New business applications in industries highly exposed to artificial intelligence rose 26.8% between the first quarter of 2024 and the first quarter of 2026, according to data analyzed by Liya Palagashvili, a labor economist at George Mason University's Mercatus Center. These applications, which lack indicators of near-term hiring or payroll plans, grew from approximately 222,000 to 281,000 per quarter. During the same period, applications in industries with stronger indications of becoming employer businesses fell 6.4%.
Palagashvili noted that while the findings are preliminary and do not establish a direct causal link, the data shows a correlation between rising new business formation and applications unlikely to become employer firms. "What AI is doing is giving those capabilities directly into the hands of the individual," Palagashvili said.
Individual business owners report using AI to manage complex operations that previously required full teams. Alex Willen, who operates 12 e-commerce brands without employees, expects to generate between $2.5 million and $3 million this year. Willen uses Anthropic's Claude for bookkeeping, customer service, advertising, and inventory, while OpenAI image tools replace the need for photographers and designers. He stated that without AI, he would likely require at least one full-time employee and various contractors for design and ad management.
AI adoption has also enabled small businesses to expand into new revenue channels. After acquiring the brand Lone Trail, Willen used ChatGPT and Claude to rebuild the company's Shopify site and manage Meta advertising. This effort increased the site's contribution to total revenue from 1% to roughly 30% in a recent 30-day period. Willen estimated the channel will generate at least six figures of annual revenue that would not exist without the technology.
Other solo entrepreneurs are seeing rapid growth through similar methods. Kristin Ginn, who founded the AI-adoption consultancy trnsfrmAItn after leaving Microsoft, reported roughly $250,000 in business received or contracted through year-end with no employees or regular contractors. Ginn uses AI for proposals, pricing, and strategy, and is currently exploring AI agents to automate labor-intensive client processes.
While solopreneurs use AI to maintain small headcounts, existing small businesses may use the technology to scale. Data from Gusto, a payroll and HR software company, shows that businesses adopting AI saw headcount growth approximately 7% higher after one year than comparable businesses that had not adopted the technology. Among firms with fewer than 10 employees, AI adopters grew their headcount about 10% more than non-adopters.
