On the Rise: U.S. Business Owners Under Age 40

Think small business ownership is just for seasoned professionals? Think again. According to data from the U.S. Census Bureau, more and more younger entrepreneurs are turning their business dreams into reality. Our research team has released a report on the rise of business owners under the age of 40. Here are some key takeaways:

Takeaway #1:

The number of younger business owners is at a 20-year high.

The early 2000s and 2010s saw an overall decline in business owners under 40. This likely had to do with the Great Recession, as well as older generations staying in the workforce longer. With fewer workers retiring, there were fewer gaps in the market. And a less-than-optimistic economy does little to incentivize the business dreams of up-and-comers.

Since 2015, however, the number of younger entrepreneurs has risen to nearly 30% of the total business owner population. The tide turning can be considered a sign of economic growth, with increased opportunities for start-ups.

Takeaway #2:

Many business owners under 40 are choosing industries without costly prerequisites.

The number of younger business owners has increased across most sectors. However, two industries are leading the pack. In the information sector — such as software development and information services — young business ownership rose from 37.9% in 2018 to 45.3% in 2023. And arts, entertainment, and recreation are nipping at information’s heels, rising from 33.4% in 2018 to 38.5% in 2023. 

One factor likely to be contributing to growth in these industries is their relatively low barriers to entry. Many of the skills used in creative services and tech sectors can be self-taught or learned via online courses. They don’t typically require costly license and permit fees, nor do they necessarily require a high level of startup capital. As a result, many younger business owners are instead taking what they know — or what they’re good at — and turning it into budget-friendly, flexible career opportunities. 

Takeaway #3:

Tech is big among young entrepreneurs.

With business owners under 40 flocking to the information sector, it’s clear there’s plenty of opportunity in digital services. And it’s no wonder. Recent years have seen not just exponential technological advancements, but also a greater-than-ever need for digital solutions.

The onset of the COVID-19 pandemic in 2020 set in motion a demand for more ways for people to work, create, and stay connected within the safety of their own homes. The pandemic also inspired many of them to become their own bosses. Combined, these factors made for great growth for young business owners in information services.

Takeaway #4:

The cost of living is making an impact.

Young business owners are concentrated in parts of the Mountain West, Midwest, and South

Source: Simply Business analysis of U.S. Census Bureau data | Image Credit: Simply Business

Many of the states with the greatest number of business owners under 40 are concentrated in the Midwest, Mountain West, and the South. The top-five states — each with over a third of their businesses being owned by younger entrepreneurs — are:

1. Utah (37.3%)
2. North Dakota (35.1%)
3. Wyoming (34.4%)
4. Oklahoma (33.6%)
5. Texas (33.5%)

So what exactly is drawing more young business owners to these regions and states? Cost of living is a likely factor. The five states with the smallest share of young business owners are all in New England, which tracks: The cost of living in the Northeast is much higher than the states with more favorable stats. Population density also might be impacting the growth of young business owners: Competition would be higher for new businesses.

Meanwhile, parts of the country with the greater populations of young business owners tend to have fewer residents and lower costs. And lower costs can be a big draw for young adults. Expanded work-from-home options and rising costs in major cities have de-incentivized living in more expensive metropolitan areas. And a lower cost of living can make pursuing a dream of owning a business far more achievable.

More from Simply Business:

Getting Ready for Business.

The cost of living is making an impact.No matter your age or the age of your business, it’s important to protect your hard work. We can help with that. At Simply Business, we work with some of the top national insurers to help small business owners find coverage suited to what they do. With our online quote comparison tool, you can shop curated coverage recommendations and browse quotes to find what works for you. All in just minutes. And with our Resource Center, you’ll find tips, tools, and guides to help you learn more about growing and protecting your business.