The Great Resignation could lead to a small business revolution.
Intuit, in its 2021 New Business Insights report, predicts 17 million new small businesses will be formed in 2022, a third consecutive record year for entrepreneurship.
The jump from working at big businesses to people launching their own comes as the pandemic has had dramatic effects on how people want to work. Some 83% of the people surveyed by Intuit who want to start a business said COVID-19 has accelerated their plans to start their own business. All totaled, the study spoke with 8,000 U.S. workers – and the accompanying Small Business Insights report surveyed 2,000 small business owners.
“When the pandemic hit, we saw an unprecedented number of new businesses formed as millions of people spotted new opportunities brought on by the ‘new normal’ or reevaluated their priorities,” said Alex Chriss, executive vice president and general manager of Intuit’s Small Business and Self-Employed Group. “Now, almost two years later, we’re continuing to see this trend, as 2022 promises to deliver even more small business growth and prosperity.”
Microbusinesses (those with between one and five employees and less than $50,000 in start-up capital) and small businesses play a critical, but often underappreciated, role in local economies, providing jobs and serving their communities. They’re small individually, but collectively, they employ 41 million people and have a $5 trillion economic impact, says Erin Igleheart, program director of the Start:ME Accelerator Program at Emory University’s Goizueta Business School.
Most of the startups in 2022 will be sole proprietorships, but Intuit predicts 5.6 million of those new small businesses will either incorporate or hire employees, topping the expected record of 5.3 million in 2021 (and the current existing record of 2020’s 4.3 million).
Finding those employees, of course, will be a challenge, as major corporations plan to open their purse strings to retain talent. Base pay may increase by an average of 3.9% in 2022, according to The Conference Board’s most recent wage survey of 240 companies. That’s the largest projected hike since 2008. And firms like Goldman Sachs and JPMorgan Chase are preparing for big bonuses this year.
Goldman is reportedly increasing its bonus pool by between 40% and 50% vs 2020, while JPMorgan is mulling a 40% increase.
To compete, small business owners plan to emphasize the close relationships with the owner(s), customers and a sense of belonging to the company. Some 44% say they plan to increase starting salaries. And to retain talent, 46% plan to increase existing pay, while 36% will offer larger bonuses. Affording those higher salaries might be a bit easier next year. Of the 8,000 U.S. workers surveyed by Intuit, 56% say they plan to spend significantly or somewhat more at small businesses over the next six months. Just 11% say they’ll spend somewhat or significantly less at those companies.
The biggest barrier to benefiting from that increased desire to buy local for many small businesses is the lack of a website. And nearly 90% of existing small business owners say online sales will be an important source of revenue in the coming year, with 40% saying increasing those is their top priority for 2022.
As a result, would-be entrepreneurs rate building a website as being even more important than securing funding or setting up a business bank account as they plan their business. (Nearly 70% say they will fund their business from their personal savings.)
That’s not to say funding isn’t important, though. Nearly half of the burgeoning small business owners say they will apply for a small business loan. And Intuit says there really has never been a better time to do so.
“Fintech has greatly expanded the availability of funding for small businesses and for many entrepreneurs it represents a simpler, faster way to access capital,” said Rania Succar, senior vice president of Intuit QuickBooks Money Offerings. “QuickBooks Capital, for example, leverages technology to help business owners that have been underserved by traditional financial institutions access the funds they need to sustain operations, invest in growth and thrive.”
