Introduction
US entrepreneurship had another strong year in 2024 despite political and economic uncertainty. New-business applications remained at an elevated level, and many new firms got off to a fast start. Well over half (65%) of new businesses were profitable in 2024 and 57% of those that hired an employee last year plan to expand their headcount this year.
In addition to creating local jobs, entrepreneurship also gave those affected by layoffs the opportunity to build financial security. In 2024, the percentage of entrepreneurs who started a business because they or their partner lost a job rose 67%.
Entrepreneurs are moving the economy forward in other ways too. New-business ownership has become more diverse in recent years, and rapid AI adoption is creating opportunities to start businesses as well as widespread productivity gains. Meanwhile, side hustles, while less common than in 2023, are still an option for many entrepreneurs who don’t want to give up their day job.
The 1,000 founders we surveyed for our fifth annual new-business formation report gave us a lot of insight into what it was like to start a business in 2024. Here’s what we learned.
Key Findings
- Women are starting almost half of new businesses. Women entrepreneurs started 49% of new businesses last year, a 69% increase from 2019 and the highest rate we’ve seen in the five years we’ve published this report.
- AAPI, Black, and Latinx entrepreneurship have made durable gains. Since 2019, the percentage of businesses started by AAPI, Black, and Latinx entrepreneurs is up 17%, 67%, and 25%, respectively.
- Side hustles have taken a hit amid the RTO push. As many employers direct their workers to spend more time in the office, fewer entrepreneurs are starting their business as a side hustle. Last year, 35% of new businesses were side hustles, down from 45% in 2023.
- Remote work is becoming less common at start-ups. New-business owners are also showing a preference for in-person work. The percentage of new businesses that allowed fully remote or hybrid work fell from 40% in 2023 to 34% in 2024.
- Entrepreneurs across generations are quickly embracing Generative AI. New-business owners are rapidly adopting Generative AI tools. Last year, nearly half (47%) of new businesses used GenAI, up from 21% in 2023. Millennial, Gen Z, and Gen X founders have adopted the technology at a similar rate.
- GenAI is creating widespread productivity gains. GenAI is giving many entrepreneurs a productivity boost, a sign of the massive impact it could have on the economy in the years to come. Four out of five (81%) new-business owners who are using GenAI said it allows them to get more done.
- A tough job market is making entrepreneurship more attractive. With hiring slow in many parts of the economy, the percentage of entrepreneurs who started a business because they or their partner lost a job rose 67% last year.
- New-business hiring is strong. Start-ups are becoming an increasingly important source of jobs in today’s sluggish hiring environment. More than two-thirds (69%) of new businesses last year hired at least one employee or contractor, and more than half (57%) plan to hire this year.
Entrepreneurs Remain a Diverse Group
Women Started Nearly Half of All Businesses in 2024
Women entrepreneurship has grown rapidly. In 2024, women started close to half (49%) of new businesses, a 69% increase from 2019 and the highest rate we’ve seen in the five years we’ve published this report.
One driver behind this trend may be a desire for more flexibility. Women entrepreneurs were 17% more likely than male entrepreneurs to say they started their business because they wanted to be their own boss, and 30% more likely to say they wanted to work on their own schedule.
AAPI, Black, and Latinx Entrepreneurship Have Made Durable Gains
Entrepreneurship became more diverse during the pandemic, and those gains have held in the years since. The share of businesses started by AAPI, Black, and Latinx founders is up 17%, 67%, and 25%, respectively, since 2019.
Some of those gains may be a response to persistent pay and wealth gaps. Latinx entrepreneurs were 1.7 times more likely than White entrepreneurs to say they started their business because they believed they could earn more working for themselves. Black entrepreneurs, meanwhile, were 2.1 times more likely than White entrepreneurs to say they started their business to supplement their existing income.
Side Hustles Are Down Amid the RTO Push
The share of businesses started as side hustles (35%) fell 22% last year, though it was still higher than in 2022 (26%). Last year’s dip came as many employers ramped up their return-to-office efforts, leaving workers with less time and flexibility to work on side projects.
Layoffs, combined with slowed hiring in many parts of the economy, put some entrepreneurs in a position where they didn’t have the choice to start their business as a side hustle. In 2024, entrepreneurs were 67% more likely to start their business because they or their partner lost their job.
Side Hustles Are Most Popular with Gen Z
Gen Z led the way in starting side hustles last year. Younger workers tend to have less wealth and lower earnings potential early in their careers, and are less likely to have financial support within their household. More than a third (37%) of Gen Z entrepreneurs are the only source of income for their household, compared to 28% of Millennials, who are more likely to be married or have a long-term partner.
Side Hustles Are Less Common in Professional Services
While Professional Services may seem well-suited to side hustles, given that it’s often easier for accountants, consultants, and other workers within the sector to work remotely, we found that Professional Services firms were actually the least likely to start as side hustles. That may stem from the fact that Professional Services jobs tend to pay relatively high salaries, which means it’s often easier for those in the sector to save enough to start a business without another source of income.
Many Side Hustles Are Big Commitments
Most side hustles look more like part-time or second jobs than hobbies. More than half (56%) of side-hustlers spend more than 20 hours a week on their business, and 16% dedicate more than 40 hours per week.
In-Person Work Is on the Rise
While a third (34%) of businesses started last year offered remote or hybrid work, the share that was fully in-person grew from 61% in 2023 to 66% in 2024, a trend that was consistent with the return-to-office push from larger employers.
Professional Services firms were the most likely to offer hybrid or fully remote work (56%), while Personal Services firms — a category including many businesses that require in-person interaction with customers such as salons, retail stores, and restaurants — were the least likely (16%).
Time Management and Cash Flow Are the Top Challenges for New-Business Owners
Starting a business often means juggling a wide range of tasks, which can be hard even for experienced founders. It’s not surprising then that new-business owners cited time management as their biggest challenge, with more than 40% saying they didn’t have enough time to do everything they needed to. Managing cash flow and finding new customers rounded out the top three challenges, with more than a third of respondents citing each.
Entrepreneurs Are Quickly Adopting Generative AI
Generative AI is quickly becoming an essential tool for new-business owners. Last year, nearly half (47%) of new businesses used GenAI, a significant increase from 2023, when just 21% of new-business owners said they were using the technology (a smaller percentage, 16%, said it was possible their employees were using GenAI without their direction).
Perhaps the clearest sign of GenAI’s emergence as an important tool for entrepreneurs is its popularity across generations. Around half of Gen Z (52%), Millennial (50%), and Gen X (48%) entrepreneurs said they were using the technology. Baby Boomers (20%) were the outlier.
GenAI Is Having a Big Impact on Productivity
One early sign of the transformative impact GenAI could have on the economy is the widespread productivity boost it’s giving business owners. Four out of five (81%) new-business owners said GenAI allowed them to get more done last year, by far the most common benefit respondents cited.
GenAI is also shaping new firms’ hiring needs. More than a third (37%) of new-business owners said the technology helped them complete tasks that might otherwise require them to hire someone else. That’s significant because labor costs and a lack of qualified candidates are challenges for many small businesses.
Entrepreneurs Are Using GenAI to Find New Customers
Customer acquisition is by far the most common GenAI use case for new-business owners, with 71% of GenAI users applying it to marketing tasks and 37% using it to streamline their sales process.
Gen Z Entrepreneurs Are Using GenAI Across Their Business
While GenAI is popular among multiple age groups, Gen Z is the most comfortable using it across business functions. At least 20% of Gen Z entrepreneurs using GenAI applied it within six of the seven we functions we measured, the most of any generation. For Millennial and Gen X entrepreneurs, AI use was more concentrated within sales, marketing, and customer service.
More than 30% of Gen Z entrepreneurs who used GenAI when starting their business used it for legal or accounting and financial tasks. These business owners are the most comfortable with GenAI, and are open to using it in areas where they may feel they have less experience or understanding.
New-Business Owners Value Autonomy, Flexibility, and Financial Security
Having control over their work and creating long-term financial stability are big motivators for many entrepreneurs. The ability to be their own boss (65%), build an asset that could create financial security (55%), or set their own schedule (54%) were the three most common reasons entrepreneurs started their business last year.
More Than ⅔ of 2024 Businesses Have Hired an Employee or Contractor
New businesses can quickly make an impact on their local economy. More than two-thirds (69%) of firms started last year hired at least one employee or contractor, and more than half (53%) had at least one full-time employee.
Most New Employers Plan to Hire in 2025
While hiring has slowed in much of the economy, many new businesses plan to expand in 2025. More than half (57%) of the firms that started last year and hired at least one employee plan to increase their headcount this year. That was true in each of the four sectors we studied, suggesting that new-business owners in many industries are feeling optimistic.
Even new businesses that don’t plan to hire this year are at least keeping their headcount steady. Only 1% of new firms that hired an employee last year are planning to cut their workforce or shut down in 2025.
More Than a Third of New Businesses That Used Financing Needed $10,000 or Less
The vast majority of new-business owners (80%) last year used some form of start-up financing, whether from a personal contribution or an external source, and more than a third (38%) of that group needed $10,000 or less. Personal contributions (53% of new-business owners who used financing) were the most popular type of financing, followed by business credit cards (19%).
New Entrepreneurs Use Financing to Cover One-Time Costs and Ongoing Expenses
One of the biggest challenges of starting a business is paying for equipment or property and managing cash flows before you start earning revenue. New businesses last year used financing to purchase tools and equipment (63% of new firms that used start-up financing) and cover one-time costs to set up a place to operate (43%). It was also common for new businesses to need financing for non-payroll operating expenses (58%). Cash flows are generally tight for small businesses, especially in their first year. During this time, these businesses may be completing work while waiting for customers to pay invoices – and seek financing to cover the gap.
Conclusion
New businesses in 2024 showed steady progress in innovation, diversity, and adapting to their macroeconomic environment. Founders are addressing local job challenges and using technologies like Generative AI to improve productivity and manage costs. These shifts point to business models that focus on stability and long-term growth rather than cashing in on short-term fads.
Women and minority entrepreneurs are playing a key role in the small-business community, adding new perspectives to everyday challenges. While the environment remains competitive, many new businesses are building a solid foundation for continued progress.
Methodology
These findings are based on a survey of 1,011 new-business owners using Gusto’s platform. The businesses were identified as having joined Gusto as a new business in 2024, and respondents were solicited across individuals who were identified to be the “Owner” or “Founder” of the business. Respondents confirmed at the beginning of the survey that their businesses were created in 2024. Respondents were asked to complete the survey via email from February 3 – February 21, 2025. Reported responses were weighted to match the industry distribution across the universe of businesses created in 2024 based on the Census Bureau’s Business Formation Statistics.
