Turning your small business into a flourishing multi-million dollar corporation may seem extremely challenging — but facts and figures prove it is not impossible.
If you are thinking of starting your own company, the first thing you need to do is to familiarize yourself with the latest trends. Learning the ropes of the industry and finding out how other startups made it big can help your own company move towards the path of success.
Luckily for you, we’ve gathered the most recent small business statistics that can provide you with some quick answers to your most pressing questions.
Stunning Small Business Stats (Editor’s Choice)
- An average of 543,000 small businesses are launched each month.
- The health, beauty, and fitness industry experienced a 34% increase in 2018.
- A 40-year-old is more than twice as likely to launch a profitable startup as a 25-year-old.
- Only 40% of small businesses become profitable.
- It takes six days to start a business in the United States.
- In the United States, there are 30.2 million small businesses.
- Small businesses provide 47.5% of the jobs in the United States.
Small Business Statistics for 2020
1. An average of 543,000 small businesses are launched each month.
This number best answers the question “how many small businesses start each year”? If you do the math, the number translates into over 6.5 million new startups every year. This means the competition is enormous and only a small number of these companies survive in the long run.
2. The most popular industry for 2018 startups was technology.
The latest stats revealed that the most profitable industries have a chance to be successful even after ten years. The technology, health, and energy industries head the list, while industries like real estate, retail, and hospitality are expected to show significant growth in the next few years.
3. The health, beauty, and fitness industry experienced a 34% increase in 2018.
In the year 2018, industries related to personal wellbeing showed a significant boom, according to small business growth statistics. Meanwhile, the food and restaurant industry saw an improvement of 14%, cementing its position as one of the top small business industries.
(Source: Guidant Financial)
4. 37% of small businesses offer employees higher salaries.
Over one-third of small businesses have to resort to offering higher salaries to their employees so that they can win them over. Along with this, they also offer many other benefits like vacation policies and other opportunities that may give them an edge over bigger competitors. As a result, these businesses face challenges with their finances.
5. Small businesses have an average of 6.1 employees.
According to small business stats, the average employment reached a four-year high with an average of 6.1 employees in small businesses.
6. Banks approved 26.9% of small business loans in 2018.
Although this may not seem much, small business loan approval reached the highest point in 2018 since the 2008 recession. In fact, 2018 was a great year for small businesses looking for capital.
7. A 40-year-old is more than twice as likely to found a profitable startup as a 25-year-old.
A study by the US Census Bureau and MIT professors found that 40-year-old entrepreneurs are 2.1 times more likely to start profitable small businesses. These entrepreneur statistics may be true because older entrepreneurs have had a chance to get more industry experience before they branch out and find their own business.
Successful college-aged entrepreneurs, like Mark Zuckerberg, are the exception, not the rule.
(Source: Kellogg Insight)
Small Business Growth Statistics
8. Almost 47% of small business owners anticipate employee growth in the next five years.
According to the Guardian, the most successful small businesses are likely to be tech firms, startups, and those driven by Millennials. They’re tipped to see growth prospects.
9. Only 40% of small businesses become profitable.
Just 40% of small businesses turn a profit at one point or another. Additionally, about 30% of small businesses break even, and 30% lose money year-over-year.
(Source: Small Biz Trends)
10. Only 17.3% of restaurant and hospitality businesses fail in their first year.
According to date from the SBA, only 17.3% of restaurants close down in their pilot year. This is less than the average small business failure rate of 20%. What’s more, one of the biggest reasons why restaurants fail is that their applications for loans get turned down, which means they shut down even before they have a chance to become profitable.
US Economy Statistics
11. It takes six days to start a business in the United States.
It takes just under a week to set up your own business in the US. While it doesn’t seem that long, it’s actually quite a bit longer than what it takes to start a business in other countries.
For instance, starting a business in New Zealand takes a single day, starting a business in Canada takes two days, starting a business in Australia takes three days, starting a business in Belgium takes four days, and starting a business in the UK takes five days.
(Source: Finances Online)
12. There are 30.2 million small businesses in the US.
For those of you who are wondering what percentage of the economy is small business, the number of small businesses in US is 30.2 million, which makes up 99.9% of all businesses. Out of these businesses, 8 million belong to minorities.
Additionally, small businesses yield a GDP of 43.5%. Small businesses also created 1.9 million jobs in 2015 alone and continuously contribute to local communities by providing job opportunities and financial security. These sheer numbers prove that small businesses are a key part of the country’s economic landscape.
13. Approximately what percentage of the jobs in the United States do small businesses provide? The answer is 47.5%.
Small businesses are responsible for employing 58.9 million people in the United States. However, it should be noted that this is the overall percentage, so some industries have a higher share of small business employers.
For example, over 85% of employees in the agriculture, forestry, and fishing industry work for small business, while just 26.4% of workers in the information science industry work for small businesses.
14. 50% of all small businesses in the United States are operated from home.
Thanks to the internet and the advancement of technology, Americans now have the luxury of working from home. According to the latest small business trends, half of all small businesses are operated from home. Out of these, 60.1% do not have any paid employees. The most common type of these business structures is sole proprietorship.
15. 75.3% of private-sector employers are micro-businesses.
In the United States, small businesses which employ fewer than ten people are called micro-businesses. Even though these businesses account for over three-quarters of all private businesses, since their number of employees is very small, they only contribute 10.5% towards all private-sector job opportunities.
Small Business Revenue Statistics
16. In 2018, 9% of small businesses made over $1 million.
The most profitable small businesses made over $1 million in 2018, while those that did not fare so well only made $10,000. That sum is not even enough to break even unless the business is run by a single person.
(Source: Business Know-How)
17. 86.3% of small business owners earn an annual income of $100,000.
It’s not a big leap of logic to understand small business owners make a great deal less than big-company CEOs. Most small business owners make less than 100 grand annually. But something that may come as a surprise to many is that a whopping $30.7% don’t take any salary at all!
18. A small business CEO makes $66,373 on average per year.
If we talk about the average income for small business CEO, it is just over $66,000 per year, with most people falling in the range of $30,000 to $152,000. PayScale also states that the business’s geographical location also has a large impact on the salary of the CEO, so those who live in high-income areas can expect to earn a bit more than peanuts.
19. Small businesses with co-owners make 30% more money.
Here’s some good news:
If a small business is founded by two people, they make nearly one-third more money on average. This is a great incentive to partner with someone else.
Having two founders does not just distribute the burden of finances and management – it also helps you earn more and can slow your company from scaling up by 19%. That’s a good thing since growing your company too fast in the early stages means you may lose business later on.
(Source: Serious Startups)
20. 1.7% of women-owned small businesses generate a revenue of $1.2 trillion.
Women have shown a lot of interest in starting their own business in recent years. In 2018, 207,900 women-owned businesses generated more than a mind-blowing $1 trillion in revenue. This is an incredible jump of 46% if we look at the average small business revenue data for the past 11 years.
Small Business Demographic Statistics
21. In 2018, there were 12.3 million women-owned businesses in the US.
The number of female-owned businesses has increased 31-fold from about 45 years ago. In 1942, women owned only 402,000 businesses that accounted for just 4.2% of the demographic. Today, they own 40% of all US firms.
22. 47% of all women-owned small businesses belong to women of color.
Businesses owned by women of color grew 163% in the last 10 years. According to small business owner statistics, the main reason was the recession period, which prompted women of color to turn into businesswomen. As of 2018, women of color generated more than $386 billion in annual revenue and provide jobs for over 2,230,600 people.
(Source: American Express)
23. There are 2,142,800 small businesses owned by Latinas.
About 17% of all women-owned businesses belong to Latinas. The number has seen a 10% jump since 2007. These companies generate an average small business revenue of $51,400.
(Source: American Express)
24. 31% of women who own businesses are between 25 and 44 years of age.
Besides that, 48% of women who own businesses are aged between 45 to 65 years. This indicates that mature women use their experience to make their companies successful.
(Source: American Express)
25. 55% of all unicorn startups in the United States were started by immigrants.
A total of 50 out of the 91 businesses that are valued at over $1 billion were started by immigrants. In the past two years, many of these companies have increased their workforce. Uber remains the leader in the industry with over 9,382 employees and 3 million active drivers. Elon Musk’s SpaceX employees 7,000 people, and Mu Sigma has over 3,500 people.
26. 2.52 million small businesses were started by veterans.
What’s more, veterans own about 9.1% of all US businesses. Out of these, 42,485 companies employed over 5 million people in 2018. Over 2 million of them are self-employed. Texas, Claifornia, and Florida are the states which boast the highest number of veteran-owned businesses.
(Source: Small Businesses)
Small Business Failure Statistics
27. 1 in 12 small businesses closes down every year.
The percentage of small business startups that fail hovers between 7% and 9%. Although the rate of success is a bit low, remember that with business knowledge, proper funding, and adaptability, you can avoid some major pitfalls.
28. 82% of small businesses fail because of issues with cash flow.
The question of what is the primary reason why so many new businesses fail can be answered by looking at these companies’ unreliable cash flow.
The thing is:
Cash flow issues don’t just mean the amount of money coming in is insufficient; it can also mean you don’t have the funds exactly when you want them. This is a particular concern for many startups that offer seasonal services. Getting consistent funding and timing the invoices can help you avoid this common issue.
29. 42% of small business startups fail because they fail to fulfill customer needs.
Another major reason for the relatively high percentage of businesses that fail is that many small startups offer products and services for which there is no need. Over four out of ten startups fail because their offerings aren’t original or provide any value to the user. Because of this, they are unable to increase their sales and become self-sufficient.
(Source: CB Insights)
30. 23% of small businesses fail because they do not have qualified teams to run the business.
Small business failure statistics show that many startups fail because they do not have the right management to stay on top of finances, organize the daily workflow, or bring in new customers. They also have a shortage of hard-working and driven employees.
(Source: Business Insider)
31. 19% of businesses close down because of tough competition.
Understanding how the competition works is essential for running a successful business. Companies that perform an effective competitor analysis have a bigger chance of staying above water by continuously improving their services, small business statistics reveal.
(Source: CB Insights)
32. 65% of startups in the construction industry close down by their fifth year.
According to the most recent startup failure rate, about 75% of the small businesses survive their first rate, 65% survive the second year, and only 35% make it through their fifth year.
The situation in the transportation industry is quite similar:
A bit more than 75% of transportation startups make it through the first year, while only 40% survive their fifth year.
Q: What is considered a small business?
A: In the United States, any business that has fewer than 500 employees is considered a small business. The number of employees varies globally, but the main concept is the same. A small business is an organization that has fewer employees than an average company.
The definition of a small business also depends on how much revenue it earns across various industries. For instance, a construction business that earns no more than $36.5 million on average annually is considered a small business. Meanwhile, in the agriculture business, companies that have average annual receipts of less than $750,000 are considered small.
A large number of small businesses employ a workforce of less than 100 people. In fact, freelancers and businesses managed by a single person are also categorized as small businesses.
Q: What is the survival rate for new businesses?
A: Contrary to popular beliefs that most startups fail within their first year, the actual small business failure rate is 30% within the first two years. Moreover, about 50% of small businesses survive their fifth year and 66% of those make it through the first ten years. Just 25% make it past year 15 or more.
However, these figures vary from industry to industry, so if you are thinking of dipping your toes as an entrepreneur in an industry, you need to do thorough research on it first.
The percentage of startups that fail may be reduced by proper funding, planning, management, and adaptability.
Q: Why are small businesses important to the US economy?
A: Small businesses make up 99.9% of all the businesses in the United States, which means they have a significant impact on the economy. They also have a high impact on the GDP of the country and create a lot of jobs, particularly to the underserved community. Many small businesses also bring highly innovative concepts, products, and services to the market.
Small services also offers key B2B services to large enterprises like design, accounting, content marketing, and legal services. Others produce niche products which they then sell to large corporations.
Even though the competition is very tough, small businesses that come up with innovative ideas, have flexible management, and good funding can manage to stay on top of the game.
These small business statistics and facts can help you understand some of the issues of startups and how you can overcome potential issues. Make sure you follow these stats and do some research of your own so your business has a chance to thrive.