Following a record-breaking surge of business applications in 2020 and 2021, reports show Wisconsin entrepreneurs continued to submit new applications in the first quarter of 2022.
Data shows that an estimated one-third of small businesses nationwide either temporarily or permanently closed since early 2020 due to the pandemic. According to the US Small Business Administration, businesses with fewer than 500 employees make up two-thirds of new jobs in the US, generating 44 percent of economic activity.
Wisconsin business owners, however, refuse to be deterred. Statewide, the US Census Bureau projected 386 new business formations in January 2022, followed by 401 in February and 378 in March. In terms of monthly business applications, Wisconsin saw 5,350 in January and 5,212 in February and March. Before the pandemic, Wisconsin saw an average of 3,175 applications per month and a monthly average of 4,700 applications from April 2020 to December 2021.
Researchers from the University of Wisconsin-Madison hypothesized that the pandemic actually pushed more Wisconsinites to take up entrepreneurship. The number of Americans who were self-employed fell quickly at the start of the pandemic, but after only a few months, researchers noted that new business applications started increasing. They suggested that unlike previous economic recessions, the aid provided by unemployment payments combined with the federal stimulus checks were integral to the increase in entrepreneurship. Historically, Americans in past recessions often lacked the cash or credit necessary to start a new business.
“Anecdotally, we saw that entrepreneurship was appealing to people who had lost employment, didn’t feel comfortable at their job anymore, or otherwise needed more flexibility,” elaborated Tessa Conroy, one of the authors of the UW-Madison report and an assistant professor of agricultural and applied economics.
The boom in recent years has not benefited every county equally. US Census Bureau data reveals that although business applications increased statewide by about 20 percent between 2019 and 2020, business applications in Outagamie County decreased by 19.3 percent. On the other hand, Milwaukee County increased by 51.7 percent. Racine County and Fond du Lac County clocked in at a 24.3 and 21.7 percent increase, respectively, while Marathon, Waukesha, Dane, La Crosse, Sheboygan, and Brown County all saw an increase of less than 10 percent.
In a UW-Madision report, Conroy notes that local differences in “entrepreneurial support culture” may cause this disparity between counties. For example, those who have access to business assistance are more likely to apply, and since many new businesses are online retailers, areas with better broadband internet access are also more likely to take up entrepreneurship.
The authors add, “Only a small number of businesses are considered likely to become operational and an even smaller number actually do,” with new businesses often forming as non-employer enterprises. From 2009 to 2021, only 12% of business applications across the country became businesses with paid employees.
Conroy describes entrepreneurship as the “key to strong communities,” a tool to raise incomes and reduce poverty. To capitalize on the flood of business applications, the authors of the UW-Madison report encourage local governments to invest in strategies and infrastructure that turn business applications into new business formations, which includes access to child care and broadband internet, training in online marketing, and networking programs.
“I hope leaders and decision-makers see this information and are encouraged to take steps to support these budding business efforts,” said Conroy.