Business Creation and the Resiliency of the Economy
Business creation is the process of developing new firms that provide products or services. This activity can be a source of economic growth and adaptation in market economies. New businesses often create jobs and help fill gaps in markets that arise when older firms decline or fail. Policy makers seek to encourage new business formation, which is associated with higher productivity and greater economic flexibility and adaptability. However, the start-up process is costly in time and money for entrepreneurs and their teams, and only about two-fifths of business startups reach profitability.
Business startup is a complex undertaking that requires inspiration, passion and cash flow planning. In addition, the timeline for launching a business can vary depending on the type of product or service and whether it is seasonal. It is also important to determine the target customer base and establish a brand name and website. Upfront research is critical to verify that the idea for a business is viable, and a detailed plan is necessary to guide the company’s future objectives.
The recent surge in new business applications suggests that the economy’s resiliency is continuing to expand and overcome the effects of the pandemic. Moreover, the strong level of new business applications reflects the fact that many of the new enterprises are in sectors that typically respond to shifts in consumer demand, such as transportation and warehousing; retail trade; accommodation and food services; administrative and support; and other services (a broad category that includes home-based and nonseasonal businesses). The overall upturn in new business applications is especially striking because it appears to be broadly based across industries.