A combination of factors is leading to some interesting data points on business formation statistics by state and industry.
Most people have always liked the idea of having their own business, but many of them are now motivated more than ever.
Thanks to helpful technology and resources, it’s easier than ever to become self-employed, but other driving factors like Covid are causing a surge in this space.
This article will dive into the data on business formation across different states, industries, and driving factors.
- 871,000 likely employer applications were filed by Q3 of 2023
- A majority of new business growth is found in the West and the South
- Industries with the most year-over-year new business growth include healthcare, retail, and more
- There were nearly 5.1 million new business applications filed in 2022
- From 2017 to 2019, there was a 23% increase in the annual number of business applications
- New business openings on Yelp were 12% higher in 2022 than in 2019
- High-propensity business applications were 36% higher between 2020 and 2023 compared to 2004 to 2020
- Accommodation and food services industries have seen a 66% change in business applications since 2019
- Construction is the second largest sector by volume of applications
- The largest year for new business formation was in 2020, with new applications growing by 24.5%
Reviewing Business Formation Statistics by State and Industry
Considering the size of the United States, data on new businesses can vary greatly from state to state.
While there are many uniform factors that convince people to start a new business, there are also many more niche indicators based on location and industry.
This particular topic has garnered quite a bit of interest in recent years.
With Covid completely changing the world within a matter of days, many people lost jobs or voluntarily quit.
In short order, the United States saw a surge in new business applications in essentially every state.
1. New Businesses in 2023
No matter which month you look at, 2023 was an active year for new business applications.
Part of this is still a continuation of the effects of Covid.
Other factors, like the rise of AI services and applications, have motivated many new business ventures as well.
Halfway through 2023, it was reported that around 871,000 new business applications had been filed by mid-year.
This is a 36% increase compared to the pre-pandemic half-year baseline.
The growth didn’t stop there, as there were 1.42 million new business applications in Q3 alone.
Taking a look at this data point from 2020 onward, there’s a consistent growing trend for new business applications.
The noticeable surge began with the onset of Covid, as people were motivated more than ever to take business into their own hands.
With the help of online resources and various technologies, starting a new business venture isn’t too difficult in today’s world.
2. Some Regions are More Active
Taking a look at the country as a whole, southern and western states account for a large portion of new business applications.
With total business applications per 10,000 residents, there was a noticeable presence in Miami Dade County in Florida.
This area saw 478 new business applications per 10,000 residents in 2022.
Clark County in Nevada was another somewhat obscure area that saw decent growth, with 213 new applications per 10,000 residents.
Areas closer to the northwest also saw an uptick, with a few counties seeing some of the highest number of applications based on these metrics.
You won’t find a single underlying factor as to what made certain areas more active than others, but there are a few universal reasons.
Covid has impacted the country as a whole, and people all over are looking for a shot at starting their own businesses.
While numbers surrounding new business applications will always vary, data on the last three years shows an increasing interest.
3. Industries That are Leading in New Businesses
While the list of industries tied to new business applications is massive, several industries are leading the way.
More specifically, this is aimed at industries like healthcare, retail, accommodation and food services, arts and entertainment, and construction.
The bullet points below offer a brief look into the number of new businesses that have been entering these sectors.
- Healthcare: 15% increase in new business apps in the first six months of 2022
- Retail: Makes up roughly 12% of all likely employer filings
- Arts and Entertainment: Saw an 11% year-over-year increase since 2022 but only represents around 2% of the overall share of new business applications
- Accommodation and Food Services: Also grew by 11% in new business applications since 2022
- Construction: Business applications in this sector grew by 9% since 2022, heavily influenced by new housing projects throughout the country
You can find many other impressive stats related to different industries, but a few are known to be leading the way.
There’s no argument that there’s plenty of opportunity in these sectors, in addition to numerous individuals who are looking for a piece of the pie.
4. Uptick In New Businesses in Recent Years
If you review historical data on new business applications, it’s clear there has been a sizeable uptick in this space since 2020.
Once again, primarily thanks to Covid, but although we’re now into 2024, this trend hasn’t necessarily slowed down by any means.
The chart below offers a clear comparison of new business applications from 2012 up to 2022.
It’s evident that new business applications have been on the rise for quite some time.
This is primarily due to technology lowering the barrier to entry for the everyday individual.
Traditionally, starting a new business comes with significant startup costs.
While this can still be true, there are plenty of modern business models that can be started for little to no money at all.
5. A Healthy Annual Increase
You can look at data on this topic from many different angles.
For example, from 2017 to 2019, there was a 23% increase in the annual number of new business applications.
This is a healthy figure, and it was right before Covid found its way across the world.
Many individuals in the U.S. have been looking for a way to go into business for themselves in hopes of breaking the 9-5 career cycle.
While starting your own business requires a lot of your time, many people feel a better sense of freedom and time management when taking this route.
2021 saw the highest number of new business applications, as the year landed in a sweet spot between initial Covid restrictions and fluctuating lockdowns.
Yearly new business applications didn’t surpass 3 million until 2016.
Although this was a sizable milestone, no one knew the surge that was going to come just one year later.
Standout Data Points in Key Industries
As mentioned earlier, several industries are leading the way when it comes to new business applications.
They’re popular for several reasons, but the influence they have on the job market and the rise of self-employment can’t be ignored.
You can even see this influence from different viewpoints, such as Yelp.
The platform has seen a sizeable uptick in new business listings.
Moreover, in the wake of Covid-19, the last three years have seen more new business applications than some years combined.
6. Yelp Has a Front Row Seat
Between 2019 and 2022, the Yelp platform has seen a 12% increase in new business listings.
Keep in mind that this only accounts for a small fraction of new business applications, as many business models don’t necessarily need a Yelp listing.
This isn’t meant to offer a comprehensive look at the statistics but a different viewpoint.
It’s a good look at how many people choose business models that provide some kind of in-customer service.
Reviews are important in today’s world, and Yelp is a primary way to get it done.
It should also be noted that the 12% for Yelp was an all-time high in new business openings on the platform.
Looking at the data from this perspective greatly reflects how the creation of new businesses can affect so many different aspects of our everyday lives and the economy.
7. A Surge in High-Propensity Business Applications
For a little more clarity, high-propensity refers to likely employer business applications.
Regarding the data, the monthly average of high-propensity applications was 36% higher between June 2020 and January 2023 than between July 2004 and May 2020.
A span of three years was more active than the entire course of 16 years.
It’s pretty staggering to think about and also acts as a good highlight for the demand for change from the general public.
Of course, the surge that’s in question won’t exist forever.
It’ll eventually simmer down to new averages, but there are bound to be new factors that drive economic change down the road.
At this time, we’re seeing many people take their shot at freedom and utilizing the resources that are available to them.
With so many changes happening in business, consumerism, social media, and tech, people are being easily driven from one idea to the next.
8. Accommodations and Food Services is Thriving
Circling back on this particular sector in the business world, accommodations and food services offer a variety of impressive statistics.
The article has already covered the fact that it’s the leading sector in new business applications.
However, this is partly driven by the growing interest in travel and dining as Covid restrictions became less of an issue.
This particular angle has grown by 66% since 2019, which inherently fed growing business interest in accommodations and food services.
It’s a cycle that somewhat feeds itself, where both sides benefit from investing more time and money.
Business-savvy individuals see where there’s money to be made, and consumers are eager to spend their money because they couldn’t travel for a few years.
Although the effects of Covid seemed pretty negative, there are always pros and cons like this to any situation.
Once again, this period of substantial growth in certain sectors won’t last forever.
Many of these sectors may be seeing positive growth right now, but a lot of it is recovery from the losses that stemmed from Covid.
9. Construction Isn’t Hurting Either
For new business applications in construction, the industry has seen 9% growth since 2022.
Things may have slowed down to some degree during the height of the pandemic, but it’s having no problem bouncing back.
On top of that, the construction industry is the second-largest sector by volume of applications.
This accounts for 138,300 or 16% of likely employer filings.
Between people looking for construction jobs and a new generation of business owners, there’s plenty of room for newcomers in this industry.
Another way to look at it is that new business filings are up roughly one-third over metrics found prepandemic.
Some industry experts mention that a lot of this is to meet the demand for growth in new housing projects throughout the country.
10. Growth Through the Decade
Referencing data highlighted earlier in this article, new business applications have been on the rise somewhat consistently over the past ten years.
However, once 2022 came to a close, it was clear that we’d seen the first decrease in new business applications.
There was a 6.1% annual decrease from 2021 to 2022.
Interestingly enough, the largest jump in new business applications was just a few years prior.
Between 2019 and 2020, there was a 24.5% increase.
It seems that once a small part of the surge started to simmer down, new businesses either failed or simply gave up on the endeavor.
This is to be expected to some degree, as the craze around new, modern business ideas brings plenty of every day people out of the woodwork.
In many cases, people don’t know how hard it is to start a new business and end up falling out within the first year.
Data supports that 25% to 50% of new businesses fail within the first few years.
Data on Different States and Regions
Many people underestimate just how large the landscape of the United States actually is.
In some ways, each state can be seen as its own country, considering the millions of people that live in each one.
Figures surrounding new business applications fluctuate on a monthly basis.
In addition to that, it’s important to remember that there are different types of business applications.
For example, new business applications and those labeled high-propensity are two different things.
Nevertheless, the final statistics for this article will break down the data a little further between U.S. states and regions.
11. New Business Applications in Different States
The table below highlights new business applications in December 2023 across several U.S. states and how this figure compares to the previous month.
Keep in mind this only focuses on brand-new business applications and doesn’t account for applications from existing organizations, high-propensity applications, and other related categories.
|New Business Applications
|Change Between Nov. and Dec. 2023
You can see that figures fluctuate quite a bit.
In recent months, some states have been much more active with applications than others.
This is generally always the case in the U.S., but it shows how each state contributes to the total in its own right.
The numbers in the table above also play into data points that focus on different regions of the country.
For example, in December of 2023, the western region saw an increase of 9.2% in applications, while every other region saw a decrease.
12. Regional Changes in Application Numbers
Focusing on a broader spectrum of data, application numbers saw a healthy increase across the board from 2022 to 2023 for the most part.
Every region in the use saw a positive increase, which means the same goes for most states as well.
Only a few states saw a slight decrease compared to the previous year.
Some of these include Florida, Georgia, Michigan, and Wisconsin, to name a few.
However, as far as regions are concerned, all of them saw an increase in business applications between December 2022 and 2023, even if it was a small amount.
- West: +20.9%
- Midwest: +8.6%
- Northeast: 7.4%
- South: 0.4%
Another angle that’s interesting to point out is that the South was a lot more active one to two years prior.
This is another good example of how business statistics ebb and flow.
It also supports data points such as many new businesses failing within the first year or two.
Although it’s known that it’s relatively easy to start a business, maintaining and growing one is a whole other story.
13. Every Region Boomed During the Surge
Going back to the height of the pandemic, 2020 to 2021 influenced new business in essentially every corner of the United States.
Alabama was the only state to see a decrease in new business applications during this time, which saw a decline of -8.9%.
Between December 2020 and December 2021, U.S. regions once more, each one took on a lot of new business applications:
- West: +29.4%
- Northeast: +25%
- Midwest: +18.9%
- South: 17.9%
While some of these came from the everyday inspired Americans, a lot of it had to do with the fact that millions of people lost their jobs.
New job prospects were few and far between, so many people resorted to trying to start a new business.
Unfortunately, this influx wasn’t sustainable for everyone.
The world of freelancing became oversaturated within months, and it felt like everyone was fighting for the same space.
Now that it has been a few years since the pandemic, many people have decided to return to the 9-5 workforce.
Some of this has helped to even out the number in the world of new businesses.
14. Numbers Continue to Rise
Once the end of 2022 rolled around, it seemed like the hype around new businesses was starting to slow down.
That year saw a 6.1% annual decrease, but now that 2023 has come to an end, it’s clear this surge isn’t entirely over.
In the third quarter of 2023, 1.42 million new business applications were recorded.
When compared to that same timeframe in 2022, it shows an 11.7% annual increase in new applications.
Overall, 2023 slightly bounced back from that decrease in 2022, continuing the upward trajectory that we’ve seen in recent years.
It’s interesting as there’s usually a variety of trends that influence the decision to start a new business.
One standout point is the rise of artificial intelligence tools.
Now that many business processes can be streamlined in seconds, many people feel the barrier to entry is much more feasible for them.
15. Only a Quarter of New Businesses Survive
Although plenty of excitement surrounds a new business, historical data supports that only 25% of new businesses end up lasting 15 years or more.
This figure gets less forgiving when you consider how many businesses fail within the first five to ten years.
65% of people go out of business within the first ten years.
While it may sound like this drastically reduces the competition, you have to take into account that hundreds of thousands of new business applications are coming through every month.
It’s a system that constantly works with the phrase out with the old and in with the new.
With 20% of new businesses failing within two years, we’re likely to see a lot of these Covid business ideas taper off sooner than later.
The Bottom Line
No one will argue that starting and growing a business is difficult, but job security has been a concern in recent years, and many people are looking to start their own ventures.
There’s nothing wrong with that, but it’ll inherently cause some disruption along the way.
Owning and running a business definitely isn’t for everyone, but recent data shows that millions of Americans are ready to give it a shot.
This article has highlighted several business formation statistics by state and industry to showcase the unique state of the country’s changing corporate culture.
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