 90% will ultimately fail
- But around 40% do turn a profit
My advice? Pay yourself just 10% of net profits initially to maintain sufficient capital reserves. Too many entrepreneurs drain cash too quickly then run out of runway. Which brings us to the next concerning stat…
First Year Survival Only 79% – Lack of Capital #1 Cause
Surviving past a first birthday as an entrepreneur is no small feat considering:
- Only 79% of startups make it through Year 1
- The #1 reason they close is running out of capital
- Proof is in the numbers: most beginnings are modest home efforts with tiny seed funding
This is why it‘s critical every new founder relentlessly focuses on cash flow and runway while building their MVP. I help my clients map out detailed 12-24 month financial plans factoring in contingencies before any splashy launches.
Still Intrigued? Your Odds May Keep Improving
While risky, if you have an idea you can‘t shake, the business creation boom is likely to continue. And more resources than ever exist to assist scrappy founders thanks to the recent startup fever. So sharpen your plan, tighten your budget, then take an objective view of the statistics stacked for and against you. Of course I‘m always happy to offer my veteran entrepreneur perspective as well. There is no substitute for experience.
Maybe you‘ll be the one to buck the gloomy new venture survival stats. The future needs courageous optimists willing to take a dutiful leap of faith. Here‘s to irrational perseverance against the odds!
Data sources available upon request
