Entrepreneurship is integral to maintaining a healthy economy. It fosters new ideas, spurs innovation, creates new jobs and occasionally promotes social change. During a time when the U.S. is having historic economic progression, it’s no coincidence that the country is also seeing record levels of entrepreneurship.
Last year, the U.S. surpassed one million establishment openings for the first time ever, according to the Small Business Administration’s Office of Advocacy. Further, the number of establishment openings jumped from 973,000 in 2017 to 1.003 million in 2018 — a three percent increase in entrepreneurship.
Closings also rose to 888,000, but this is standard for an economy when the number of openings rises. In fact, this is the eighth consecutive year that annual openings have exceeded closings.
“The opening of new establishments is closely related to economic growth,” a representative from the Office of Economic Research says. “When both openings and closings increase, an economy is said to be more dynamic, with the population of businesses changing faster.”
Over 98 percent of these establishments had fewer than 20 employees, as well, meaning the presence of small businesses is growing stronger in the country.
Arizona also experienced a rise in establishments. With roughly 18,000 openings last year, Arizona ranked 17th in the nation for entrepreneurship.
According to the U.S. Small Business Administration, small businesses thrive in Arizona specifically. As of January, 99.4 percent of Arizona’s businesses were small (meaning they had less than 500 employees), and 44.5 percent of Arizona employees work for a small business.
“This is a remarkable milestone for the U.S,” explains Chad Heinrich, state director of the National Federation of Independent Business. “Arizonans should be proud that our state is a mecca for small businesses. In Arizona, small business drives the economy by employing more than 1 million people.”
The spike in entrepreneurial attitudes is likely tied to the record-high small business optimism level reached last year. According to the Wells Fargo/Gallup Small Business Index, optimism among small business owners reached 118 in the second quarter of last year — the index’s highest score in the fifteen years of the report.
“What we’re hearing from our members is that the optimism does flow into their business decision making. If they’re optimistic about their economic growth, they’re more willing to invest in more employees and better benefits for existing staff,” Heinrich said. “Another thing that’s important is that small businesses can be very capital intensive. They’ll make capital spending decisions when optimism is high.”
Presently, optimism is fairly high among small business owners. 59 percent of small business owners reported capital outlays last month — a two percentage point month-to-month increase — and 28 percent are planning capital outlays in the next few months.
This year, a tight labor market may impede many entrepreneurs from finding the right talent and starting new companies. Nevertheless, job creation, earnings and quarterly sales continue to remain strong for small businesses.