42 Small Business Statistics: Everything You Need to Know

By the numbers

42 Small Business Statistics: Everything You Need to Know

written by Milja Milenkovic July 23, 2019

From eCommerce stores and brick-and-mortar boutiques to finance consulting, art galleries, and craft breweries, small businesses are as varied as they are numerous. With around 534,000 new businesses started every month, it’s obvious that the market is highly competitive, and that living out the dream of being your own boss might not be quite as easy as it seems. So, what can you do?

If you have your own company (or plan to start one soon), then the best way to make a sound business plan is to familiarize yourself with a few small business statistics. Learning the ins-and-outs of the industry and how other similar firms made it work can help your own company grow and thrive. After all, small enterprises are the backbone of the American economy, and every person with an idea and the drive to succeed should be given a proper chance to better themselves professionally.

If you don’t want to read through a bunch of boring research papers, don’t worry—we’ve got you covered. For those readers who are looking for quick answers, we’ve also prepared a small FAQ section at the end of the article. If you’ve been wondering about questions like how long do small businesses last, how many small business jobs are generated each year, and why are small businesses important for our economy, you can find all the answers after the stats.

So, without any further ado, here’s a detailed list of some of the most useful stats for business owners and future entrepreneurs.

Practical Small Business Statistics for Your Company

• There are 30.2 million small businesses in the U.S.A.
• 50% of small businesses survive five years or more.
• 84% of small business owners indicate that they’re feeling optimistic about the future of their companies.
• 50% of all small businesses are operated from home.
• 82% of businesses that fail do so because of cash flow problems.
• Small businesses account for 99.7% of all businesses in the U.S.A.

General Small Business Stats

1) The Small Business Administration defines a small business as a firm with fewer than 500 employees.

(SBA.gov)

In Australia, any business that has fewer than 15 employees is considered a small business under the Fair Work Act. In the European Union it’s under 50, and in America it’s under 500. The numbers vary across the world, but the definition is the same—it’s any business with fewer employees and revenue than the average corporation.

2) There are 30.2 million small businesses in the U.S.A.

(SBA.gov)

According to the US Census Bureau, in 2017, small businesses employed 47.5% of the entire country’s workforce. That number keeps rising by the day. Given that it can take as few as six days to file the paperwork and open up your own company in America, it’s no wonder people are eager to jump at the opportunity. If you’re thinking of starting your own venture, bear in mind that you’ll be facing stiff competition from all sides.

3) Small businesses account for 99.7% of all businesses in the U.S.A.

(Fundera)

Small business stats show that the majority of businesses in America have fewer than 500 employees. Firms with fewer than 100 employees account for 98.2%, and those with fewer than 20 employees account for 89%.

4) Micro businesses account for 75.3% of private-sector employers.

(SBA.gov)

A micro enterprise employs nine people or fewer, and this is the most common kind of private-sector business in the U.S. Small business statistics show that while this might be the most common kind of enterprise, its share of employees is very small, providing only 10.5% of all private-sector jobs.

5) Analysts predict that half of the workforce will be freelancers by 2020.

(Forbes)

A lot of small businesses hire full-time workers even when they don’t have enough work to make it worthwhile. Freelancers are usually a much better investment, especially for a company that’s just starting out and can’t find the resources to pay full-time employees. Luckily, the number of freelancers is on the rise, which gives small companies a great opportunity to find professionals at an affordable price.

6) 19% of small business owners work over 60 hours a week.

(Fundera)

Small business statistics indicate that most owners work hard to make their company succeed, particularly when they’re just starting out. Indeed, it’s not uncommon for bosses to work 60-hour weeks. Stats show a whopping 89% have a habit of working weekends, while 81% work nights.

7) 50% of all small businesses are operated from home.

(SBA.gov)

Given that 290 million people in the U.S.A. have access to the internet, it’s a lot easier to work from the comfort of your own home. This is especially true for sole proprietorships where owners don’t have to worry about finding space for multiple employees. However, one of the challenges of home-based businesses is running an effective marketing campaign, so owners need to be organized and advertising-savvy if they want to build a good customer base.

8) Small businesses employ 59 million people in the U.S.A.

(SBA.gov)

US economy statistics show us that small businesses have always been an important part of both our culture and our success. They contribute to the local economy by bringing stability, jobs, and financial growth, and they can offer a more diverse inventory or specialize in unique services. Whether they remain small or grow into large corporations, these kinds of companies also contribute to the government’s budget through taxes.
Small Business Growth Statistics & Small Business Financing

9) 84% of small business owners indicate that they’re feeling optimistic about the future of their companies.

(StartBlox)

Despite the sheer number of other small business and the heavy competition they face, most owners actually feel very optimistic about their future. Companies expect growth in the upcoming years, and they aren’t afraid to put in the hard work needed to succeed.

10) The health care and social assistance industries are projected to grow by 21%.

(Fundera)

According to the Bureau of Labor Statistics small business failure rate, the healthcare and social assistance industries are the most stable for start-ups, where 85% of businesses make it past the first year.

11) Technology, health, and energy are the top businesses to start now if you want to be rich in a decade.

(Fundera)

Tech, health, and energy are not the biggest industries out there, but right now they’re the most lucrative ones. If you planned to start your business in one of these sectors, your services are bound to be in high demand.

12) 64% of small business owners begin with only $10,000 in capital.

(Intuit)

Small business stats show that the average amount of capital needed to get a company going is around $10,000. This doesn’t sound like much, but for those managing their business from home it can be more than enough to set everything up, especially if they don’t intend to hire many employees.

13) Micro businesses can get off the ground with just $3,000 in capital.

(LendEDU)

How much capital you need to start a business depends on a lot of factors, but research shows profitable small businesses can be financed for as little as $3,000.

14) Approximately a quarter of small businesses begin with no financing whatsoever.

(LendEDU)

It might surprise you to know that a lot of small businesses succeed despite starting off without any money behind them.

15) The average small business loan is worth $633,000.

(Fundera)

This should give you a rough idea of how much money you might be able to get to start your business. Bear in mind, though, that the actual amount you receive will depend on a range of factors, including your own credit history.

16) The average SBA loan was $107,000 in 2017.

(Fundera)

SBA loans are issued by banks but guaranteed by the Small Business Administration. If you meet all the criteria, you might be able to apply for one and get a lump sum to finance your business endeavor.

Small Business Revenue Statistics

17) 86.3% of small business owners earn an annual salary of less than $100,000.

(Fundera)

As you’d probably expect, small business owners rarely make as much money as CEOs of big corporations. They usually make less than $100,000 a year, but what’s even more surprising is that 30.7% don’t take any salary at all.

18) Only 40% of small businesses are profitable.

(SmallBizTrends)

While 40% of businesses start to become profitable at one point, 30% start losing money, and 30% break even.

19) In 2018, 9% of small businesses made more than $1 million.

(Business Know-How)

The most profitable small businesses made over $1 million last year, while the least profitable 16% made less than $10,000.

20) Small businesses with two founders raise 30% more money on average.

(Serious Startups)

Having a partner means sharing the burden of management and finances with someone else. It also increases your chance of earning more money and makes you 19% less likely to scale too fast. Growing your company before you’re ready can mean losing businesses later on, so it’s important to pace yourself and follow the plan.

Small Business Failure Statistics & the Biggest Small Business Challenges

21) 50% of small businesses survive for at least five years.

(Fundera)

Contrary to popular belief, failure rates are not quite as dire as they appear. Two-thirds of all businesses survive for at least two years, while around 33% survive over ten years. While the competition is certainly stiff, a consistent business plan can help you stay on top of the game and build your company from the ground up.

22) On average, one in 12 businesses closes every year.

(LendEdu)

How many small businesses fail? Apparently, the average is just below 10% – one in 12, to be precise. This might not seem like an overly encouraging stat, but bear in mind that with the right funding, adaptability, and knowledge, you can avoid the common pitfalls of owning a small business and push past the start-up stage. Establishing your company is by no means easy, but it is absolutely achievable.

23) 82% of businesses fail because of inconsistent or insufficient cash flow.

(Fundera)

What is the primary reason that so many new businesses fail? Cash flow is the culprit here. Companies that run seasonal businesses encounter this problem more frequently than others. For example, a gardening company that gets the majority of its work during the warm months might struggle to scrape by during the off-season. Timing your invoices and analyzing cash flow statements can help fix this problem.

24) 27% of businesses aren’t able to receive the funding they need.

(NSBA)

No financing often means no sales and not enough money to hire the workers you need. A certain percentage of businesses that fail seem to do so because they can’t fund further business endeavors, which prevents them from growing. Financing should always be a top priority, regardless of what kind of company you’re trying to run.

25) 42% of failed small businesses offer products or services that don’t bring anything new or useful to the market.

(Fundera)

The main purpose of a business is to fulfill its customers’ needs. If no one wants or needs your services, it’s unlikely that your company will manage to hold its ground. There is a great percentage of startups that fail because they don’t provide anything original to consumers in a competitive market. Without a product that stands out, they can’t increase their sales enough to finance their own growth.

26) 19% of small businesses fail because of their competition.

(CBInsights)

Not paying attention to what your competitors are doing is one of the biggest mistakes you can make. Companies that perform effective competition research are more likely to adapt and improve their services to get ahead. By impressing their customers, they give themselves a better chance of succeeding.

27) 23% of small businesses fail because they don’t have the right team running the business.

(Business Insider)

The startup failure rate shows us that good management is essential to surviving your first years in business. If you don’t have the right kind of professionals to help you stay on top of your finances and help you organize other aspects of your daily workflow, you won’t be able to focus on getting new customers. But it’s not just management that you need to focus on—having competent and hard-working employees is also important.

28) 17% of small businesses fail because they lack a business model.

(CBInsights)

It’s surprising how many startups fail because they don’t have a business model. After all, it’s practically impossible to start and maintain a successful company without a well-developed plan. Simply having an idea is not enough—you need to define objectives and predict your income stream if you want to make it. A business plan is especially important for companies that are seeking investors; most people won’t even consider financing you without a clear vision.

29) 14% of small businesses fail because of poor marketing.

(CBInsights)

You might have managed to create a great product that’s better than anything your competitors could ever offer. But if you don’t advertise it effectively, no one will buy it.

30) Only 35% of businesses in the construction industry survive their fifth year.

(Fundera)

Construction companies are among the toughest businesses to manage, as their extremely high failure rate suggests. While 75% manage to survive their first year, the majority can’t seem to push past the five-year mark.

Business Trends for Women & Minority Populations

31) There are 12.3 million businesses owned by women in the U.S.A. 

(WBENC)

Since 2007, the number of women-owned businesses in the United States has increased by a whopping 58%. Now, women-owned businesses employ more than 9.2 million people across the country.

32) Businesses owned by women generate $1.8 trillion in revenue. 

(WBENC)

While this number looks impressive, it actually only represents 4.3% of total private-sector revenue. It’s clear that, despite all the progress women have made, there’s still a long way to go before we achieve gender equality in the workforce.

33) 46% of African American small business owners are the only employee in their own firm. 

(Guidant Financial)

Small business statistics show that nearly half of businesses owned by African American people have one employee only, while 41.2% employ between two and give workers. Only 13% have more than six employees. While the number of African American business owners is on the rise, a lot of firms still struggle to find enough capital to hire employees.

34) Veterans comprise 9.1% of the small business owners of America. 

(Small Business)

Veterans own more than 2.5 million businesses in the U.S., and 2.08 million of those are entirely self-operated businesses with no employees. Technical services and construction are the most common industries in which veterans own businesses.

35) Immigrants own 25% of new businesses in the U.S.A. 

(Forbes)

A quarter of all small business owners are immigrants who have arrived in the country in pursuit of the American dream. When you consider how many small businesses in the US there already are, this is a significant number. In certain states, such as California and New York, this number is over 40%. However, in others, like Idaho, it’s less than 5%.

36) Immigrants have founded 55% of the unicorn startups in the U.S.A. 

(NFAP)

More than half of all billion-dollar companies in America were founded by immigrants, the most notable being Uber, co-founded by a Canadian immigrant called Garrett Camp. SpaceX, Avant, and Palantir Technologies are some other examples of exceptionally successful immigrant-run firms in America.

Marketing & Small Business Firms

37) 47% of businesses emphasize marketing as their top growth strategy. 

(StartBlox)

Small business trends show us that companies are becoming more aware of the importance of advertising. Roughly 47% of them plan to invest in marketing efforts, followed by the 33% whose primary focus is developing strategic alliances with business partners.

38) Only 64% of small businesses have their own website. 

(Clutch)

We live in a digital world. It’s almost unthinkable that a firm could function without a website these days, and yet more than one-third do. Most companies, regardless of which industry they operate in, can benefit from advertising their business online. Given that a lack of marketing strategy is a major contributing factor to the small business failure rate, creating a website is a necessity.

39) 92% of business owners believe having their own website contributes effectively to their digital marketing strategy. 

(Iron Paper)

Fortunately, while not all owners have a website, most understand that their business needs one. This shows a certain willingness to adapt to modern times and invest more resources into advertising.

40) 31% of small business owners identify driving sales as their top marketing goal. 

(Keap)

The average small business revenue depends largely on sales, so most firms are making this their priority in the near future. This is followed by 24.6% of businesses, which are focusing on boosting customer engagement and retention, and 17.1% that want to build brand awareness. Finding the time and resources to build a good marketing campaign can be tricky for most owners. However, the efforts tend to pay off in the long run.

41) 70-80% of people research a small business before visiting or making a purchase. 

(Blue Corona)

Most successful small businesses understand that customers these days need to research a company before they feel confident about making a purchase. One of the easiest ways for people to look into your business is to check out your website and social media profiles, then read the reviews left by other customers. Investing in marketing can help you present your firm in the best possible light and make it easy for consumers to trust you.

42) 61% of small businesses invest in social media marketing. 

(Clutch)

Considering the number of small businesses in the US, social media marketing can be a great way to stand out from the crowd. Most of your customers tend to have accounts on platforms like Instagram, Facebook, and Twitter. If your company doesn’t, you’ll struggle to compete. A solid social media strategy can help you inform your customers about important deals or events, and can also serve as an easy way to get in touch.

FAQ

What is considered a small business?

A small business is a privately held corporation or a sole proprietorship. It has fewer employees and earns less yearly revenue than a large business, but the exact definition varies from industry to industry. For example, the agriculture industry classifies small businesses as those with less than $750,000 in annual receipts on average, while the construction industry’s maximum is $36.5 million in average receipts annually.

It’s important to define exactly what small businesses are in order to protect and promote them. The government usually grants special subsidies and benefits to help the little firms compete against the big market-share holders in their industry. They can also generally get bank loans sooner and more easily.

Why are small businesses important to the U.S. economy?

Small businesses are important to the U.S. economy because they make a significant contribution to the yearly GDP while also creating job opportunities, especially for disadvantaged minority communities. They also spark innovation and bring original ideas and products to the market.

Small businesses also complement the economic activity of larger organizations. Many offer important B2B services like accounting, web design, and legal services. Others offer niche products and services; for example, it’s usually small businesses that build specific car parts for large auto manufacturers. An average car has anywhere between 28,000–30,000 parts if you count each nut, bolt, and screw. Most of these parts are produced by small companies who then sell them to larger firms.

What percentage of the economy is small business?

Small businesses account for 44% of economic activity in the U.S.A. according to the latest available report from 2014. While their overall market-share has decreased over the years, they’re still an important part of our financial system. Small businesses’ share of GDP has fallen from 48% to 43.5% over the years. According to the SBA Office of Advocacy, this decline can be attributed to the fast growth of large businesses and the Great Recession.
Approximately what percentage of the jobs in the United States do small businesses provide?
There are 30.2 million small businesses in the U.S.A., and they make up 47.5% of the private workforce. Small businesses created 1.9 million jobs in 2015, and they keep contributing to local communities by providing employment and financial stability to many.

Small companies tend to hire more often than big ones because they need employees to grow and expand. Unfortunately, small firms also have a lower survival rate, meaning workers sometimes lose their jobs because of business closures.

How many small businesses start each year?

Around 627,000 new businesses start every year according to 2008 statistics, which are the latest available stats on this subject. This includes sole proprietorships, partnerships, and corporate entities.

One of the reasons so many new businesses open each year is the relative ease of getting started. In America, you can get most of the paperwork and licenses you need in as little as six days. The process is particularly easy for at-home sole proprietorships because owners don’t have to worry about hiring employees or finding the right location for their business.

What is the success rate of small businesses?

It’s difficult to calculate how many businesses are successful because it largely depends on the industry. For example, finance, insurance, and real estate seem to be doing particularly well—58% of these companies still operate after four years. Information companies have the highest failure rate—only 37% of them are successful after four years.

In general, 40% of companies are profitable, 30% break even every year, and 30% continue to lose money.

What is the survival rate for new businesses?

According to Fundera, 50% of small businesses survive for at least five years, while 80% survive the first year. The older your company is, the harder it can be to maintain your business. Federal income taxes, strict government regulations, and healthcare-management for employees are some of the biggest challenges small business owners have to face, and dealing with these problems is the top priority for many firms.

Conclusion

The competition is stiff, but most owners have a positive outlook on the future. While you’re likely to face challenges along the way, these small business statistics show that it’s possible to run a company successfully when you know what to expect.

Use this knowledge to create or modify your existing business plan, and start growing your business one step at a time.

Sources: 

1) SBA.gov

2) SBA.gov

3) Fundera

4) SBA.gov

5) Forbes

6) Fundera

7) SBA.gov

8) SBA.gov

9) StartBlox

10) Fundera

11) Fundera

12) Intuit

13) LendEDU

14) LendEDU

15) Fundera

16) Fundera

17) Fundera

18) SmallBizTrends

19) Business Know-How

20) Serious Startups

21) Fundera

22) LendEdu

23) Fundera

24) NSBA

25) Fundera

26) CBInsights

27) Business Insights

28) CBInsights

29) CBInsights

30) Fundera

31) WBENC

32) WBENC

33) Guidant Financial

34) Small Business

35) Forbes

36) NFAP

37) StartBlox

38) Clutch

39) Iron Paper

40) Keap

41) Blue Corona

42) Clutch