Essential Small Business Statistics: Big Business Starts Small
Before we get going, let’s begin with a small business definition. According to SBA statistics, a small business is any independently operated company that employs up to 500 people. The number of small businesses in the United States is measured in the tens of millions, and they constitute a crucial part of the US economy.
Since the SBA’s definition is very loose, this category includes companies from all industries and doesn’t discriminate between eCommerce and brick-and-mortar businesses. In any case, small businesses drive innovation, reduce unemployment, trade with foreign countries, and provide a large percentage of the nation’s goods and services.
Small entrepreneurs need to be extremely inventive, persistent, and brave to survive in a highly competitive market. With thousands of new small businesses launched every day, it can be tough to stand out from the crowd.
At Fortunly, we want you to be as prepared as possible when it comes time to launch your own small business. That’s why we’ve compiled these business statistics, which we hope will provide a useful insight into the current entrepreneurial landscape.
All the information you’ll find below comes from reputable sources, including the United States Census Bureau, the National Small Business Association, the US Federal Reserve, and the World Bank.
Small Business Stats for 2023 – Editor’s Choice
- According to the Small Business Administration, it takes an average of $30,000 to start a business.
- There are 30.7 million small businesses active across the United States.
- It takes only four days to open a small business; around 33% get started with less than $5,000.
- More than 50% of small businesses rely on the entrepreneur’s personal savings in the initial phase.
- Only 0.7% of US entrepreneurs who apply manage to get VC funding.
- Four years ago, millennials became the largest workforce generation in the States. By 2025, they will make up 75% of the global workforce.
- More than 25% of US businesses are started by immigrants.
- 90 million small businesses use Facebook to promote their brand, products, or services.
General Small Business Stats
According to SBA statistics, there are 30.7 million small businesses active across the United States.
(U.S. Small Business Administration)
It’s estimated that these small businesses combined have around 60.6 million employees, which accounts for 47.1% of all employees in the US.
Deloitte’s small business report suggests that businesses with fewer than 500 employees represented 99.7% of all US businesses in 2017.
(Deloitte; U.S. Small Business Administration)
This percentage grew to 99.9% in 2019, according to the SBA. This represents almost half of total employment in the US private sector.
It takes only four days to start a small business in the United States.
The time required to start a business varies from country to country. According to the World Bank, it takes 11 days in Japan, while in Luxembourg it takes 17 days.
When asked about the top challenges of running a business, 29% of small business owners said that it’s handling the impact of the coronavirus.
(Guidant Financial; U.S. Small Business Administration)
Other major challenges are attracting customers (13%), financial stability/cash flow (12%), advancement in technology (5%), and taxes (5%).
It costs around $30,000 to start a business, according to the Small Business Administration. However, home-based small businesses can be started for $1,000 to $5,000.
More small businesses are structured as sole proprietorships than as any other kind of business: 23.5 million (73%) in total.
(The Balance Small Business, Berkman Solutions)
LLCs are followed by S corporations (4.2 million), LLCs (2.2 million), C corporations (1.6 million), and partnerships (583,000).
Small Business Financial & Revenue Statistics
In 2017, 9% of all small businesses in the US exported goods or services. Small businesses accounted for 98% of exporters and 97% of importers.
(International Trade Administration, US Chamber of Commerce)
Small and medium-sized businesses with fewer than 500 employees exported goods worth a total of $541 billion during that year.
In 2017, $719 million from the president’s budget was provided for capital, assistance, and contracting opportunities to America’s small businesses. The 2021 budget included massive cuts to these programs.
(U.S. Small Business Administration, NSBA)
This included loan guarantees for more than 65,000 small businesses, encouraging entry into global markets, entrepreneurial training programs, and a host of other incentives. The 2021 budget proposal included a 35% cut to Small Business Development Centres and a 20% cut to SB microloans.
78% of small business owners involved in a recent survey by Guidant Financial and LendingClub said their business was profitable.
On average, respondents rated their level of happiness as eight on a scale from one to 10.
More than half of small businesses (56%) rely on the entrepreneur’s personal savings or loans from family or friends to get them off the ground.
(SBE Council; Fed Small Business)
Aside from that, small businesses also rely heavily on traditional debt. A recent Small Business Credit Survey by the Federal Reserve Banks of several states shows that the most common types of external financing for employer firms are loans and lines of credit (54%) and credit cards (53%).
Approximately 30% of nonemployer firms and 7% of employer firms began without any startup business capital.
About 33% of small businesses get started with less than $5,000.
(Kabbage, SBA, Small Business Trends)
On average, it costs around $30,000 to start a business, according to the Small Business Administration. However, home-based small businesses can be started for $2,000 to $5,000. Online publication Small Business Trends further reports that 58% of small businesses start operating with less than $25,000.
Besides personal savings, the top sources of capital expansion for small businesses are profits/assets, credit cards, bank loans, home equity, and other personal savings.
However, according to the national small business bureau, 53% of small businesses surveyed weren’t able to expand their capital.
Small business loan default rates are currently at an all-time low of less than 2%.
(U.S. Small Business Administration; Biz2Credit)
The peak of small business loan default rates was in 2009, immediately after the Great Recession, when the average rate was around 6%. However, loan approval rates fell by 50% in the 2019-2020 period.
Small business lending statistics show that the most common purpose for using loans is financing equipment or fixed assets.
(FDIC Small Business Lending Survey 2018)
Other common purposes for which small firms use loans include accounts receivable, inventory, and working capital.
Only 0.7% of US entrepreneurs who apply get venture capital funding.
Small business’ share of US GDP fell from 48% to 43.5% between 1998 and 2014.
(U.S. Small Business Administration)
Small businesses’ contribution to the GDP of the USA was around $5.9 trillion in 2014, the last year for which data is available. SMEs account for 44% of economic activity in the States.
Some of the most profitable small businesses operate in the following industries: home improvement and cleaning services, delivery services, digital marketing, and app development.
These highly profitable industries stand out because of their net profit margins. Examples of the least profitable industries include beverage manufacturing, oil and gas extraction, forging and stamping, and, surprisingly, software publishing.
On average, CEOs of the top 350 firms in the USA were paid $21.3 million in 2019.
(Economic Policy Institute)
According to this research, this represents a 14% increase from 2018. Nowadays, CEOs earn 320 times more than typical workers. This figure is expected to keep rising despite the coronavirus pandemic.
One in four small-business entrepreneurs reports spending more than 40 hours per year working on their federal taxes.
(National Small Business Association)
When asked how much time they spend each year dealing with taxes (calculating payroll, working with the accountant, and filing reports), 11% of small business representatives answered that they spend more than 120 hours. Another 15% said that they spend between 41 and 80 hours on tax-related tasks.
Around 63% of small businesses spend more than $1,000 per year on federal taxes alone.
(National Small Business Association)
The National Small Business Administration’s Small Business Survey shows that 3% of small businesses spend more than $40,000 per year just on federal taxes – and that’s not counting accountant fees, legal fees, and other costs.
The largest percentage of small businesses (24%) earned between $1 and $5 million in 2018.
(National Small Business Association)
Only 1% made $150 million or more in gross sales or revenues, 23% earned less than $100,000, and 14% earned between $100,000 and $250,000.
More than half of small businesses have a chief financial officer.
(The Wall Street Journal)
Small business research by The Wall Street Journal and Vistage International showed that of the 895 firms surveyed, more than 50% of enterprises have a team member responsible for managing finances.
Small Business Failure Statistics
A recent study by US Bank has shown that 82% of small businesses fail due to problems with cash flow.
Poor financial management is the number one cause of small business failures, regardless of the industry.
The second-most common reason why small businesses fail is because there’s no market for their products or services.
Of the percentage of small businesses that fail, 42% found there was no need for their products or services, 23% didn’t have the right team, and 19% were simply beaten by their competition. Another important cause of failure is the lack of adequate business systems to achieve sustainable growth.
Around two-thirds of small businesses last for two years, while around half survive for five years.
(U.S. Small Business Administration)
This indicates that the small business success rate improves as the business ages.
According to the Bureau of Labor statistics, the small business failure rate is 20% in the first year of running a business.
(U.S. Department of Labor; Fundera)
And if you’ve ever wondered how many small businesses in the US fail after 10 years in business, the answer is 70%.
Each month, about 543,000 new businesses are founded.
Nonetheless, the small business failure rate (the number of businesses that are shut down) on a monthly basis is higher than that. Data provided from Statista in 2020 shows that there were 804,398 businesses that were less than a year old in March that year.
Small business founders are more likely to succeed if they’ve previously failed than first-timers.
Founders of a previously successful small business have a 30% chance of success. On the other hand, founders who have failed with a prior venture have 20% odds, while first-time entrepreneurs have an 18% chance of not becoming a number among the small business failure statistics.
Having two founders (one technical and one business developer) instead of one small business owner increases the chances of success.
(Startup Genome Report; NYU Stern)
Such teams raise 30% more funds, have 2.9 times more customer growth, and are 19% less likely to scale too fast. However, there’s some new research indicating the opposite: that solo entrepreneurs are 2.5 times more likely to survive than co-op ventures.
The National Small Business Association (NSBA) reports that there has been an increase in optimism among small business owners.
(National Small Business Association)
While in July 2020, 69% of small business owners were still very concerned about the effects of the coronavirus, this is a decrease from 85% in May.
Selling services rather than products decreases the chance of failure.
According to Xero’s Make or Break Report, 59% of small businesses selling services survive five years, compared to 49% of failing companies. More than twice as many businesses that were selling products failed — 41% in comparison to just 19% that survived.
Successful small businesses prioritize investments in technology.
Almost six in 10 small business survivors (58%) use software to manage their finances, compared to 14% of failed businesses in comparable fields.
Small Business in America: Statistics About Employment
Firms with fewer than 100 employees have the biggest share of small business employment.
(United States Census Bureau; JP Morgan Chase & Co.)
Around 18% of all employees in the USA work for companies with fewer than 20 employees.
Small firms created 9.3 million new private jobs between 2005 and 2019, which accounted for 64% of the total jobs created in the country.
(Congressional Research Service)
Small enterprises continue to have a significant positive impact on the employment rate in the US. During 2017 - which is when the most recent data was published - small businesses created 47.1% of all jobs in that year.
According to the US Census Bureau, 62% of businesses in the States have five employees or fewer.
(U.S. Small Business Administration)
Official US small business statistics show that nearly two-thirds of businesses in America had five or fewer employees in 2014.
More than 1.9 million new jobs are currently generated annually by small companies in the United States.
(U.S. Small Business Administration; U.S. Department of Labor)
For example, in Q3 2016, about 240,000 startups were founded, generating more than 870,000 new jobs. However, during the same period, about 215,000 startups were closed, which resulted in almost 750,000 jobs lost.
Small Business in the USA: Statistics Related to Demography
According to small business owners statistics provided by UENI in 2020, 45% of small business owners are female.
This is an immense jump from 1972, when women owned only 4.6% of all businesses.
Between 1997 and 2017, female entrepreneurship grew by more than 114%.
During the same period, the growth rate for small businesses owned by non-Caucasian women was 467%. The number of small businesses owned by women grew by 21% between 2014 and 2019, while businesses in general grew by only 9%. In 2019, non-Caucasian women accounted for 50% of all woman-owned businesses.
Millennials as the Small Business Workforce
In 2016, millennials became the largest workforce generation in the States.
(Pew Research Center)
Anyone who is considering starting a small business should bear in mind the work ethics of millennials. People born between 1981 and 1996 constitute the largest segment of the US labor force; more than one-third of American workers (35%) belong to this generation. In 2019, there were 72.1 million millennial workers in the US.
100% of millennial owners of small businesses that generate between $1 million and $10 million in revenue believe that AI and machine learning will impact their industry in the next five years.
(Business Insider; Capital One Small Business Growth Index)
Capital One Small Business Growth Index findings suggest that millennial business owners are more open to innovation, more optimistic when it comes to business success, and more likely to offer benefits to their employees.
Millennials will make up 75% of the global workforce by 2025.
(Inc.com; Forbes; Cox BLUE)
Multiple studies show that millennials are willing to work for small and medium enterprises. SMEs provide opportunities that are very appealing for this generation, such as taking more responsibilities earlier or the ability to work on their own terms. According to a survey by Bentley University, 77% of millennials say that flexible work hours make them more productive.
For the first time since 2016, the number of millennials who want to stay with their employer became higher than the number of those that want to quit.
The Deloitte 2020 Millennial Survey reveals that for the first time since the company began measuring millennial job loyalty, the number of those who will stick with their employer long-term (35%) is higher than the number of those who want to quit their job in the next two years (31%).
More than 62% of millennials believe that virtual meetings (video calls and online chats) encroach on face-to-face meetings.
(Meetings Mean Business)
Millennials actually prefer face-to-face meetings over virtual communication at the workplace. According to one study, 41% of millennials feel overwhelmed with information overload, versus 31% of older generations.
Millennials already run 16% of small businesses in the US.
(Thrive Global; Gallup; Quickbooks)
Members of this generation are starting to run a business much earlier than their parents did (at the age of 27 versus 35 for baby boomers). Generally speaking, they are entrepreneurial by nature and financially realistic. Millennials value small businesses a lot — according to Gallup’s Confidence in Institutions poll, 33% trust small businesses “a great deal” and 37% trust them “quite a lot.”
There are 3.2 million immigrant-owned businesses in the US right now.
(Inc.; New American Economy)
Small business data gathered by Inc.com show that immigrant-owned businesses pay approximately $126 billion in wages on a yearly basis. One in 10 Americans working for private firms are employed by immigrant-owned small businesses. Additionally, a 2019 report found that 45% of Fortune 500 companies have been founded by immigrants or their children.
An estimated 8 million US small businesses are owned by people from a minority background.
Of these, 3.4% are owned by Native Americans, 27.75% are Asian-owned, 32.5% are owned by African Americans, and 41.25% are owned by citizens of Hispanic origin.
The majority of American companies with fewer than 500 employees are located in the South, not on the West Coast.
(National Small Business Association, Fortune 500)
The NSBA end-of-year report for 2017 identified that 27% of small businesses were located in the South, followed by 22% of firms located in the Mid-Atlantic. Small businesses located in the Pacific region accounted for 15% of the overall number. Findings from 2021 indicate that the situation is largely unchanged.
Small Business Marketing Statistics
90 million small businesses use Facebook pages to promote their brand, products, or services.
(DMR; Crowdspring; Hootsuite)
75% of these firms use paid advertising, including boosted posts and longer-term social media marketing campaigns.
Even in 2014, 94% of small companies had used smartphones to conduct their business. Today, running a business is unimaginable without smart devices.
The majority of businesses estimate they save up to $6,000 per year by using mobile apps.
However, 51% of small business owners in 2016 were still reluctant to use new technologies because of the time it takes to implement them. In 2017, this figure fell to 30%.
(Business Insider, Business News Daily)
According to the 2016 State of Small Business Report by UPS CONNECT, 64% of small businesses use social media for business advice, 62% consult industry peers, 52% browse the internet, and 44% use business-related media. According to a study by AT&T, 75% of small business owners were eager to adopt new technologies in 2017.
Every small business should consider these marketing statistics: 88% of online consumers are less likely to return to a website after a poor experience.
The majority of Americans prefer to shop online. Most people who don’t like a particular eCommerce website will shop somewhere else next time.
Firms that have a blog on their website generate 126% faster lead growth than those that don’t.
Small business growth statistics provided by HubSpot also suggest that a neat landing page, a presence on social media, and strong keywords contribute to generating more leads.
Despite the stats listed above, 80% of small businesses still do not invest in content marketing.
Marketing experts agree that such firms are missing a key opportunity to increase sales, customer loyalty, and brand awareness.
Small Business Website Statistics
Almost two-thirds of small companies rely on websites to engage potential customers.
According to Clutch, 64% of small businesses had a website at the beginning of 2018.
47% of small businesses experienced at least one cyberattack in 2018.
Entrepreneurs operating online should also be aware of these small business cybersecurity statistics: As many as 43% of cyberattacks target small businesses. Data from 2019 indicates that cyberattacks are set to cost businesses around the world $5.2 trillion between 2019 and 2024.
Small Business Sociology
In 2012, 69% of new small businesses were founded at home.
Around 60% of established small businesses older than 3.5 years continue to operate from home.
The top three small business trends in 2019 were remote employment, outsourcing, and the adoption of IT tools.
Unemployment in the USA has hit a historical low, so employers are having a difficult time finding quality talent. Many businesses will now have to opt for mobile workers, as there’s an increasing demand to work remotely, especially with the pandemic.
Another solution is to hire freelancers instead of full-time employees. Powerful online tools (such as cloud apps) that allow work to be done remotely also support collaboration on a truly global scale.
The most popular motivation for someone to start a small business is determination to be their own boss.
In a survey by Guidant Financial, 26% of responders said they wanted to be their own boss, while 23% said they wanted to pursue their own passion.
And there you have it! We hope this list of small business statistics helps you better understand the challenges and potential benefits of starting up your own business. If you have the chance, we’d encourage you to choose small companies over large corporations when purchasing products and services. By doing business with small local firms, you’re directly helping the economy, while also supporting innovators like yourself.
For years, the clients I worked for were banks. That gave me an insider’s view of how banks and other institutions create financial products and services. Then I entered the world of journalism. Fortunly is the result of our fantastic team’s hard work. I use the knowledge I acquired as a bank copywriter to create valuable content that will help you make the best possible financial decisions.
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