Michigan’s entrepreneurial economy is on an upward swing of steady growth, even outpacing the U.S. average, according to a report released today. The 19h Annual Entrepreneurship Score Card, released by the Small Business Association of Michigan (SBAM) Foundation, measures Michigan’s performance in entrepreneurship-specific economic indicators compared to other states to forecast trends and identify signs of instability ahead.
Over the past two decades, Michigan has seen extended periods of decline, stagnation, recovery, and growth. Despite the inherent risks associated with starting a small business, indicators show business starts have hit record highs.
“The pandemic seems to have sparked an impressive increase in entrepreneurship,” said SBAM President and CEO Brian Calley. “Michigan citizens appear to be turning to entrepreneurship more than ever before, even as the rising costs of inflation and worker shortages pose challenges, and a potential economic slowdown looms on the horizon.”
Beginning in the summer of 2020 and continuing through 2022, Michigan has seen record business starts, including those with employees and those operating as independent contractors and sole proprietors. What’s more, the five-year survival rate for small businesses shows notable improvement.
“It is a widely held rule of thumb that more than half of new small businesses fail within five years,” Calley said. “However, since 2020, Michigan has seen the five-year survival rate notably improve. An increase in new business starts combined with more businesses surviving past the five-year mark is a powerful combination for growth.”
Positive economic indicators for Michigan small businesses identified in this year’s scorecard include:
Small business revenue has experienced a 24.2 percent increase since 2020 – triple the U.S. increase of 8 percent.
Michigan now boasts 8.5 percent more small businesses open as compared to the beginning of 2020. This compares very favorably with the overall national average increase of 3.1 percent.
Nationally, Michigan ranks number four in four-year and tech credentials: the percent of bachelor’s and above degrees/certificates earned in technology-related fields. This talent pool is critical for Michigan’s future tech and non-tech growth companies.
The Score Card also identified pressing issues facing small businesses and entrepreneurs, such as labor force lags…
Michigan has 721,000 fewer people in the workforce as compared to January of 2000. Labor force participation peaked at 68.8 percent around the turn of the century. Today, Michigan struggles to stay above 60 percent.
During that time period, Michigan has seen the steepest declines in labor force participation among younger workers.
As of the end of 2022, Michigan’s workforce was down by 97,200 people since COVID struck.
Net domestic migration for Michigan has improved through the past decade but remains negative, indicating that worker supply from out of state is not a promising worker supply.
…and inflation still looms large:
40.6 percent of U.S. Small Businesses and 41.9 percent of Michigan Small Businesses experienced what they describe as large/severe price increases in 2022.
The full Score Card report is available to download at www.sbam.org/scorecard.