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Home » How Many New Businesses Are Started Each Year? Data Reveals the Answer.

How Many New Businesses Are Started Each Year? Data Reveals the Answer.

Chart showing the number of small businesses started each year in the US.

Data from the US Census Bureau shows that an average of 4.4 million businesses are started every year. That average is from the past five years of business formation data in the United States.

The onset of the pandemic in 2020 has driven a surge in new business creation, so the number of new businesses is trending up. According to data from the US Census Bureau, 5.4 million new business applications were filed in 2021, which is the highest of any year on record and a 53% increase from 2019.

How many businesses are created each year?

YearNumber of New Business Applications% Change vs. the Prior Year
20225.0 million-7.4%
20215.4 million22.7%
20204.4 million25.7%
20193.5 million0%
20183.5 million9.4%
20173.2 million6.7%
20163.0 million7.1%
20152.8 million3.7%

Of course, not all of these newly formed businesses will stick around—many won’t even last past their first year. In fact, research from the US Small Business Administration shows that the average failure rate for new businesses is the following:

  • 70% of new businesses survive beyond two years
  • 50% of new businesses survive beyond five years
  • ​​30% of new businesses survive beyond ten years
  • 25% of new businesses survive beyond fifteen years

So as we can see, the number of new business applications and the number of new businesses that survive more than a few years are quite different. However, the actual survival rate of new businesses is much better than the commonly-cited myth that 50% of businesses fail in the first year.

New businesses started during the pandemic

The number of new business formations increased after the onset of the pandemic The increase in small business applications has continued into 2022 after the surge brought about by the pandemic: 5 million businesses were started in 2022. Although the pace of new business creation has slowed slightly, the rate of new businesses being created is still far higher in 2022 than it was prior to the pandemic.

During Q1 2022, from January to March, there were 1.46 million new business applications in the US. That’s a 33.5% increase in new business formations compared to Q1 2020 and a 31% compared to Q1 2019.

However, the data shows new formations are cooling down, as the number of new business applications in Q1 2022 is 8.1% lower than in Q1 2021. This data can be pulled here.

Number of new businesses created every quarter

YearQ1 New Business FormationsQ2 New Business FormationsQ3 New Business FormationsQ4 New Business Formations
20221,459,0561,324,0541,196,1361,065,502
20211,568,8921,505,5081,219,2641,070,361
2020965,077934,6291,480,413964,976
20191,001,711912,961814,788767,003
20181,003,458916,296827,528739,280
2017904,358825,780752,698699,060
2016844,544741,881718,755643,409
2015752,198725,798720,241598,478

Why have so many new businesses been created in the past two years? The prevailing theory after the numbers started to rise was that there was a backlog of business applications held up by the pandemic.

That was slightly true, but the number of backlogged cases was small and not the main driver of the increase. An analysis published by The Economist argued that the pandemic provided both the motive to start (with millions of people losing their jobs) and the means to start (via stimulus checks and high unemployment insurance) that drove this entrepreneurial awakening.

The 2022 numbers show that the increase in new business formations was not a temporary trend, but we’ll need more time to determine what the new baseline is this year and beyond.

The first chart was created by the Economic Impact Group and can be found here. The second chart was created by the US Census Bureau and can be found here.

Read these next

How Many New Businesses Are Started Each Year? Data Reveals the Answer.

What is a Small Business? Here’s How the SBA Defines Small Businesses.

10 Small Business Statistics Everyone Should Know (Updated Frequently)

How Many Small Businesses Are There in the US in 2022? Data Reveals the Number.

What Percentage of Small Businesses Fail Each Year? Fewer Than You Think.

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