The Number of Small Businesses Is on the Rise. Here's Why
Despite the onset of the pandemic, 2020 was the highest year on record for new business applications since the data started being collected in 2004. The surge continued into May 2021, the National Bureau for Economic Research (NBER) confirmed.
But that's not the whole story. While the number of new business applications has been increasing, the total number of small businesses dropped. By the end of 2020, small businesses in operation declined 29.7 percent in comparison to January 1, Peterson Institute for International Economics noted. This drop can be largely attributed to the global pandemic and the accompanying economic disruption it brought.
Launching a business requires—as it always has—courage and strategic thinking. But this decline underscores that protecting your business once it's off the ground is vital, particularly in these tumultuous times. Small business insurance is one key to longevity.
Small business insurance protects your business's assets, property and income against a variety of risks, such as accidents, shutdowns, natural disasters and lawsuits. If you're thinking about jumping in the entrepreneurial pool—or you've already taken the plunge—it's important to give careful thought to shoring up your enterprise. Choosing affordably priced, customized small business insurance from a reputable company like State Farm should be part of your plan. We explore what drove the small business trend and how to protect what you've built.
An Entrepreneurial Reboot
Some startup entrepreneurs felt more confident about their financial prospects, thanks to stimulus and unemployment checks enabling a launch, NBER research suggested. But other factors also played a role.
One was the availability of time afforded to many Americans since the pandemic began. Sheltering in, some without their usual work and personal obligations, aspiring business owners had free hours to conceive a business idea and to follow it through.
Technology also made the startup process easier. Would-be entrepreneurs could use online platforms to begin marketing and selling their products and services from their socially distanced homes. Social media platforms such as Facebook and Instagram played a key role, connecting buyers and sellers during a period when setting up shop in person may not have been feasible. Facebook Marketplace reached over 1 billion users in April 2021. Instagram added its Shopping features to enable e-commerce on the platform, and this new marketing tool set appears to be working well. A March 2021 survey of consumers by the NPD Group reported that 51 percent made a fashion purchase while scrolling through Instagram and Facebook.
Keep a Business Secure for the Long Haul
Many of the financial challenges of the last couple years were unavoidable, but there are also valuable lessons to be taken from the blows that have been dealt to businesses as of late. Every business owner should have a contingency plan in place for protection against unexpected crises, whether a weather-related emergency, an event like a fire, employee dishonesty or vandalism.
Having the safety net of a solid business owners policy is important. This policy includes coverage for property insurance, which protects your place of business, buildings and your personal property from theft, fire and many other factors. It even provides equipment coverage, business liability for those slips and falls, and professional liability insurance for select businesses to help protect you against costly claims and lawsuits.
Every small business owner should look into coverage for general liability and property (a business owner's policy takes care of both), health insurance, life insurance and auto insurance, according to State Farm. Workers' compensation insurance is an important tool in protecting your most valuable asset, your employees, as well as the financial assets of the business, from the high cost of medical care to wage replacement. Workers' compensation is required in most states if you have employees. If your employees drive their own vehicles for your business, then State Farm's Employers' non-owned car liability coverage would be important to have.
A State Farm agent can help you find a policy for your needs.
Protection through insurance is one way to increase the odds of staying in business, even when others around you are closing their doors. It's part of planning for success—whatever the future holds.
Find a local agent or visit statefarm.com/smallbusiness to start safeguarding your business today.
The contents of this article is for informational purposes only and does not constitute financial or investment advice. It's important to perform your own research and consider seeking advice from an independent financial professional before making any investment decisions.
State Farm
Bloomington, IL