Business creation is a process that turns an idea into a profitable economic activity and, ultimately, allows individuals to pursue their goals and ideals with greater independence and control. It requires a great deal of hard work and perseverance, as well as an ability to juggle cash flow and make decisions that will impact the lives of entrepreneurs and their employees.
It starts with market research, which helps to define the contours of the future activity, including determining whether there is a real demand for the product or service and identifying what differentiates it from competitors (e.g., better quality, faster, lower price). It also identifies possible legal structures and the business model, which describes how the company creates value.
Once the initial research is complete, it is time to write a business plan, which will outline the steps needed to launch the new venture and the financial resources required to support it throughout its early stages. This step will also help to identify potential sources of funding, such as angel investors or venture capitalists and grants from local, regional and national entities, as well as community development corporations and business incubators/accelerators.
Prior to the COVID-19 pandemic, new employer business creation was on a long-term downward trend and remained below its pre-recession average through 2018 (see figure). However, it appears that the high-propensity business applications that have been recorded since the summer of 2020 have surged—particularly those from likely nonemployer firms—to overtake pre-pandemic levels. This is encouraging news and offers hope that strong rates of new business formation can help drive recovery.