I was in LA over the weekend because we (at soona) partnered with Shopify to bring some product photography love to the community out there. We began set up on Friday, wrapped up a few loose ends on Saturday, and had the event on Sunday. And boy what an event - we completed 130+ photo shoots in 6 hours with just 4 of us in total! The entrepreneurial community in LA is awesome!

Anyways, I share this because even though I was shattered I promised myself on the red eye flight home that I would maintain my streak and get this newsletter out this week. This makes 4/4 in 2023. One month down!

Ok. Now, lemme share this juicy gem.

Business Formation Statistics

Back in May of 2020 during the heart of the pandemic, I was leading marketing for an insurtech company, Thimble, and struggling to predict current demand and make decisions around paid spend. Thimble specialized in selling policies to the smallest of SMBs - typically individually operated businesses or very small teams where the owner was the decision maker.

I could turn on some marketing channels and keep an eye on various metrics like CAC and AOV or their leading indicators like CPM, CPC, or CVR. I could even look at impression share to see if my competitors were active as well. But cash was tight, investors were cautioning us, and we didn't want to be idiots and make the first wrong move.

Timing would be everything. Our first external signal that things might be coming back was the dramatic decline in February and bounceback by June of publicly traded companies.

But at the same time, unemployment rates were behaving inversely to the stock market.

While public company data was interesting we needed to find the pulse of small business operations. And then a thought occurred to me. "If unemployment is high, what are all these people doing with their free time?"

I had a feeling hope that high unemployment actually begets high entrepreneurship and to figure out if this hunch was right I went to the first place many marketers go to do research - Google Trends.

It was clear I was onto something! Searches for starting a business had the same sharp decline and bounce back as the market and aligned perfectly with the inverse spike in the unemployment rate. But Google Trends is finicky and looking at indexed data was not the smoking gun I was hoping for.

A few Google searches later and I found it! It turns out that the Census publishes business formation statistics every month! This gold mine of data reflects the number of people that file to form an LLC from across the country!

I stumbled on this data in May and by June-July we were really in the thick of things. Google indexed its highest volume of searches for "start a business" ever and that coincided with the highest amount of LLC formations ever!

For Thimble, our product was perfect for new business owners so knowing that a record amount of small businesses were being formed gave us the confidence to turn up ad spend after months of battening down the hatches. We even shared this research with our board who now nodded excitedly.

Small businesses and their formation have a ripple effect across the entire economy. They need software tools, manufacturers, raw materials, and so much more. Businesses like Shopify and Etsy thrive during high business formation as their products are apt for new entrepreneurs.

And, to my delight, the Census allows you to splice the data in a number of interesting ways.

When you file for a business you identify your industry according to a number called a NAICS code so we could now see which industries that we sold insurance for were coming back fastest and allocate budgets accordingly.

We could even see patterns by state to influence our geo-targeting strategy as well.

Fast Forward To 2023

The BFS (yep, I just abbreviated it) weren't just useful for that moment in our history either. Even today, there's a treasure trove of takeaways if you keep your eye on its trends.

Interestingly, we see that 2020 was a cataclysm of entrepreneurialism that, even though has settled slightly since, is still much higher than it ever was before. With mass layoffs occurring daily we'll have to see if the unemployment rate is truly budging. So far the media attention on unemployment isn't actually showing in the rate which sits around 3.5% today. But if it begins to rise drastically, as it did in 2020, then we'll likely see a rise in new business formations again and we'll each have to think about how our individual businesses can take advantage of these changes.

Alright well, that's issue 4, and my first month of writing a weekly newsletter complete. Thank you to those of you who have subscribed and have been reading. I'd really appreciate it if you forwarded this to anyone you think might enjoy it.

Also, let me know what you think so far. Tweet at me!