Labor challenges aside, Michigan’s small business economy thrives.

Michigan’s small business economy is flourishing according to the 19th Annual SBAM Entrepreneurship Scorecard released recently. The report is published by the SBAM Foundation and analyzes the entrepreneurship in Michigan, revealing small businesses in the state to be outpacing those of the nation as a whole regarding the number of small businesses opening and revenue. In Michigan, small business revenues have increased by 24.2% since 2020, three times more than the national 8%, the report suggests.

Furthermore, the state has seen an increase of 8.5% in small businesses operating since the beginning of the pandemic in early 2020, which is similar to the 2019 record. However, this figure is still above the national average growth rate of 3.1%. These figures indicate that Michigan’s small business community is growing despite the pandemic’s effects on the economy and workforce.

Although more than half of new small businesses usually fail within five years, Michigan’s five-year survival rate had significantly improved since 2020, with more companies now surviving beyond the five-year threshold. This progress is considered a significant achievement in the current economic climate.

Michigan has also shown an increase of individuals obtaining four-year degrees and technical certifications, ranking fourth in the nation. These diverse talents are critical to the future growth of Michigan’s tech and non-tech companies. The report suggests that challenges remain, as Michigan’s working population has decreased, with about 721,000 fewer people working than in January 2000.

The labor force participation rate was 68.8% in the early 21st century, whereas currently, it hovers around 60%, with about 4.86 million residents working. Michigan’s workforce has shrunk by more than 97,000 since the pandemic began, and projections indicate that about 200,000 residents will be unemployed by the end of 2022, with about 400,000 job openings.

The report also highlights demographic changes that have impacted the state’s workforce, with a negative effect on workers aged 16-19 and those aged 25-54. One potential hurdle that small businesses are currently facing is inflation. Around 42% of small businesses in Michigan and 41% nationwide have reported a significant increase in their prices over the last year.

Despite the current challenges, Michigan’s entrepreneurs remain resilient. Carey, the SBAM president and CEO, stated that Michigans are now turning more toward entrepreneurship than ever before, “despite rising costs from inflation and labor shortages challenging them, and a potential economic slowdown looms.” He added that “I am very excited to see where the entrepreneurial spirit will take us. I think it bodes well for our future. There is a resilience that comes from having a strong small business community in the state. It means we don’t have to put all our eggs in one basket.”

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