During the recent recession, one of the biggest surprises was that more people weren’t starting businesses. Past recessions were generally a spur to business startups and small business ideas, but not this one. Well, that seems to have changed. As the economy improves, U.S. entrepreneurship is on the upswing and has hit its highest level in over 10 years, according to The 2012 Global Entrepreneurship Monitor (GEM) U.S. Report from Babson and Baruch Colleges.
Almost 13 percent of U.S. adults were entrepreneurs in 2012, and among first-generation immigrants, the percentage was even higher (16 percent). These business owners aren’t starting companies to make up for being laid off. More than three-fourths of respondents say they started businesses to pursue an opportunity, rather than out of economic necessity.
Entrepreneurs typically stay close to home, the study found. More than two-thirds (69 percent) of U.S. business startups begin at home, and 59 percent of established business owners remain home-based. The median startup cost of the business startups polled was $15,000, and 82 percent of business startups’ funding comes from sources close to home—personal savings, family and friends.
Entrepreneurs are feeling optimistic about the future. More than 43 percent of them believe there are now good opportunities for entrepreneurship—the highest level since GEM began this study in 1999, and a more than 20 percent increase over 2011 figures. What’s more, 37 percent expect to hire more than five employees in the next five years, and 34 percent say they are introducing innovative products and services.
Entrepreneurs are still facing some challenges, though—primarily in the financing arena. Most business owners in the study were still tapping into close friends and family and bootstrapping, rather than obtaining financing from sources such as banks and venture capital. Compared to other similar economies in GEM’s study, U.S. entrepreneurs were more likely to be constrained by difficulties obtaining financing.
One area where GEM says entrepreneurs could do more is selling internationally. Entrepreneurs cited difficulties selling outside the U.S., including unfamiliar customs, language issues and less favorable business environments. Only 12 percent of companies in the study generated more than 25 percent of their business overseas. This is a big missed opportunity for small businesses.
Are you struggling with financing? Or are you ready to grow your business globally? Look for places to help such as your local Small Business Development Center (SBDC) and SCORE, which provide free business advice from experts.