FLORIDA SMALL BUSINESS DEVELOPMENT CENTER AT IRSC
SURVEY SHOWS SMALL BUSINESS STARTUPS
SURGE IN THE WAKE OF THE PANDEMIC
A graduate of Miami-Dade College, Florida
International University and the St. Thomas
University, Clifton Vaughn has more than
40 years of business experience working
in South Florida as an auditor, financial
controller, financial planner and small
business owner and operator. During his
years as a business professional he spent time
in airline industry, construction, consulting
with small business owners and teaching
business and accounting courses at Johnson
& Wales and St. Thomas University. Vaughn
has served on the boards of directors of the
Miami-Dade Chamber of Commerce and the
Miami-Dade Partnership for the Homeless.
TCBusiness.com 19
We all know that the pandemic has
been devastating for small businesses. We
don’t have to look any farther than neighborhood
shopping centers to see small
businesses that have closed for good. And
for many of those companies that have
survived, business is far from what it was
pre-pandemic. The severity of the crisis
will no doubt be felt for months or years
to come.
During the stretch in 2020 from February
to May, it looked especially bleak – 20
million jobs were lost nationally. Businesses
were wiped out at a faster rate than
during the financial crisis a decade earlier.
Yet there’s one very positive economic
trend to report: There has since been a
boom in new business formation.
The number of entrepreneurs starting
a business hit a record high in 2020. That’s
according to a new study from the National
Bureau of Economic Research by University
of Maryland economist John Haltiwanger.
The data was distilled from the first
step typically taken by an entrepreneur in
the creation of a business, an application
for an employer-identification number
required by America’s tax authorities, the
Internal Revenue Service.
Applications for new businesses fell
substantially in the early stages of the pandemic
but then surged in the second half
of 2020. This surge has continued through
May 2021. The pace of applications since
mid-2020 is the highest on record.
These patterns contrast sharply with
those in the Great Recession when applications
for likely new employer businesses
and in turn actual startups of employer
businesses plunged sharply.
The data also gives a rapid read on the
changing economy. For example, the largest
sector of new business formation
during the surge of 2020-21 is in “nonstore
retailers,” who account for 33% of
new businesses formed over the pandemic.
They were helped by e-commerce
platforms such as Amazon, Shopify and
Stripe and it’s a whole lot cheaper to set
up a business there than with brick and
mortar. Yet, Axios reports, physical businesses
have been booming, too, in Texas,
Florida, and Georgia, particularly for laundromats,
trucking, and even restaurants.
Haltiwanger goes on to detail big differences
between the crises of 2008 and
2020. In 2008, Americans lost billions of
dollars in home equity, the stock market
was crashing and banks stopped lending.
In 2021, the crisis released trillions of dollars
in new government spending, much
of it for small business relief efforts, there
was also no accompanying financial crisis
and the stock market surged.
There is not solid data yet on how many
small businesses closed during the recession.
A recent Fed paper suggests that
about 130,000 firms went out of business
in the first year of the pandemic. That was
up between a quarter and a third from
normal levels, and much lower than many
economists originally feared. But with the
surge in new business creation, the total
number of small businesses likely went
up. To be sure, Americans are starting
small businesses at a record pace.
According to Clifton Vaughn, Florida
SBDC at IRSC business consultant, this national
trend is reflected with new business
start activity along the Treasure Coast.
“Registrations for the center’s Start Smart
orientation classes and request for start-up
consulting services are both higher year
over year,” Vaughn said.
While Vaughn stressed it is not easy
to launch a new business, he said, “It is
encouraging and rewarding to work with
enthusiastic, passionate and entrepreneurial
minded individuals seeking to launch a
new venture.”
NEW BLACK-OWNED BUSINESSES
SURGE MOST
A second study showed the trend among
new Black-owned businesses was particularly
strong.
Last year there were more new Blackowned
businesses proportionate to the total
population than at any time in the last
quarter-century, according to the Kauffman
Foundation’s annual study. Indeed,
Black entrepreneurism ranked higher than
for white-owned and Asian-owned companies,
the group found.
On average, 380 out of every 100,000
Black adults became new entrepreneurs
during the 2020 pandemic, up from 240 in
each of the prior two years, according to
the study based on census data.
Of course, the surge was partly a reflection
of the heavier toll the COVID-19 crisis
took on Black Americans, in deaths as well
as job and income losses. According to
the researcher, 40% of Black-owned firms
closed in the immediate aftermath of the
outbreak versus 20% of all active U.S. businesses.
What’s more, the startup numbers
likely include some businesses that were
reopening after closing at the start of the
pandemic.
Other surveys show the boom could
have been even larger. According to a
LendingTree survey, one-quarter of Americans
thought about starting a business during
COVID-19, but the lack of financing was
the big barrier for would-be entrepreneurs.
If you’re thinking about starting a business,
contact your local FSBDC for support
at fsbdc@irsc.edu or call 772.336.6285. v
BY NANCY DAHLBERG
/TCBusiness.com
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