It's not uncommon for there to be an upswing in the creation of new businesses in an economic downturn. One reason for this is that often experienced professionals are laid off and receive good severance packages which provides them the opportunity to start their own business. Growth in sole-proprietorship has been on a steady increase since 2000, according to the SBA and this may provide some support to the idea that businesses get started in an downturn. And since small businesses represent upwards of 75% of all new job, that's very good news.

The numbers themselves are impressive. Income for sole proprietors was $728.4 billion in 2000 and that figure has grown to $902.8 billion in 2004, a 19.3% increase. Bankruptcies are also at a lower rate than 2000, which was the peak of the Internet bubble. Perhaps the most interesting figure in the NFIB Business Optimism Index, which was 104.6 in 2004, and only 100.3 in 2000. Small businesses appear to be doing better than they have in the last five years, which indicates a strong, thriving economy despite the gloom often distributed by the news media.

Originally published June 9, 2005.

Source: SBA The Small Business Advocate, Vol. 24, No. 6