A steady increase in business applications at the end of 2024 reflects cautious movement in entrepreneurial activity across key sectors such as professional services and construction. While retail applications saw a decline, growth in other areas suggests evolving economic dynamics. These trends reveal how aspiring business owners are navigating diverse challenges in establishing their ventures, balancing optimism with operational hurdles like accessing capital and managing cash flow.
What sectors drove the December upswing?
December witnessed a 1.5% increase in business applications for tax IDs, totaling 457,544, based on U.S. Census Bureau data. Though this growth marked a deceleration from November’s revised gain of 5.7%, it represented only the fourth monthly rise in 2024. Notably, professional services saw a 4.6% increase in projected business formations, while the construction sector experienced a 3.2% boost. These gains underscore heightened consumer demand for services such as tax preparation, legal support, and home improvement tasks.
Why did retail applications decline despite overall growth?
Retail business applications fell 9% in December compared to November, indicating weaker momentum in this segment. However, professional services and construction, which collectively accounted for nearly a quarter of all applications, offset this decline. Overall, projected business formations reached 28,834—a 2.6% rise from November, standing 5.8% higher than December 2023 levels. This growth points to a shift in focus toward sectors with less reliance on consumer-facing retail models.
Past reports highlight challenges for small and medium-sized businesses (SMBs), especially in construction. Late payments have caused financial disruptions, with the sector experiencing a $280 billion loss due to delayed settlements. Such delays often force contractors to use personal savings or credit cards to maintain operations. Instant payments, as suggested by industry studies, could mitigate these cash flow issues, enhancing sector resilience.
Construction management platform Knowify’s recent integration with Intuit’s Enterprise Suite offers a potential solution to payment and operational lags. By combining financial tools with project management capabilities, this platform aims to streamline processes for construction businesses, potentially reducing the risks associated with late payments and improving financial visibility.
Access to credit remains a hurdle for many SMBs. Research revealed that only 37% of SMBs have any credit card access, with smaller firms disproportionately affected. Firms generating annual revenues under $150,000 are significantly less likely to have credit access compared to larger entities. This disparity impacts their ability to navigate cash flow gaps and maintain financial stability.
The December rise in business applications, though promising, highlights broader economic implications. While some sectors thrive, others face persistent challenges. Tools like integrated financial platforms and faster payment systems could be instrumental in supporting business owners in navigating these issues effectively. Entrepreneurs, particularly in construction and professional services, may benefit from leveraging technological advancements to address capital constraints and operational inefficiencies.
