Of course, starting a business is a cornerstone of the American Dream, but in recent years, the dream has developed a new edge. People all over, from kitchen tables to coworking spaces, are finding ways to bring their dreams to fruition. But how many new businesses are actually starting up every year in the United States? Let’s break down the numbers, the dynamics behind them and what they might mean for the future of work.
A Surge in Entrepreneurship – The Headline Numbers
Something big has been happening in the United States in recent years, and it isn’t just about remote work or TikTok dances. Business is big here. The U.S. is experiencing a major surge of new businesses being formed, and the numbers tell a pretty compelling story.
There were 4.35 million new business applications filed in 2020. while the pandemic raged. That was already a big leap from the years prior, but the growth has not slowed. That figure jumped to 5.4 million in 2021. A year later, in 2022, these numbers dropped to 5 million, which was still a 42% increase compared to pre-pandemic levels. And in 2023? We hit 5.5 million.
For context, prior to 2020, the U.S. added more than 3.5 million new businesses in a typical year. So, this is not some sort of blip; we are talking about a record-breaking sustained shift.
From the side hustlers who’ve gone full-time, to the entrepreneurs taking on completely new industries, one thing’s for sure: the business spirit in America is not only alive and well, it’s flourishing.
The Weekly Boom – 100,000 New Businesses Every 7 Days
Let’s dismantle that surge even further. In 2022, new businesses were being created at a rate of nearly 100,000 per week. Each week, the equivalent of a small city of brand-new businesses sprouted across the country.
The information is derived from the Census Bureau’s Business Formation Statistics, which captures new business applications filed throughout the U.S. This includes everyone from freelancers to potential brick-and-mortar stores.
So, what sorts of businesses are people starting? Many of them, according to an analysis from Gusto, are one-person shops. We’re talking about consultants, creators, e-commerce sellers, and freelancers. Strong growth is also evident in personal services such as construction and retail.
This weekly formation rate is telling us something more profound: business is growing at the same pace as the population. More people want to make something for themselves. Perhaps it’s the siren call of flexibility, or a longing to leave the 9-to-5 world. Either way, this boom is not just about volume; it’s about shifting the culture.
The 5-Year Average – A New Era for Business Formation
Here’s the part that nails home how different things are these days: the number of new businesses formed each year on average since 2020 is 4.7 million. That compares to the pre-COVID years, when the annual average was about 3.5 million or fewer people.
That’s an increase of more than 30 per cent. And it’s not slowing down.
So what’s behind the jump? One is that this is not a one-time change. It could be structural. The barriers to entry were as low as they’ve ever been. Interested in getting into consulting? You create a website, buy a domain name, and you’re already halfway there. Thinking about starting an e-commerce shop? Shopify, Etsy and Amazon provide an easy landing spot. Freelancing? Platforms like Upwork or Fiverr can accelerate this process.
And, of course, the expansion of remote work has offered them more flexibility, more time, and, in some cases, the nudge they needed to strike out on their own. Pandemic layoffs also caused many to pivot. For many of us, that meant beginning anew.
In short, the increase isn’t only the result of an economic shock. That’s because how we work and how we think about work have changed.
From 2020 to 2023 – What’s Driving the Growth?
Many forces converged to ignite this wave of entrepreneurship.
First, the COVID-19 pandemic. It derailed careers and transformed the way people thought about job security. For many, starting a business was not a lifelong dream; it was a requirement. Side hustles became their main hustles.
Second, the rise of e-commerce and online platforms. Shopify, Squarespace, TikTok, Instagram, and even email lists have made it easier than ever to reach customers without storefronts.
Third, startup tools and entrepreneurial resources became a hell of a lot easier. You no longer have to hire a lawyer to register a business. Sites like Stripe Atlas or LegalZoom even hold your hand through it.
Fourth, we have observed a cultural change, particularly among the new generations. Gen Z is entering financial independence with greater confidence. More than half of Gen Z are already investors. Some are starting businesses while still in school or at part-time jobs.
Mission-driven businesses are also on the rise, according to Salesforce. Startup entrepreneurs are working to solve real-world problems or to build communities, not just to make money.
So, while the spark may have been the pandemic, the fuel is everything else that has happened in the months since: better tools, better access, and a whole new attitude.
Business Formation by Sector – Who’s Starting What?
Millions of businesses are being started, but they’re not all alike. There are clear trends in the types of businesses people are electing to build.
Professional services have received a significant boost. Think of consultants, coaches, marketing experts, and designers. These are lean businesses that typically require only a laptop and some good connections.
E-commerce is another significant actor in the funding process. With online shopping becoming the norm, it should come as no surprise that many entrepreneurs have turned to product sales, whether on their own websites or through platforms like Amazon and Etsy.
Construction, home improvement, and personal services (including beauty, pet care, and wellness) are also up. There is a high demand, particularly at the moment when people are spending more time at home.
A vast proportion of these businesses are one-person shops, occasionally referred to as solopreneurs. They’re not hiring staff (yet), but they’re building a torrid base.
What Happens Next? Will This Growth Continue?
It’s the big question: Is this another cyclical phenomenon, or are we truly on the dawn of a new age of entrepreneurship?
And so far, early indicators suggest the pattern is continuing. Numbers for business applications are high, and optimism abounds. A recent Goldman Sachs survey of 10,000 small business owners, for example, found that three-quarters of them are feeling positive about the future.
Of course, there would be potential complications. Inflation, high interest rates and changing regulations, for example, can all act as headwinds to small business growth. The competition is intensifying, especially in digital realms.
However, many experts believe we are only just beginning to see what this new generation of entrepreneurs will create. Now we have more of the resources, information, and confidence to do that. That’s hard to undo.
So long as that innovation continues to democratize entrepreneurship and the desire for autonomy and flexibility continues to be held in high regard, this trend not only may be here for the long run, but it might even speed up.
Conclusion: A Defining Decade for American Entrepreneurship
From 2020 to the present, the United States has experienced a startup boom unlike anything in recent memory. We’ve gone from 3.5 million new businesses a year to more than 5.5 million. And it’s more than just the numbers; it reflects people taking bold leaps, stepping up and taking risks, and reconsidering what work can look like.
We are witnessing a moment of entrepreneurship in the truest sense of the word. If the last few years have taught us anything, it’s that building something new is more doable and more popular than ever.
Where does it go from here? That’s still unfolding. But one thing is sure: the American entrepreneurial spirit isn’t just back. It’s thriving.