Although unemployment remains at a historic low, some industries, including tech and retail, are experiencing mass layoffs fueled by inflation. With fears of more layoffs to follow if the economy does sink into a recession, we wanted to find out how workers who have already been laid off this year are handling an unpredictable job market.
We surveyed 1,250 workers who were laid off in 2022 and found that:
- 1 in 10 plan to start their own business instead of returning to the workforce as an employee
- 50% say they will fund their new company with a small business loan
- 4 in 5 are somewhat or very concerned about starting a new business while inflation remains high
Less Than Half of Workers Laid Off This Year Will Remain in Their Industry
The majority of workers who were laid off in 2022 do not plan to get another job in the same industry. 49% of respondents said they plan to find another job in their field, 29% plan to find a job in a different field, 10% will start their own business, and just 6% say they will go back to school instead.
The most common industries survey respondents reported being laid off from included retail (21%), service and hospitality (12%), healthcare (10%), and manufacturing (9%). Additionally, of the laid-off workers who plan to start their own business, close to two-thirds say their new business will be in a different industry.
“Try to get some real-world experience in the industry [before starting your business],” advised small business consultant Dennis Consorte. “You can either take on a part-time job to get your feet wet, or you can explore the industry as a customer.”
“You don’t have to actually buy anything. But, you can pay attention to industry trends, the customer experience in different retail shops and online, and what you like or don’t like about competitor products.”
“After you’ve done some research, you’ll have a better idea of whether the industry is worth pursuing, and you’ll know more about the competition and how you can differentiate your own product or service,” said Consorte.
More Money and Passion Projects Are Top Reasons for Starting a New Business
When respondents were asked why they wanted to start their own business instead of going back to work, the top answers given were to make more money (57%) and to pursue a passion (56%).
“No matter what you pursue, it should be something that you’re excited about,” continued Consorte. “If you lack the passion when you start out, then it’s likely you’ll burn out before the business becomes a success. If you haven’t worked in the field, then learn as much as you can before you start your business. You can spend hours diving into industry publications, websites, and online videos to get some background.”
50% Counting on Small Business Loans to Fuel Their New Venture
Half of respondents planning to start their own businesses say they will apply for a small business loan. 46% plan to use money from their savings and 38% will try to find investors. Additionally, the largest group of respondents, at 43%, say they plan to hire 1-5 employees to work at their new company.
“Make sure you’ve written out your business plan including a financial model that you’ve worked out in a spreadsheet,” advised Consorte. “A pitch deck is also helpful if you plan to raise money from investors.”
“Start with friends and family to get a little seed capital. In fact, you can ask people for feedback on your pitch without directly asking them for money. That gives you the opportunity to practice in front of a friendly audience, and to get feedback to apply to the next pitch.”
“If they’re interested in investing, they’ll let you know,” Consorte continued. “You can go for angel investors or VCs after that, depending on your industry. Also, be sure to look for small business loans and grant programs in your area.”
“For example, there are often programs to improve economic development in certain geographies and to encourage women and historically marginalized groups to start businesses. If you’re creating a product, then you can consider crowdfunding, too.”
“Many startups began as Kickstarter projects, where they raised enough for their first round of production,” added Consorte. “Finally, consider bringing on a business partner. You can either find someone who has more of the financial responsibility for the company while you handle more of the ongoing operations. Or, you could partner with someone who might qualify your company for funding to which you wouldn’t otherwise have access.”
Majority Are Concerned About Starting a New Business Amidst Inflation
Although the majority of respondents plan to launch their business this year (33%) or in early 2023 (40%), they have understandable concerns about the state of the economy. 79% are somewhat (48%) or very (31%) concerned about starting a new business while inflation remains high.
“You need to cover all of your bases when starting a new business,” said Consorte. “Inflation is at an all-time high and there’s talk of a recession. If you start a new business, have enough cash in the bank to cover operating expenses for a while. Traditionally, this would be six months. But, in this economic climate, you may want to have more like 9-12 months of operating expenses saved.”
Many Have No Backup Plan in Case Business Fails
However, nearly 1 in 4 respondents say they don’t have a backup plan in case their business doesn’t make it. 1 in 5 say they are determined to pursue entrepreneurship and will try starting a different business if their initial attempt fails, while 50% say they will go back to work as an employee if their business is not successful.
“Keep in mind, during an inflationary period, your money loses value while it’s in the bank. So, try to have some inflation-resistant investments, too. As a backup plan, you may want to take on a side hustle just to keep some cash flow going while you build your business,” finished Consorte.
“Additionally, make sure that you’re working your network every day. The right connections will help you to get the right resources for your business, and will open doors to a new career if things don’t work out with your startup.”
This survey was commissioned by Digital.com and conducted online by the survey platform Pollfish between July 15 and August 3, 2022. In total, 1,250 participants in the United States were surveyed. All participants had to pass through demographic filters to ensure they were above the age of 18 and identified as currently being out of work. Respondents also had to pass through a screening process to ensure they were laid off between January 2022 and the time of taking the survey.