Will there be a surge of startups in 2013? First let me explain that in my view a business is a startup for about three years, from six or so months before to two-and-a-half years after its official launch date. So some of you reading this may still be in the startup phase—which is good news since all signs point to a good year ahead for new businesses.
Startup entrepreneurs themselves are feeling good about 2013. In the Kauffman/LegalZoom Startup Confidence Index survey, a whopping 83 percent of startup business owners are confident about their potential profits next year. Young entrepreneurs, ages 18 to 30, are even surer of themselves: 93 percent say they’re “confident” or “very confident” about 2013 sales projections.
Jobs and OptimismThis is good news for the nation as a whole since, startups drive job creation. Again, according to Kauffman, 40 percent “of hires at young firms are for newly created jobs,” which is much higher than the rate of jobs created by more established companies. And according to the 2011 Global Entrepreneurship Monitor (GEM) U.S. Report issued by Babson College and Baruch College, more than 29 million Americans were involved in startups last year, and 40 percent of them expect to “create more than five new jobs in the next five years.”
“We saw an unprecedented jump in entrepreneurial activity in 2011,” says the lead author of the GEM Report, Donna J. Kelley, an associate professor of entrepreneurship at Babson College. “Importantly, necessity-based entrepreneurship—people who start businesses because they can’t find a job—accounted for a lower proportion of entrepreneurial activity in 2011. The entrepreneurship rate was pulled up primarily by those starting businesses to pursue promising opportunities—a strong sign of entrepreneurial activity occurring as a result of optimism, not desperation.”
What’s behind the startup bravado? Kauffman reports that 45 percent of the new business owners “expect a moderate to significant increase in consumer demand in the next 12 months.”
On the downside, you’re going to have to be creative when it comes to crafting compensation packages. The wage gap between startups and established businesses is growing, according to Kauffman, with real wages at startups hitting an all-time low. To attract employees, you’ll need to consider what perks and benefits you can afford to offer, especially if you’re in the uber-competitive tech sector. Don’t overlook the intangible benefits like flex time, virtual work and promotional opportunities.
Also on a down note, financing will still be tough for new businesses. Startups in 2013 will need to operate lean and mean, without relying on the usual capital sources. Venture capital, for one thing, will be elusive if data from PricewaterhouseCoopers and the National Venture Capital Association is any indication. With less capital in the pipeline, VCs have been feeling more cautious and investing fewer dollars in fewer deals, a trend that’s likely to continue into next year. If you hope to grab some of the scarce cash, it’s best to be in the software or health-care industries.
If you’re unemployed and aspiring to start a business, there’s new help from the federal government. In December, the U.S. Department of Labor and the Small Business Administration launched a website to support state workforce and unemployment agencies in implementing or enhancing Self-Employment Assistance programs. These voluntary programs, initially funded in May through the Middle Class Tax Relief and Job Creation Act of 2012, make it possible for eligible people collecting unemployment to receive financial assistance equal to their unemployment benefits while they get access to entrepreneurial training and resources to help them start their own businesses.Not every state is participating in the Self-Employment Assistance program. Check the website to see if you're eligible.
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