In 2023, U.S.-based entrepreneurs filed more applications for new businesses than any other time over 20 years. Gusto surveyed 1,300 business owners who started companies in 2023 to understand why. A big reason for the jump? More people already working full- or part-time for another employer decided to start their own businesses as side hustles, with that number increasing from 27% in 2022 to 44% in 2024. The survey also revealed that younger workers, aged 25 to 34, are more likely to start their businesses as side gigs.
In an interview with Fox Business, Liz Wilke, Principal Economist for Gusto, shared her thoughts on what inspired this change:
- Hybrid and remote working is now a norm, which allows people to take control of their schedules and juggle regular jobs and side jobs more fluidly;
- A volatile economic outlook and inflationary pressure, which are encouraging people to find additional work to pad their wallets; and
- The rise of advanced technologies like generative AI, which empower people to boost efficiency and productivity.
The Face of the New Small Business Owner
We saw more women starting their own businesses during the pandemic and that trend is continuing, according to Gusto. Nearly half (49%) of new small business owners were women in this latest survey, up from a mere 29% in 2019. Despite their growing role in the small business environment, women still struggle to get capital investment: just 3% of women entrepreneurs said they received private capital to start their businesses, compared to 9% of men.
When asked to share their motivations for starting their own businesses, women were more likely than men to site flexibility as a motivator (70% versus 66%). Conversely, men were more likely to note that they started their own businesses because they or their partner lost their last job (10% of men versus 5% of women).
Gusto also saw a rise in the number of Black and Hispanic small business owners, with most of these respondents citing financial stability and empowerment as their key motivator. In fact, these respondents are more likely than any other demographic to cite this as a focus.
Generative AI, Emerging Tech Empower Small Businesses
It should come as no surprise that small business owners and entrepreneurs are testing generative AI to determine how it supports their internal workflows. Approximately 22% of new firms are currently using generative AI with marketing being the most popular use case (76%), including content creation and market research. A smaller percentage of respondents use generative AI for sales (41%), such as crafting communication with leads, as well as customer service (26%).
