The business world is tough, especially for startups. In the beginning, it’s all ambition and hope, but along the line, most of these entrepreneurs are discouraged as they cannot keep up with the level of competition in the space.
Small business statistics reveal that most businesses don’t make it after four years of establishing. This is mostly due to the lack of relevant business knowledge and skills, which are the major components of running a successful business.
As an entrepreneur, getting to know the latest business trends is important. Not only will you be capable of getting through critical stages, but you’ll also make the right decisions on a future course. With the help of the National Small Business Association, US Census Bureau, and other agencies, we have compiled a list of data that will improve your business.
Small Business Facts
- Only 49% of business owners have an explicit growth plan for their business
- There are around 543,000 new startups on a monthly basis
- Minorities own 38.1% of small businesses in America
- Top techniques used by small businesses for growing are advertising and marketing
- Women-owned businesses increased to 9.9 million
- Small business owners earn less than $100,000 a year
- Businesses with two founders are more likely to succeed
- 44% of small businesses fail after four years.
What Is Considered A Small Business?
Every government agency such as the Small Business Administration (SBA), the Affordable Care Act (ACA), and the Internal Revenue Service (IRS), has its own definition of what a small business is.
Small businesses operate under different structures, and they can be a sole proprietorship, partnerships (either general or limited), and corporation. According to ACA criteria, a small business is a business with no more than 50 employees. As for IRS, on the other hand, small businesses are defined according to individual tax laws.
Meanwhile, The Small Business Administration defines a small business as a firm that has fewer than 500 employees.
Small Business Growth Statistics
1. More than half of small businesses saw an increase in revenue over the last 12 months.
A recent survey by the NSBA reveals that 53% of small businesses saw a boost in revenue over the past 12 months. That is about a 6% increase compared to last year. However, the story isn’t the same for others, because 20% of small firms that took part in the survey reported a decrease in revenue. As for the remaining 27%, they have claimed to have seen no changes at all.
2. 69% of startups in the US are home-based.
Small business statistics by Global Entrepreneurship Monitor show that 69% of startups in the US are home-based.
3. Only 49% of small business owners have an elaborated growth plan.
Majority of small business owners are optimistic about their business. But only 49% have a stated plan for their development. SunTrust has published the results for its 2019 survey on small businesses. It shows that only one-third of the business owners with a growth plan have shared it with their external partners.
The rest said they only shared it with their advisers. The analysis shows that the most successful small businesses are the ones with a growth plan shared with all partners.
4. Small businesses utilize 47.3% of the private workforce in the US.
The office of advocacy released analysis which shows that small firms add 1.8 million new jobs in the United States. It goes further to indicate that they employ 47.3% of the private workforce.
The businesses have provided jobs in healthcare/social assistance, business services, accommodation/food services, home services, and commercial trade. Small businesses are part of the major aspect of economic development in the United States.
5. There are around 543,000 new startups on a monthly basis.
Statistics show that approximately 543,000 new businesses launch every month. Unfortunately, the number of small businesses in the US that shut down is even higher. The US Small Business Administration revealed that in 2013, there were about 406,000 establishments, 401,000 (98%) of which closed down in less than a year.
6. Minorities own 38.1% of establishments in the US.
Top demographics of minorities who run a business are as follows: Hispanic (3.3 million), African American (2.6 million), and Asian (1.9 million). The US economy statistics reveal that these businesses have made a clear impact on the overall US economy and unemployment rates, especially among the said minorities.
7. Advertising and marketing are leading growth techniques.
As for their growth strategies, 47% of small businesses revealed that advertising and marketing are crucial for a successful business. Apart from those, 33% said the strategic alliance serves as a better option for them. About 30% agreed that web presence and e-commerce are other strategies that improve the business. Additional techniques on the list include mergers, acquisitions, and exporting.
8. Women own 9.9 million small businesses.
Small business stats published by SBA in 2012 show that women owned 9.9 million small businesses (33.4%) in the United States, compared to the 14.8 million owned by their male counterparts. That signifies eight out of 100 working-age females.
There are also benefits for certified women-owned businesses. The purpose of this certification is to increase opportunities for women. The two types of certifications for women are the Women-Owned Small Business (WOSB) and Women Business Enterprise (WBE). Benefits include access to opportunities like federal agencies and large corporations, mentorship programs, networking opportunities, etc.
9. The number of small businesses in the US is 28.8 million.
Small businesses are indeed the backbone of America. The 2019 demographics show that 99.7% of businesses in the United States are small businesses. If you’re wondering how many small businesses are in the US, the number is currently 28.8 million.
10. 86.3% of business owners report taking less than $100,000 in salary per year.
CEOs of big enterprises receive salaries way bigger than most owners of small businesses. You might think it’s the opposite, but the truth is that most owners of small businesses, 86.3% to be precise, are taking salaries less than $100,000 a year. According to Payscale, 30% of them reported not taking salaries at all, despite their hard work.
11. Independence is the major reason for opening a business.
Guidant Financial survey shows that the top two reasons for people opening a business are independence and personal satisfaction. The result shows that the most profitable small businesses are owned by those who put their focus on working for themselves (49%) and those who find personal satisfaction in it (42%).
Other reasons include life events such as death, opportunities, being dissatisfied with corporate America, and not being ready to retire.
12. Education is never an obstacle to succeed in business.
High school grades hold the highest percentage in small business ownership. The analysis shows that 33% are high school levels. Others include a Bachelor’s degree (29%), Associates degree (18%), Master’s degree (16%), and Doctorate (4%). The majority of them have seen great achievements. That said, education does not signify prosperity.
13. FBA sales, skilled trades, software engineering, and development are among the top small business trends.
FBA sales, skilled trades, software engineering, and development are the topmost lucrative businesses. They might not be the biggest, but they have a high demand. Research shows that those who go into any of these four businesses are likely to become rich in a decade.
Other trends on the list are meal kit services and delivery, VR computing, self-storage, construction, etc. The good thing about most of these businesses is that they don’t require a Ph.D. or years of experience.
14. How many small businesses are home-based?
Statistics from SBA reveals that about 50% of small businesses are home-based. The stats are as follows:
- firms without paid employees (60.1%)
- small employer firms (23.3%)
- large employer firms (0.3%).
Industries that are more likely to be home-based are IT, technical services, and construction.
Over 60% of small business owners that participated in a recent survey revealed that they love working at home. Although working at home sounds like a good idea, there are still some challenges you might face. One of them is time management, as reported by 41% of the surveyed participants.
Small Business Revenue Statistics
15. 9% of small businesses reported making over $1 million a year.
Research shows that in 2018, 9% of small businesses made an annual revenue of over $1 million. Around 66% of full-time business owners that participated in the Business Know-How survey reported that they make less than $100,000 in annual sales from their business. As for part-time business owners, the number goes up to 81%.
The least profitable small businesses, about 16%, made earnings of less than $10,000. The survey also shows two views of small business annual sales — full-time/part-time and full-time businesses only. The results are as follows:
Full-time businesses only
- $1 million and above (9%)
- $500k – $1M (4%)
- $200k – $499k (19%)
- $150k – $199k (3%)
- $100k – $149k (14%)
- $75k – $99k (3%)
- $50k – $74k (11%)
- $25k – $49k (12%)
- $10k – $24k (9%)
- under $10k (16%).
- $1 million and above (7%)
- $500k – $1m (3%)
- $200k – $499k (15%)
- $150k – $199k (3%)
- $100k – $149k (11%)
- $75k – $99k (4%)
- $50k – $74.9 (9%)
- $25k – $49k (13%)
- $10k – $24k (13%)
- under $10k (22%).
16. Businesses with two founders are more likely to succeed.
Two heads are indeed better than one. When you have a partner, you’re both likely to achieve more in your business. Small business stats show that businesses operated by two leaders raise 30% more money on average and are less likely to scale down prematurely.
Having a partner who puts in as much hard work as you do and someone you can share burdens and collaborate with, will definitely help the business at critical stages. Though some people would prefer running the business alone, a partner will always motivate you, and both of you will attract new customers a lot faster.
17. Only 40% of small businesses become profitable.
According to SmallBizTrends, 40% of small businesses start to become profitable at some point. Another 30% begin to lose money, and the remaining 30% cease to function. The research has shown that 95% of small businesses close after they reach five years of operation.
Going further, research also lists the top three types of businesses with high risks and factors that can cause them to fail. Businesses on the list include retail stores, independent restaurants, and direct sales. Common reasons that cause them to fail are fierce competition, lack of finance, lack of motivation, and improper training.
Small Business Failure Statistics
18. 44% of small businesses collapse after five years.
There isn’t a 100% accurate statistics on small business failure rates. The top sources (Bureau of Labor, Harvard Business Study, and SBA) make use of different methodologies, which is why they don’t arrive at the same point.
Data from the Small Business Association shows that 30% of startups fail when they reach two years of existence, 50% shut down in five years, and 66% in 10 years. Only 25% were said to make it to 15 years. However, the Bureau of Labor statistics on small business failure rate shows that about 44% of businesses fail after five years. Our entrepreneur statistics also show that 22.5% of small businesses fail within their first year.
19. 33% of business owners said the lack of capital is their greatest challenge.
A lack of capital can put a limit to what the company can achieve by jeopardizing its ability to finance daily operations. These operations can be equipment needs, salaries, and inventory purchase. With the lack of capital, companies are unable to cope with emergencies.
Recent small business statistics show that 33% of business owners lack the capital to run their business. Lack of a steady income stream and reliable customers kills every business. Other challenges are time management, recruiting, and administrative work.
20. The information industry has the highest failure rate.
Research by The Statistic Brain Research Institute presents the failure rate of different business sectors. This is how many businesses shut down by industry sectors:
- finance insurance/real estate (42%)
- education and health (44%)
- agriculture (44%)
- services (45%)
- wholesale (46%)
- mining (49%)
- manufacturing (51%)
- construction (53%)
- retail (53%)
- transportation/communication/utilities (55%)
- information (63%).
As you can see, the industry sector with the highest percentage of businesses that fail is information.
21. Small business owners younger than 30 are more likely to fail.
Experience is the number one factor that determines whether a business is going to be successful or not. Small business owners older than 30 are more likely to succeed. Research shows that only 0.09% of young entrepreneurs below 30 are among the top 0.1% businessmen, compared to 0.17% of entrepreneurs above 30.
Small Business Trends in 2019
There are new trends almost every year that change the way industries work. As a smart entrepreneur, you can utilize these trends for launching your new business and achieve the success you desire.
The best thing about these trends is that business leaders don’t require years of experience or a Ph.D. All they need is passion and a little experience. The following business trends could also prove to be useful for many years to come.
Fulfillment by Amazon (FBA) Sales
This is an Amazon service that allows sellers to market their goods through the world’s largest online retail platform. With the help of this service, sellers are free from the stress of running an online retail store in exchange for a fee.
Skilled trade turns out to be among the top business trends of 2019. A lot of people dislike skilled work due to belief that they won’t earn much from it. But the truth is that skilled trades are in high demand and are also well paid.
The US Bureau of Labor predicts that there is going to be a 17% increase in demand for software developers starting from 2023. In 2017, software devs made a median salary of $101,790 per year.
Other top trends are self-storage unit, virtual reality computing, home renovations, bike sales/servicing/rentals, facility support, meal kit sales/delivery, and gourmet coffee.
Most Popular Small Business Jobs
The world’s leading job listing site, Indeed, released categories of the most clicked jobs on its site. Administrative support happens to be on top of the list. Other most clicked categories include customer service, sales, installation/maintenance/repair, management, food services, driver, warehouse, retail, and medical technician.
The SBA statistics from 2015 show that small businesses create up to 1.9 million net jobs. The smaller businesses with less than 20 employees added 1.1 million net jobs, while those that employ 100 – 499 employees added 387,874 net jobs.
Average Small Business Revenue
The average revenue for small businesses varies according to states, experience, industry, special skill, and gender. However, the overall average is estimated to be less than $100,000 a year.
The SBA statistics show that the economic condition of a state can affect the earnings for small businesses.
The top three richest states per annual revenue are:
- Maryland. Incorporated small businesses: $50k/ Unincorporated small businesses: $26k
- Alaska. Incorporated small businesses: $55k/ Unincorporated small businesses: $30k
- New Jersey. Incorporated small businesses: $60k/ Unincorporated small businesses: $29k.
The top three poorest states per annual revenue are:
- Mississippi. Incorporated small businesses: $46k/ Unincorporated small businesses: $22k
- Arkansas. Incorporated small businesses: $44k/ Unincorporated small businesses: $20k
- West Virginia. Incorporated small businesses: $41k/ Unincorporated small businesses: $19k.
Top Businesses to Start
The three most successful business ideas are accounting/payroll services, real estate, and rental companies.
Accounting takes the lead and is also not a hard business to start. What’s more, you don’t even need to invest huge capital into equipment. Statistics show that the overall net profit margin for this business was 18.3% in 2016, which is the highest of all small businesses. The sales growth was an incredible 17%.
Real estate is second on the list of top businesses to start, with an overall net profit margin of 17.4% and a sales growth of 15%. However, the cost of starting a real estate business is extremely high because it involves the purchase of properties or getting a mortgage. As for the agents and brokers in the real estate industry, the net profit margin is 14%, and the sales growth is 16%.
The rental industry is third on the list. Statistics show companies within this niche see a profit margin of 12%.
What is the success rate of small businesses?
The success rate of small businesses varies, depending on the industry.
Among all, information companies are most likely to fail, with their success rate lowered to 37% after four years. Industries with the highest rate of success are finance, real estate, and insurance, with 58% operating after four years.
Small Business Administration (SBA) statistics show that there is a low success rate for small businesses with a two-thirds of startups succeeding their two years in business, and less than 50% making it to the fifth year.
How many small businesses start each year?
The latest statistics by SBA show that the number of small businesses started every year hovers around 400,000. One of the reasons for having so many new startups every year is that they are easy to launch. You can easily acquire licenses and finish all the paperwork within a few days. The process gets easier for those running a home-based business because they don’t have to bother with finding the perfect location.
What is the survival rate for new businesses?
Running a small business is not a simple task. There are lots of challenges to face, such as healthcare management, tax payment, regulation, etc. Statistics show that around 80% of startups make it to the next year, and only 50% survive after four years. Business operations get tough as times goes on.
To be more precise, approximately 79.8% of small businesses survive their first year, 69.2% make it through the second year, 50.2% survive the fifth year, and 33% will survive the 10th year of existence.
How long do most small businesses last?
According to statistics by the US Bureau of Labor, two out of three small businesses last for about two years. Stats show that there is a decrease in the rate at which people quit their small businesses. That means people are starting to have a better knowledge of the products they sell and the market.
What percentage of the economy is a small business?
There are about 30 million firms in America, and over 99% are small businesses. About 88% of them have less than 20 employees, and around 40% generate below $100,000 in revenue per year.
Small businesses in the US employ 47.3% (58 million) of the total workforce. States like Montana and Wyoming have the highest employment rates — around 67.6% and 62.3%, respectively.
What is the primary reason that so many new businesses fail?
There are lots of conditions that can lead to business failure, and most small businesses make the following mistakes:
- Not having a business plan. The lack of a business plan could kill any company. Successful firms always have strategic plans they follow strictly. An accurate plan includes business description, vision, goals, budgets, market analysis, etc.
- Wrong motivation. Most people who start a business do it because they want to be their own boss, have more time for their family, and make lots of money. But those shouldn’t be the reasons to start a business. To be successful, you need to have passion, determination, and love for the business.
- Lack of capital. Insufficient funds is a huge problem for any business. Startup owners sometimes make the mistake of starting a business without enough capital. Such a mistake forces the business to close without a chance to succeed. Research by Business Insider on how many small businesses fail shows that 82% fail due to lack of funds.
- Wrong location. Your business location matters a lot. Before choosing one for your business, you should consider a lot of factors, such as competitors’ location, traffic, customers location, safety, accessibility, etc. Your home can as well be a good location depending on the business you’re into.
- Having no website/social media. Having a social media presence and a website is essential. You can get lots of customers by putting your business online. Over 88% of America’s population are internet users. That’s why you should be present on platforms such as Facebook, Instagram, Twitter, etc.
Approximately, what percentage of the jobs in the United States do small businesses provide?
Research shows that there are about 28 million small businesses in the US, and these companies provide 47.3% of all jobs.
The rate of employment by small businesses varies across states in the US. The highest rate of employment by small businesses are in Montana (67.6%) and Wyoming (62.3%). States where small businesses employ the least percentage of the total workforce are Nevada (40.8%) and Florida (43.3%).
Why are small businesses important to the US economy?
Small businesses are important to the US economy because they create local government taxes, provide jobs, etc. Example of the benefits that small businesses provide can be seen in 2015 stats by the SBA that shows that small businesses added 1.9 million jobs that year.
Taking note of these small business statistics is important for anyone that wants to dive into the world of entrepreneurship. The failure rates are not there to discourage you. Instead, they are vital information that will help you make the right decision and avoid possible mistakes made by others.