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Small business growth is skyrocketing across America due to cultural and economic changes during COVID, but the startups are hiring fewer employees than they used to.
The Big Picture: There’s now a record number of entrepreneurs but fewer opportunities for people simply looking for full-time employment.
Between the Lines: WSJ calls the new breed of businesses “pint-sized startups.”
- Census Bureau data found that startups had an average of 5.8 employees at the beginning of the century. Now they have 4.6, and it’s been trending sharply downward since COVID.
- Part of the reason is that entrepreneurs are taking on more roles at their own companies to keep overhead as low as possible and be flexible in what feels like a constantly changing economy.
- Additionally, founders are relying more on contractors (a mix of part-time and full-time; US-based and international), gig workers, and AI tools to scale up/down depending on demand and goals.
Closing Thoughts: Small businesses are the backbone of employment growth in America, accounting for 60% of jobs created between 1995 and 2023. But as startups shift to smaller headcounts, more people may be forced to consider starting their own business if they want to be employed — a riskier endeavor considering that most startups fail within their first year.
Go Deeper: Silicon Valley is obsessed with the idea of staying in “founder mode” — founders taking on larger roles at their companies instead of delegating to reports (in other words, needing fewer employees).
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