We’re about to see a major boom in entrepreneurship.
Why are we so confident? There are a number of reasons people take the entrepreneurial leap of faith, and several of those factors are about to hit at the same time.
People start businesses after recessions.
First, we’re about to emerge from a recession. Technically, the COVID-19-related recession ended a while ago. But because of public safety measures, Americans are still living as if there is a recession. Economic activity is still depressed, but for public health-related reasons.
Many experts think that economic downturns propel entrepreneurship—and though the data on the subject is complicated, it does make sense that economic hardship is a breeding ground for innovation and startup energy.
Innovation is the child of necessity, and at no time is necessity more powerfully felt than during recessions. Many of America’s most profitable and creative businesses were formed during recessions: Hewlett-Packard, Uber, AirBnb, Mailchimp, Microsoft, Warby Parker, Slack, and Venmo were all started during times of upheaval.
Another reason that recessions can be so friendly to new businesses is that young companies are frugal by nature. While economic hardship can be deadly to existing businesses that carry heavy expenses, lean startups don’t have bulky overhead to worry about!
This recession was special.
Even though economic activity has been low this year, the average American household has actually saved money because of the COVID-19 pandemic rather than losing it.
Many families’ expenses have decreased as travel, dining out, extracurricular activities, and childcare have posed hazards to public health. Generous unemployment insurance programs and federal stimulus packages have also poured income into families’ checking accounts, strengthening this effect.
Therefore, not only will there be lots of pent-up entrepreneurial energy from starter hopefuls, but a large amount of demand from customers for new and interesting businesses!
People are going to want to shop local, go out to bars and restaurants, gather in the community, and spend their money at higher rates than they did pre-pandemic.
Of course, this also means that someone dreaming about opening a business may now have the financial means to do so.
Major life changes create entrepreneurial mindsets.
Even though time and money are vital ingredients to starting a business successfully, they aren’t sufficient.
You will never have enough time. Or enough cash. Starting a business is inherently risky—for good reason. It isn’t a change in resources that stirs someone to start a venture, but a change in mindset.
So what brings that change of mindset?
Large external events. Changes in the environment. A major circumstance shift. These might look like a breakup, getting married, having children, losing a job, buying a first house, moving, getting divorced, or being bereaved.
If COVID-19 has done anything, it has caused significant changes and uprooting in people’s lives—some beneficial and some terrible. But despite how good or bad those realities are, such climactic events wake us up and allow us to reevaluate our lives.
So prepare yourselves: hordes of people are about to decide to take their economic futures into their own hands and strike out on their own.
Are you ready for them?