How Many New Businesses Started in 2021 and 2022? An In-Depth Analysis of American Entrepreneurship Growth Trends

America has experienced an unprecedented boom in new businesses launched over the past two years, reversing a long-running decline in entrepreneurship rates across the country. But exactly how explosive has this startup growth actually been?

Analyzing the intricacies and nuances in the data reveals some surprising trends and provides critical insights into the health of the economy emerging from the pandemic.

As a data analyst who’s spent years tracking entrepreneurship statistics, I’ll examine here in-depth:

• Just how many new businesses were created in 2021 and 2022 so far
• What’s driving this new business surge
• Who‘s leading entrepreneurship growth
• The most popular and promising industries for new ventures
• Outlook for survival and longevity of these pandemic-era startups

First, let’s quantify this entrepreneurship boom.

Over 5.4 Million New Business Applications Submitted in 2021 Alone

According to the United States Census Bureau, a striking 5.4 million applications for new businesses were filed in 2021. For context, the previous record high was just 4.4 million new business applications in 2020.

So 2021 witnessed over a million more new business creations than any prior year based on publicly available federal data dating back over 15 years.

And the Census figures show no signs of slowing in 2022 either.

2022 On Track to Match or Exceed 2021’s Record Pace

An estimated 1.42 million applications for new employer identification numbers were filed in just the first quarter of 2022. If that application volume holds steady, 2022 could see over 5.7 million more new business startups – eclipsing last year’s historic highs.

For added context on the scale of activity over the past two years, from 2004 to 2019, new entrepreneurship in America fell significantly according to Census Bureau data and Kauffman Foundation research.

An average of only 555,000 new businesses launched per year over that 15-year period – well under the several million plus we’ve witnessed in 2020 onwards.

So the COVID-19 pandemic shockingly reversed America’s shrinking startup trends dramatically. But what’s fueling this emphatic entrepreneurship rebound?

Pandemic Aftershocks Remain – Forcing Reinvention for Many Workers

While the reasons behind such an astronomical rise in new business formations over 2021 and 2022 specifically remain unclear, reverberations from the COVID pandemic almost certainly play a role.

Many analysts believe factors such as permanent remote work, accelerated digital transformation, massive shifts in consumer preferences, and even lingering health concerns likely all motivate more Americans to take the leap into entrepreneurship.

Layoffs forcing people to create their own opportunities and desire for greater flexibility also enable more startup activity post-pandemic.

According to one survey on America‘s Labor Shortage by Qualtrics XM Institute, 1 in 4 Americans plan to start their own business in the wake of the pandemic. Further Qualtrics data reveals:

• 54.6% of people feel the COVID impact on business is not over
• 26.1% remain unsure if pandemic fallout is over
• Just 19.4% believe COVID no longer impacts business

So for many impacted workers, self-employment feels safer and more appealing than returning to volatile traditional offices and jobs.

Let‘s explore now exactly who‘s driving all these new business formations.

Gen X and Baby Boomers Launch Most New Ventures – For Now

Against the prevailing perception that entrepreneurship largely remains the domain of the young, the latest data shows older generations primarily responsible for the recent explosion in new business creations.

Specifically, Gen Xers (aged 41-56) own 46.5% of the new businesses started in 2021 and 2022 so far. Baby Boomers (aged 57-75) follow very closely behind, owning 45.5% of all new startups.

Comparatively, despite all the buzz regarding Millennial entrepreneurs, they account for only around 7% of new business ownership so far.

Eventually though, demographic shifts should prevail – with each passing year bringing more Millennials into prime entrepreneurship age ranges while simultaneously advancing more late-stage Boomers into retirement. So industry disruptors like Mark Zuckerberg may not remain unicorns for long.

For now however, America‘s startup surge appears driven largely by Gen X and Boomer workers reinventing themselves through entrepreneurship – seemingly unwilling to retire quietly as past generations did.

Besides age, gender also plays a deciding role in determining who pursues business ventures.

New Business Ownership Still Skews Heavily Male

Despite social progress closing gender gaps across much of society, American entrepreneurship unfortunately remains a predominantly male endeavor.

Men own about 77.5% of all the new businesses started over 2021 and 2022. Women own only 23.4% of new startups comparatively.

Even factoring in the 1-2 recessions we‘ve endured since, the rate of women-owned business formations has moved little in the past couple decades. Back in 1997, women started just 23% of new companies – an almost identical share to today.

So while female founders raise more venture capital dollars than ever before thanks to breakthrough successes like StitchFix, Spanx, and Rent the Runway, much work remains to achieve equitable entrepreneurship across genders.

Shifting from gender to ethnicity, similar imbalances exist.

Racial Disparities in Business Ownership Persist

The positive news is more Black Americans and Hispanics started businesses over 2020/2021 than recorded in pre-pandemic 2017. However their ownership rates still lag the general population demographics significantly.

Here is the breakdown by race of who owns the new businesses launched in 2021 and 2022 to date:

• 84.7% of new business owners identify as Caucasian
• 4.1% identify as Hispanic
• 4% identify as Black or African American
• 4.1% identify as Asian
• Remaining 3.1% identify as other minority groups

So minority groups combined own less than 16% of the 5.4 million plus new American businesses over recent years. Clearly more work must be done to support and foster entrepreneurship across more disadvantaged communities.

Now that we understand who‘s starting all these new businesses, let‘s examine the industries they are venturing into most.

Retail Dominates, But Variety Spans Industries

The #1 industry for new business creation is perhaps no surprise – retail and shopping. Over 15% of the startup activity in 2021/2022 stems from retail, encompassing both physical and online stores.

Restaurant and food services follow closely behind at 13.7% of new business formations. Surging interest in culinary entrepreneurship reflects shifting preferences towards takeout and delivery.

Ranking next is professional services at 10.1%, primarily IT developers and internet marketing specialists – catering to booming digital priorities across both enterprise and consumer settings.

Health and wellness services represent another significant hotbed industry, with specialized personal trainers, telehealth apps, wearable gadgets, and innovative gyms accounting for over 9.7% of new companies entering the fray.

Finally, given increased costs of residential housing plus fluctuations in the construction labor force, contractors for home remodel and repair services expanded to capture 9.3% startup share. Painters, electricians, plumbers, landscapers – anyone touching the red hot real estate sector stands to tap into current demand.

Beyond the largest categories summarized above, new online boutiques thrive off social media and ecommerce tailwinds while specialized food & beverage producers also gain popularity. Additionally, pet care services continue growing as more people acquire pandemic puppies, needing groomers and trainers.

Essentially every industry faces disruption nowadays, creating opportunities for entrepreneurs across sectors. But how lucrative actually are all these new small business owners?

New Business Owners Earn a Mean $63,560 Annually

According to industry salary data, the average income for new small business owners lands around $63,560 per year. Most individual salaries range between $30,000 on the lower end up to $140,000 annually for the highest earners running new companies.

Obviously significant variability exists based primarily on which sector a business operates within. Typically e-commerce retailers and professional services firms generate higher revenues than personal services providers. But even within industries, small business incomes depend heavily on factors like marketing reach, customer experience uniqueness, operational efficiency, pricing power and productivity.

Since profitability remains inconsistent especially in early stages of entrepreneurship, what portion of earnings should new founders pay themselves versus reinvest in growth?

Pay Yourself 10% of Profits – At First

Showing financial restraint pays future dividends when starting any nascent business. Rather than pulling all profits out as personal salary, entrepreneurs should adopt a balanced pay strategy focused on scaling impact over time.

Industry guidelines suggest new business owners pay themselves approximately 10% of net profits post-tax. So on $100K revenue and $70K net, take $7K as salary during the initial business phase.

Reinvest the remaining profits after owner pay into capabilities strengthening the foundation for profit growth – whether that means hiring key roles, buying essential equipment, upgrading digital systems, licensing technologies, building market awareness through advertising, or leasing higher-performing real estate.

Prioritizing such investments compounds returns which ultimately provides greater owner income in later years. With this balanced strategy, new entrepreneurs boost 3 year incomes by an average of 60% compared to those paying themselves all profits from day one.

But a major looming question remains – how long will all these millions of pandemic-era businesses actually last?

At Least 20% of New Companies Fail in Year One

Let‘s acknowledge from the outset that launching any new business at any point in time remains an inherently risky endeavor fraught with uncertainty. Founders sacrifice stability and face weighted odds frequently ending in failure.

The first year proves particularly perilous for startups. Approximately 20% of small businesses across sectors fail within 12 months of inception according to historical data.

Among notoriously tricky restaurant new ventures specifically, first year failure rates run slightly lower at around 17% likely thanks to post-pandemic tailwinds still bolstering demand for takeout.

Zooming out longer term, only about 30% of new businesses survive through 10 years. So while founding stories from Subway or Apple represent inspiring outliers, reality for most entrepreneurs entails fighting odds stacked against eventual success.

Still, today‘s underlying operating landscape offers new business owners key advantages. Specifically, the rapid adoption of digital technologies and remote collaboration tools enabling more Americans to start businesses at lower upfront costs than seen historically.

Lean Digital Business Models Improve Odds Today

Cloud computing, video conferencing apps, online payment and accounting systems collectively minimize foundational friction for new entrepreneurs across sectors. Utilizing this new suite of rapid deployment SaaS tools eliminates substantial cost burdens previous generations of business owners contended with.

For example, utilizing Google Workspace or Office 365 circumvents big ticket IT infrastructure expenses associated with running servers or configuring on-premise data centers to facilitate remote work capabilities.

Similarly, selling products or services nationwide no longer requires storefront or office investments upfront either thanks to ecommerce and internet marketing channels. The overnight shift to remote selling driven by COVID restrictions paved the way for more lean startup models.

So today‘s new Generation Z and Millennial founders launching ventures present more digitally native understanding from the outset. Having built side hustles already through internet apps over the past decade, this youngest crop of entrepreneurs enters battle hardened with online business management experience many older small business owners still often lack.

The net beneficiary of these digital tailwinds are American consumers – gaining access to more niche products and services as technology reduces barriers entrepreneurs once faced trying to compete regionally or nationally.

Conclusion: Entrepreneurship Evolution Only Accelerating

While small business creation patterns typically track the overall economy‘s strength, America‘s current explosion in new ventures counters a downturn, subverted instead by technological and social change. The next decade portends even less linear entrepreneurship thanks to exponentially faster digital disruption cycles.

And demographic data suggests Gen Z and Millennials still sit just below the crest of the entrepreneurship wave‘s peak potential, as their total US population eclipses other generations right as cloud computing fully democratizes startup foundations.

So while approximately 20% of those inspired in recent years transform ambition into sustainable ventures at present, coming generations appear primed to thrust that entrepreneurial completion rate even higher – launching and scaling ventures faster than witnessed historically thanks to app ecosystems.

The promise of the American dream manifesting into careers cultivated by autonomy and ownership remains alive and well thanks to new digital wind at the backs of entrepreneurs today. By further expanding access and support for founders of all ages and backgrounds in coming years, our economy and society both stand to benefit enormously.