The National Bureau of Economic Research has shown that the COVID-19 pandemic caused tremendous damage to the American economy, with more than 100,000 small businesses permanently closing their doors. Yet, surprisingly, even in such dire conditions, applications for new businesses hit a 13-year high. Moreover, among new business founders, 27% were laid off from their full-time jobs, and 51% identified a unique business opportunity and decided to make the leap.
A SCORE survey on the impact of COVID-19 on startups in April 2020 discovered that 44% of startups took a "wait and see" attitude about starting or continuing their business, 18% scaled up their plans, 15% scaled down plans and only 3% abandoned their business. A majority of those surveyed were "solopreneurs" with small businesses. The top industries represented were professional and business services, restaurants and food services, retail and wholesale trade and healthcare and social assistance.
However, there was a split among entrepreneurs who were optimistic about their one-year revenue expectations rising and falling. Some of the optimism could likely be attributed to funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. These figures show a higher ceiling and a lower floor in terms of rewards and risks for the potential entrepreneur in the COVID-19 era.
Why Start a Business Now?
With change — even negative circumstances like a pandemic — come opportunities for those who can anticipate consumer needs and deliver in ways that conventional businesses cannot. This pandemic has caused people to struggle economically and socially, and many consumers still have difficulty accessing products, services and experiences they need. Many consumers, especially those who have been able to work from home, may not be struggling but have changing priorities, such as home improvement.
During the pandemic, clever entrepreneurs in this environment asked questions like: How can I help keep local restaurants afloat while enabling consumers to still enjoy the dining experience? Is there a way to keep people in shape, despite gym membership cancellations? How can I support people who are now working from home permanently, who do not yet have their homes set up to support their professional needs?
Given the risks of high overhead with bricks and mortar enterprises, some ask How can I offer similar products and services with an online-only business? Businesses like mom and pop shop consultancies, online resellers, online bookkeeping, restaurant delivery services and virtual fitness training sessions emerge from all these questions. But will these be short-term solutions or will they change consumer mindsets and become viable long-term businesses?
Fortunately, entrepreneurs do not have to make uneducated bets; with digital marketing, they can engage with existing customers and prospects to learn more about their needs and how those needs might change in the future. Social media platforms make it easy and inexpensive to conduct market research. Communication platforms make it easy to create informal focus groups of target audiences to determine ongoing needs and pain points. Affordable survey tools enable further research on product and service viability and marketing and pricing strategies.
The Pandemic Has Benefited Some Businesses
Businesses in the following realms, which can operate with a skeleton crew, cost-sharing with other businesses and work-from-home policies have flourished in 2020 through 2021:
- Cleaning and delivery services
- Grocery and liquor stores
- Game companies
- Pet sales
- Fitness equipment companies
- Telehealth services
- Tutoring services
- Used car dealers
- Behavioral health providers
- Home health providers
- Technology companies
Considerations for Entrepreneurs in This Environment
No matter what a post-pandemic world looks like, the United States can expect a future of more remote working, virtual meetings, lean operations and low overhead to be some of the hallmarks of successful entrepreneurship. These digital tools are often cost effective and help businesses find talent outside of local bounds and earn government subsidies.
Entrepreneurs should invest in their own educations and expertise before anything else. Then choose a low-investment business that can generate quick cash flow, and if possible, make the transition gradually while keeping your current job.
Have a question or concern about this article? Please contact us.