Pandemic opens window of opportunity, and Minnesota business ownership now at 10-year high

Spurred by a mix of pandemic disruption and personal ambition, business ownership in Minnesota is at a 10-year high.

New business formations are rising across the nation. In 2021, for instance, business formations in the U.S. topped 400,000 each month for the year, the first time that has occurred in at least 20 years. Online data on U.S. business formations compiled by the Census Bureau date only to 2004.

"One explanation is the pandemic has really prompted a lot of people to think carefully about what they really want to do in their working lives," said Dan Forbes, an associate professor of strategic management and entrepreneurship at the University of Minnesota's Carlson School of Management.

Whatever the reason, thousands more Minnesotans took a leap to create their own business over the last two years. Business formations nearly doubled between 2020 and 2022 compared to 2017 and 2019, census data show.

How employers handled work-from-home or on-site operations during COVID-19 could have played a role, as well as requirements for workers who had to double as caregivers as the pandemic shut down schools and day-care centers, Forbes said.

Other factors include advancements in digital technologies that allow people to work remotely, workers shedding the cost of commuting or people wanting to adjust their cost of living by moving to more affordable areas.

In some cases, people found entrepreneurial work could offer greater pay, Forbes said.

"It helped people realize starting a business in their living room was something that was feasible in a way that under normal times wouldn't even cross their minds," he said.

Jessica Rowland, a house painter, saw the number of people remodeling their homes and figured she could hire some help and take advantage of the surge.

Marcus Hulmer decided it was time to launch his own architectural and design company, while keeping his full-time job for steady income.

Before the pandemic, Brian Slater and Phil Clark had decided to take their passion for fishing and start an apparel company. The pandemic, though, had them reimagine the plan for where and how that company would play out.

Pat Lambert, district director and treasurer for Minnesota SCORE, has noticed the wave of new business owners. They have been seeking help through the business education and mentoring nonprofit's four offices across the state and its more than 350 mentor volunteers.

Most of those new businesses are focused on health care, especially in-home care for assisted living, and life coaching, Lambert said.

Retail and e-commerce-focused companies are also rising, he said, as entrepreneurs find a simpler entry to market with more digital payment systems and online shopping platforms becoming easier to navigate for both business operators and consumers, he said.

The remaining bulk of new clients include people launching cafes and food trucks as workers return to traditional office settings, Lambert said. The majority of entrepreneurs seeking help are women, comprising 60% of clients, he said.

Whether the pandemic made it easier to start businesses or just provided time to pursue a dream, the rise in new businesses is promising for the state's economy, Lambert said.

But he also offers a caution: Half of new businesses fail at the five-year mark, and 25% fail after the first year, a statistic to keep in mind when considering whether to join the Great Resignation.

As more people retreated to their homes at the onset of the pandemic, an increasing number decided to splurge on remodeling projects for a home office or to spruce up rooms where they were spending a lot more time.

Nationwide, sales for home improvement and remodeling work has increased steadily since spring 2020, according to the Joint Center for Housing Studies at Harvard University, and demand within the industry has trickled down to operators across the nation.One of those is Jessica Rowland, who before the pandemic was a solo painter.

Rowland decided to seize the opportunity, hire a crew and start her own painting and wallpaper installation company.

In June 2020, Rowland officially launched Rowland Paint, a Minneapolis company providing interior and exterior painting plus wallpaper installation for residential and small commercial projects.

In less than two years, Rowland has expanded her team to five painters and wallpaper installers, all of them women.

Sales for Rowland Paint doubled in 2021 since its launch, she said. Rowland is hopeful sales will also double, or come close to that, this year.

Being a women-owned and -operated business has led to some customers intentionally seeking her company's service, she said.

"It's really good for residential remodeling right now," Rowland said. "Business is really good, despite there being obvious supply chain issues. We don't have direct competition for how unique our business is, being an all-women team and women-owned."

Rowland has been a self-taught painter for 10 years, but her experience in the remodeling industry dates back to her teenage years, when she would assist her father on remodeling projects around the Twin Cities for extra cash.

While working for a real estate agency a few years ago, though, one of the agents asked Rowland if she could paint a room in a client's home. Other agents followed suit, and Rowland steadily built a network of clients.

After operating in the gig economy most of her adult life, Rowland realized painting paid better than any other job. It also gave her the ability to control her own work schedule and build her income.

"I came to a realization that I'm a self-employed person," she said. "I was so used to trying to get things to work in the moment. It was a way to make money, so I kept doing that."

Rowland soon met other women who wanted the same opportunity.

Dissatisfied with her job in the health care industry's supply chain, Katie Woodling contacted Rowland in early 2020. She knew her through her sister and mutual friends, and she asked if Rowland needed an extra hand on her next painting project.

Rowland wasn't prepared to pay Woodling or have any employees, but told Woodling "we can see how it goes," she said.

Almost instantly, Woodling became full-time.

"It's serendipitous in the way we're the perfect two people to go next level," Rowland said.

"At the time, we were taking it week by week, like everyone was," said Woodling, who now serves as the company's lead wallpaper installer and painter. "Only in hindsight do I feel like it's a crazy feat we accomplished."

Initially, Rowland operated the business from her apartment. She would use her parents' garage in south Minneapolis to store tools and equipment. Last year, though, she moved the business into a makers space on East 36th Street in Minneapolis that is owned by a local blacksmith.

Rowland plans to eventually buy her own commercial space.

While business is thriving, operating Rowland Paint has not been easy, Rowland said.

"I describe what I'm doing to the scene in 'Speed' where Keanu [Reeves] has to get everyone off one speeding bus onto another speeding bus," she said.

Rowland added workers as she was piecing together the foundations of a company, namely benefits and standard operating procedures. Meanwhile, Rowland Paint has to finish projects and go after new contracts to keep a steady cash flow.

Recently, Rowland had a professional company perform a strength assessment of each member of her team. The results have helped Rowland with delegating certain projects and tasks.

"It's basically building a business while you're running a business," she said. "I know it's worth it, but it is really tough."

Just before the pandemic hit the U.S., friends Brian Slater and Phil Clark decided to combine their passion for fishing and knowledge of advertising and design and launch a new venture, Ten and Two, an artistic outdoor clothing and apparel brand.

Both full-time professionals in the advertising industry, Slater and Clark started Ten and Two as a side business from their respective homes in the Twin Cities, with dreams of making it their main source of income.

The weekend before stay-at-home orders went into effect, they had set up their first pop-up store, where sales exceeded expectations, Slater said. As pandemic shutdowns continued, however, they realized their plan was not tenable.

"Because we don't have a ton of startup capital and it's just funded by ourselves, we were going to build it very slowly and organically by showing up in interesting ways locally, build a core following, and then let it grow from there," Slater said. "We had all these ideas and then COVID happened. Our whole strategy of how this was going to happen fell apart on us."

COVID-19 disrupted their whole work lives, as they moved to a remote set-up for their day jobs. As it turned out, the new set-up added flexibility in their routines to commit more time to their passion project. It would just have to operate in a different way.

Using social media platforms like Instagram, Slater and Clark focused on their e-commerce sales, allowing them to sell not only to consumers in Minnesota, but in Texas, Colorado and even England. In 2021, the company sold close to 600 units.

Ten and Two also sells ski apparel, which accounts for less than half of their overall inventory, Clark said.

Fueling growth were partnerships with organizations that strive to protect fish and their ecosystems. In 2020, they were connected to a river conservation group on the West Coast that needed assistance with website design and branding.

That led Slater and Clark to turn Ten and Two into more of a studio that offers marketing and advertising services to similar nonprofits and organizations focused on fish and the environment.

"That's led to a lot more customers and broadened our network of people that come to Ten and Two," Slater said. "Without a ton of social spending, we've done a decent job of growing our audience, and it's become sort of a snowball effect for us."

Slater and Clark met eight years ago after being introduced by the owner of a fly fishing shop owner who felt they had much in common.

As they fished together, they realized they could combine their creative skills from their advertising experience into a new venture.

"We spent a lot of time complaining about how stuff looked in the outdoor space," Clark said. "Everything was overly cliché, and everything felt the same. If it was a fishing brand, it had a fish on the shirt."

The brand would represent fly fishing and outdoors in Minnesota, but in an artistic fashion, allowing people to wear the items for casual outings.

"We thought we could own this space and be authentic about it," Clark said.

The hours are long, and the journey is stressful.

In the end, though, the undertaking to build a successful business is something Marcus Hulmer is learning to manage, day by day.

"The end goal is to be able to make that your sole source of income or revenue," said Hulmer, president and founder of Hulmer Architecture + Design Consulting, which he runs while working full-time at a larger construction company. "That's how you support your family. Ultimately, the main goal of all entrepreneurs is to gain that flexibility of lifestyle."

For the past five years, Hulmer has performed solo design work, first as a sole proprietor, then upon registering as a small business. His workload through his consulting company began to increase in the past year.

So far, Hulmer has worked about seven projects through his startup. He specializes in building sciences and regulatory code application, and small projects typically take half a year to complete, he said. He puts revenue from those projects back into the business to fund its growth.

"I put my name out there, it's my name in the business title," he said. "Anything that I do, my name is on it, so that's something that's nerve-wracking but also invigorating because knowing that, you're always going to be putting 100 percent and always trying to do your best job."

The idea to start his own business began in 2015 when Hulmer took on consulting work for a private contractor. Similar opportunities came his way, and as he matured in his job, feedback from various clients gave him the confidence to start his own consulting firm.

"Little things forced me to say 'Gosh, I can't forgo these opportunities, so I need to set up this business and I need to get that in motion,'" Hulmer said.

To get his consulting business off the ground, Hulmer contacted staff at SCORE, a nonprofit that offers business education and mentorship services, just before the pandemic began. He continues to meet bi-weekly with a mentor to discuss the direction of the company, which he wants to expand strategically and methodically until it's at a point where he's comfortable to make it his full-time job.

"Right now, it's all about trying to learn the business structure and sell the idea of the business," Hulmer said. "Once that takes off, that's a good problem to have to try to increase your resource."

As an architect, Hulmer said he's constantly doing problem-solving work with building designs. Add in the hours it takes to start a business, and he's easily spending between 70 and 80 hours a week between both companies, fulfilling his duties to his primary employer first, and using whatever time he has available on his business.

"There's obviously a reason why people don't try to [become entrepreneurs] all the time," he said. "It takes a lot of preparation, a lot of time and a lot of dedication and patience to get there."

Married with three children, Hulmer said balancing his family life, a career and a business simultaneously has proven to be very difficult.

"There's this pursuit of building something in an effort to ultimately gain the desired flexibility in life," Hulmer said. "That flexibility affords someone the ability to choose when and how to spend time with those you love. However, in my case, I'm in the service industry and I care about the service I provide, so determining the level of sacrifice between family and providing quality, dedicated service to clientele is a never-ending balancing act."