People are leaving their jobs to start their own companies

It’s not quite the “Great Resignation,” but the siren’s call of entrepreneurship appears to be  luring people away from their office jobs.

Most volatile times don’t spark an increase in startup activity, according to Luke Pardue, economist at Gusto, a small-business HR platform. But the Covid-19 era has been different.

“We’ve been seeing this huge surge in entrepreneurship…There were 5 million new business applications [in 2022], which is up about 40%,” Pardue told HR Brew.

Recently published research from Gusto suggests that frustration with the nine-to-five, including a lack of desired wages and flexibility is leading people to attempt to strike out on their own. In 2022, 41% of owners started a business because they were “concerned about their financial stability or wanted to supplement their household income,” up from 24% in 2021.

DIY DE&I. Since 2020, at least 47% of new businesses have been started by women, up from 29% before the pandemic, according to Gusto. Black entrepreneurs were more likely than white entrepreneurs to start a business for financial stability or greater flexibility.

“At a time when folks are rethinking their lives and choices, it is not surprising that more Black women are electing to become CEOs of their own companies, rather than waiting for their intelligence and skills to be recognized at their current firms,” Melissa Bradley, founder and managing partner of 1863 Ventures, an agency for entrepreneurs of color, told Insider.

This pull is hitting people of all ages. Younger workers (aged 25–34) were the most likely to quit their jobs to make more money with their own business, while workers-turned-entrepreneurs aged 35–54 were most likely to say they left because of burnout.

Rise of the freelancerpreneuer. Scaling up from freelancer to small-business owner also may be easier now that remote work is the new normal. Gusto’s data found an increased ability and willingness to hire freelancers and employees from countries outside of the US, and a rise in professional services firms among new companies.

The data showed that 48% of new businesses that hired full-time employees did so in a hybrid or remote role, up from 35% in 2021, and 75% of those who hired contractors did so hybrid or fully remotely, compared to 50% in 2021.

“A lot of the businesses that were started at the beginning of the pandemic were in retail and food and beverage, but over the past few years, we’ve seen the shift in new business creation to professional services, just as this trend in remote and hybrid work has been taking hold,” Pardue said.

Some people are even holding on to their full-time jobs while starting businesses, either for supplementary income or as an insurance or escape plan.

“Side hustles have been going on forever. But we’ve really seen this confluence of the economic conversation around inflation and rising costs with new business creation, and how that trend around inflation is driving a lot of the business creation we’re seeing right now,” Pardue explained.

Layoffs are also playing a role in increased entrepreneurial activity, and some remnants of the Great Resignation are still playing a role here, where people are reconsidering “climbing the ladder” in favor of having a lifestyle business or just taking some time to explore freelance opportunities before finding a new job.

“We pushed this idea around for years and continued to give excuse after excuse after why now is not a good time, and Covid just made the whole world stop…I don’t know, if Covid didn’t happen, if we’d ever have gotten around to it,” Angela Muhwezi-Hall, who started her business during the pandemic, told The New York Times.

“The pandemic really changed the relationship between entrepreneurship and the economic conditions,” Pardue said. “Looking back on the public data we have going back to 1970, we’ve never seen a surge in entrepreneurship during a recession, and 2020 kind of turned that on its head.”—AK