Small businesses launched between March 2020 and March 2021 averaged 4.6 employees, a decline from 5.3 the previous year
Newly-found small businesses are hiring fewer employees, a U-turn from a time when startups were big job creators in the 2000s.
Pandemic-era disruptions, the rise of remote work, and inflation are a few of the reasons behind smaller teams.
Census Bureau data reveals that firms launched between March 2020 and March 2021 averaged 4.6 employees, a decline from 5.3 the previous year and a steep drop from 5.8 in the past two decades.
Between 1995 and 2023, small businesses created 60% of the net new jobs, according to the Small Business Administration.
Why the drop?
As the COVID-19 pandemic hit, businesses changed their work patterns and realized they could operate with leaner staff.
Additionally, the expansion of the gig economy and advanced software tools have enabled businesses to operate with leaner teams.
Many new businesses are following the trend. Some rely heavily on contractors rather than full-time staff to manage costs and adjust to market changes.
Even though more people are starting businesses, these small startups face big challenges like inflation and a tough job market, making it harder to hire and grow.
Entrepreneurs increasingly choose smaller setups to stay adaptable and balance work-life dynamics. About 60% of businesses started in 2021 were active after a year.