There has been a surge of new business applications in the last few years since the pandemic. And new data from the US Census Bureau confirms that the surge continued throughout 2022. 5 million new US businesses were created in 2022, up 42% from the rate of new businesses being created before the pandemic.
This is partly because so many people were laid off and suddenly had the free time to bring their business ideas to life. But it’s also partly because interest rates were at rock bottom and government stimulus checks helped pad people’s pockets, giving them the means to consider finally starting that business. These conditions were perfect for entrepreneurs to get started and helped get us where we’re at today.
Small businesses are saving the economy
As the US economy gets closer to a recession, small businesses are currently helping to stop that from happening. The problem is that no one knows how long it will last. They’re helping the economy by hiring, while many larger firms and tech companies are conducting layoffs, which contributes to a strong labor market that helps fend off a recession. But as the recession gets closer, their hiring is starting to slow down as well. And as that happens, the labor market will slow, which can potentially push us closer to a recession.
Where it gets challenging for small businesses
Although they’re still hiring at higher rates than larger firms, it’s not all good news for small businesses. The result of the low interest rates, government stimulus, and a generally strong economy was that those factors helped fuel high inflation, lower savings, and — eventually — interest rates that rose even higher than before. This brings us to conditions that can make it really difficult for new businesses to succeed. And those rates are already pretty grim — the US Bureau of Labor Statistics reports that around 20% of new businesses fail in the first two years, 45% fail during the first five years, and 65% during the first ten years. So, how can small businesses save themselves from that 65%?
Finances are one of the top reasons small businesses fail
There are four major hurdles for small businesses that tend to be the nail in the coffin for them: financial issues, failures in management, bad business plans, or poor marketing. And financial issues can be one of the quickest ways to see your small business fail. Not pricing your products or forecasting revenue correctly can really hurt a small business, but the biggest issues tend to be around lack of funding when they need it and poor money management. And that’s not surprising. Most entrepreneurs start a business because they have a vision, not because they’re particularly knowledgeable about finances or funding.
Smarter banking for small businesses
Lili is designed specifically for small businesses so that all of your banking needs are met directly on your desktop or on mobile. We make it easy for you to get paid early, generate invoices. With easy to use transaction categorization and pre-filled forms like the Schedule C form, tax season is something you’re already prepared for, before it ever arrives.
We won’t help you price your products or forecast revenue correctly just yet, but we will make money management, taxes, and accounting a breeze for your small business. Open a Lili account today for a better banking partner that can help your business grow and thrive.