Starting a new business is an exercise in optimism. Entrepreneurs see an opportunity, often a local one — a vacuum where demand is there to be met, and money is to be made.
In the latest data from the U.S. Census on business formation, November marked a month of optimism, it seems for retail. At a high level, business applications for tax IDs, adjusted for seasonal variation, reached nearly 449,000 last month.
Tax IDs are among the first steps in making a business more than a concept. The 449,000 number marks an increase of 5.5% compared to October 2024. Projected business formations, that is, the estimate of new startups that will result from the applications, reached almost 28,000. This is a 3.6% jump over October.
The application gains are a month-over-month increase that has not been seen in about 3½ years.
Retail Leads the Pack
Among industries, retail trade amounted to over 86,000 business applications, a 16% uptick from October. This sector accounted for 19% of all business applications in November, followed by business services (13%) and construction (10%). Overall, applications grew in 18 out of 19 sectors, the exception being mining, which was virtually flat (-0.2%)
Together with business applications, the Census Bureau also provides projections on the likelihood that a business application turns into an employer business and the consequent number of startups that will derive from these applications. This forecast results in a potential 28,000 business for the year following November, 3.6% more than forecast in October. This is also a multiyear high. Again, retail was the leader here, as projected formations compared to October were up 12%.
Payments Are Keys to Success
Among the considerations for these merchants — whether staying local or whether they intend to cross borders and tap markets internationally — lies payments choice.
PYMNTS Intelligence found earlier this year that more than two-thirds of consumers said they’d choose their merchants based on the ease and convenience of the shopping experience overall. That includes payment options, which sway the choices of 16% of individuals we surveyed. The urgency of payments optionality — especially in the digital realm — is underscored by the fact that, as recently as October, we found that 70% of consumers consider the availability of their preferred payment method to be very or extremely influential when choosing an online store.
Main Street small businesses recognize the importance of selling online. In a recent dive into the business models of these smaller firms that are the mainstays of the U.S. economy, the data show that 66% of retail trade firms have a website, higher than the overall 57% across all industries that we surveyed.
Not surprisingly, digital payment modalities are gaining favor. In past coverage, we noted that fewer than 60% of small businesses accept digital wallets. But half of all users, including 78% of Generation Z, would stop patronizing merchants that do not accept this payment method.
