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Business Applications Soared During COVID

| December 20, 2021

Sadly, the number of business failures over the next year will be historic too

Thinking of starting a business? Owning a business is a dream for many, but often business success comes down to timing (hard work and luck are givens).

Did you know that the U.S. Census Bureau keeps track of the total number of business applications and formation statistics? It’s done by measuring the number of applications for Employer Identification Numbers through IRS fillings. But knowing what other like-minded people are doing might inform when you start your business.

Business Applications Unchanged

Business applications for October 2021 were 432,101, almost the same as the previous month.

But just because someone files a business application, that doesn’t mean that an actual business will result. But since the U.S. Census Bureau has captured so much historical data, they can project the number of businesses that might result from the applications. Here is how they do it.

Projected Businesses Within The Next Year

The Census Bureau calculates what it calls the “Projected Business Formations Within 4 Quarters.” This is an estimate of the number of new business startups that will actually be created from the total number of business applications within 4 quarters of the actual applications.

For the most recent month, the Census Bureau is projecting that 31,831 new business startups with payroll tax liabilities will form within 4 quarters of the business applications that were filed in October 2021. In other words, the Census Bureau is predicting that of the business applications that were filed, less than 10% will result in a real business.

By Sectors

The Census Bureau also keeps track of business formation statistics by sector – and the results can be informative. 

A few highlights:

  • Mining – projected to be up over 10%
  • Utilities – projected to be down over 15%
  • Real Estate – projected to be up over 5%
  • Accommodation and Food Services – projected to be down over 2%

That Spike Was Enormous

But maybe most interesting is the spike in business applications.

Given the massive spike in business applications during the beginnings of the COVID-pandemic, it stands to reason that there will be a lot of businesses that fail over the next 6 months too.

Something to keep in mind if you’re considering starting a business.