Economists’ Surprise: Small Business Growth in the United States Frankfort, Kentucky: In the 1960s, Aundrea Owens was raised in Frankfort, Kentucky. When she and her mother went downtown to buy an Easter dress at that time, there were still some stores where they weren’t welcome.

She and her husband, Darnell, opened a small retail cooperative on Main Street the previous year. Here, she and her Black and White friends are selling everything from men’s suits to T-shirts to jewelry and art. Two works of art had sold for more than $500 at a sip-and-shop event at the Drip Drop the night before I stopped by.

Owens stated, “When I pull up, the fact that I have a store on Main Street in downtown Frankfort gives me goosebumps.” As her husband, Darnell Owens, informed me, she and her husband see themselves as members of their city’s community rather than isolated members of an economic renaissance.

Since the pandemic, they have been a part of a nationwide surge in entrepreneurship that experts are astonished by its strength and persistence. The Economic Innovation Group reports that in 2022, the rate of new business formations increased by 27.8% compared to 2019.

According to EIG, businesses likely to hire employees submitted nearly 1.7 million applications in 2022, the second-largest total ever recorded and only 6.5% less than in 2021. The number of new business applications was 5.1 million, which included businesses that were unlikely to employ others.

A COVID-19 reset is one possible explanation. The economy, including where and how people live, has been altered by the pandemic. According to EIG research and policy analyst Daniel Newman, these shifts may present opportunities. There is hope that it has sparked a new era of business development.

As a result of disillusionment with a corporate system that did not support them during the pandemic, many people in Black communities believe they may not have much to lose.

According to the data, the increase is particularly pronounced in some areas with significant Black populations. The majority of new business owners in the United States are people of color, particularly Hispanics.

People of color own businesses, which are also the most vulnerable. For instance, during the pandemic, they were more likely to close. In addition, the question for the future will be how successful the new businesses will be. Between 15 and 25 percent of new businesses eventually become employer businesses. Due to the changing nature of American business, many sole proprietorships will eventually use freelancer and contractor networks to generate revenue. But capital is needed by all kinds of businesses, and with the country’s already-shrinking banking system under pressure, it’s important to know if new businesses can get loans or other kinds of investments.

“The issue at hand is whether they have access to capital,” said Joe Scantlebury, CEO of Living Cities, a group of philanthropic foundations and financial institutions working to close the racial wealth and income gaps in U.S. cities. Living Cities is based in New York City.

Why It’s Important Americans like to think that their economy is very active, and that was the case for a lot of the 20th century. However, prior to the pandemic, entrepreneurship had been declining in the United States and other developed nations. The Congressional Budget Office says that while new businesses (those with at least one employee and less than five years old) made up 38% of all businesses in 1982, they only made up 29% in 2018. According to a report on Main Street Businesses released in November 2016 by the Ewing Marion Kauffman Foundation, white business owners have experienced the fastest declines.

The long decline came to an end in 2020. Recessions are common times for people to start businesses because they need money. Some people were also aided in starting businesses by government aid.

However, in 2022, when the rate of business formation remained so high, the real surprise occurred. Because of their significance, these trends are closely monitored by economists. In any economy, most of the dynamism, job growth, and innovation come from small businesses and startups. One of the few things that can close the racial wealth gap is ownership of a small business. This may be one reason why entrepreneurship has remained strong and grown recently among people of color.

Indeed, Scantlebury, the CEO of Living Cities, is unsurprised by the most recent data. The New York City-based organization runs city leadership peer networks that assist leaders in obtaining funding and technical expertise. The organization has a presence in 23 cities across the country and receives a budget of $7 million annually. It also makes investments in intermediaries and organizations that work to close wealth and income gaps based on race. He wants to raise $100 million for a fund that will invest in other funds managed by people of color and other committed supporters. Those funds will, in turn, make investments in businesses run by people of color.

Black business was all you saw when I was growing up. As a youngster I sold bathroom tissue in the city for a quarter a roll,” he said. ” That spirit, in my opinion, has always existed.

“Now we are having frank discussions about our contribution to the economy,” the statement reads.

According to Newman of EIG, there is no “unifying theory” among economists regarding the rise in business formation in 2022. Coaxing the patterns out is hard, Newman said. Starting from a small base, some areas of high growth are simply beginning.

However, he and others have noted that some of the regions with the highest increases in business formation also have a high concentration of Black people. This is in addition to the fact that the increases are concentrated in areas with significant population growth. There are large Black populations in Georgia, Alabama, and Mississippi, three of the states with the highest increases. Also, metro Atlanta, which is a popular place to start a business, does.

I was informed by a volunteer working in the Owenses’ shop of what she believed to be actually going on. It became abundantly clear during the pandemic which workers were essential and which were not. The essential workers thought to themselves, “If they were so essential, why were they paid so little and let go when the companies liked it?”

She stated, “A lot of people weren’t getting paid for the work they were doing.”

The woman requested that I not use her name because she was concerned that the bureaucracy that issues her disability checks would find out about her volunteer work. For some, starting a business is a rejection of a government and corporate system that has not served them well.

Numerous businesses pledged to diversify their investments, workforce, and suppliers following George Floyd’s assassination. That has largely vanished.

“On the George Floyd piece, I push back. Scantlebury stated, “Investment is a longer-term attention and relationship. Horror and sensationalism brought promises.” Can we attain equity and growth? Can we collaborate on that for more than a minute?”

Putting Their Savings Away If the Owens, who also help out other members of their extended family, like a young grandson who moved from Detroit to Kentucky, succeed, they will not only be able to work for themselves but also for other members of their family and community. Assuming they offer the business or make enough to save, they’ll make generational abundance that can be given over.

During the pandemic, the couple operated a hospice center in their home. They opened the space last spring after moving into the city’s heart. It hasn’t been simple. However, when they switched from a flea market model to one in which they took sliding commissions on sales based on the product, things changed. They are pleased that a section of the store features T-shirts made by two young entrepreneurs (approximately 8 and 10 years old, according to them) and suits made by the long-time owner of a fancy men’s dress shop in Frankford that has since closed.

Setting Up on a Shoestring Aundrea Owens had worked more than 100 hours as a hospice worker the week before I interviewed her, so both of them are keeping their day jobs. Darnell Owens is employed by the state government; together, they have invested $50,000 of their savings in The Drip Drop. Darnell Owens now has a voice in the community thanks to his participation on a downtown business board. A great deal of these spots,” he signaled to empty retail facades outside, “are claimed by truant landowners as a feature of their portfolios.”

That frustrates me. One more is that he found so little data on the most proficient method to maintain a business on a tight budget. Like, how would you set up economical Mastercard frameworks? Additionally, the online information was of no use. He stated, “I don’t need someone to teach me how to be a good bank product consumer.”

However, they claim that the white community in particular has supported them.

They are hopeful that they will begin the summer with positive cash flow. Vine Time Tours, a business with a higher profit margin, is also an idea they have: voyages through wineries and nearby undertakings for ladies. They hope to sell it to wives who go on bourbon country tours with their husbands.

The Owens family decided to go it alone, almost out of faith.

Darnell Owens stated, “Our social consciousness rose.”

Aundrea Owens stated, “I’ve got a lot of friends with businesses on the side.” Come, share this space, I told them. Give it a go for a month. We can move forward if we focus on the idea of community.