The United States is known for its opportunities, especially for entrepreneurs. Individuals from all over dream of striking it big in Silicon Valley or another major startup hub. In fact, according to CNBC’s US World & News Report, recent small business statistics rank the US as the third best country to start and run a business in.
But what’s the US economy really like for small businesses? How much of an impact do these businesses make? How many of them fail, and how many actually survive? Below, we’ve gathered the most useful and current data to give you a clearer perspective on the state of American small businesses.
The Top 10 Small Business Stats & Facts
- There are 30.2 billion small businesses in the United States.
- And there are 3.7 million microbusinesses with less than 10 employees.
- Small businesses provide work for 55% of the American workforce.
- 57% of small business owners rely on personal savings to start off.
- The most valuable startups are centered in the United States and China.
- Most small businesses fail due to cash flow problems.
- For startups, the primary reason for failure is a lack of market need.
- About 90% of startups fail.
- The health care and social assistance industries have the highest survival rates.
- The small business statistics show that nearly half of small businesses allocate less than $10,000 to digital marketing.
Small Business and the Economy
1. 55% of the American workforce is employed by small businesses.
In fact, small businesses can be credited for 66% of all job creation since the 1970s. Since 1982, they’ve created around 8 million new jobs. Most of us don’t pay it much thought, but small businesses really do help keep the economy stable.
2. Job openings at firms with less than 500 employees were responsible for 40% of new jobs from 1992 through 2012.
The number of small businesses has risen by 49% since the 80s. Additionally, the small business stats further demonstrate that expansions by these smaller companies comprise an additional 60% of the jobs created.
3. In 2017, 42% of small businesses had a payroll of less than $100,000.
Only 13% of smaller firms paid out between $1 million and $5 million to employees that year. A tiny 6% of small businesses had enormous payrolls starting at $5 million and reaching over $150 million.
4. 46% of small businesses have 1–5 full-time or part-time employees.
Surprisingly, a number of small businesses in the US don’t hire any part-time employees at all (41%), although 38% expect to hire more within the year. It likely has a lot to do with the fact that over 50% of small business owners have a more positive outlook on the economy.
5. 75.3% of employers in the private sector were microbusinesses in 2013.
These businesses employ a total of 10.8% of private sector workers. The majority of them are likely to be employed in the finance, insurance, and real estate industries. Microbusinesses happen to have an 85% share of these industries.
6. An amazing 82% of small businesses provide on-the-job training for their employees.
Based on small business owner statistics, 61% of them also provide on-site training for specific positions. And another 61% either pay for off-site training, allocate money for certifications, or utilize apprenticeships. With this much investment into their workforce, it’s no wonder that 63% of small business owners retain their employees for four years and longer.
7. Only 5% of small business firms hire union workers.
Additionally, only 6% of small businesses have been the target of any union campaign. And of those that were, 31% became a unionized firm. In most cases (54%), the union fails to garner sufficient support for unionization.
General Statistics About Small Businesses
8. How many small businesses are in the US? The total number is 30.2 billion.
They account for a striking 99.9% of businesses in the country. What’s more, they contribute to international trade, with small business exporters currently totaling 287,835 firms. These firms comprised 97.6% of all companies that exported goods from the country in 2015.
9. The majority of small business firms in the US are run as limited liability corporations (LLCs).
According to the small business stats from the latest NSBA Year-End Report, 35% are LLCs, while 33% are structured as sole proprietorships. The rest are either corporations, S-corps, or partnerships. Only a very tiny 2%, however, use the partnership structure.
10. There are 3.7 million microbusinesses in the United States.
Microbusinesses are defined as firms with less than 10 employees. And small as they are, they certainly play a crucial part in the US economy. From 2000 to 2013, it was these businesses that were responsible for 20% of job turnovers, according to SBA statistics.
11. At 27%, the majority of American small businesses are located in the Southern region of the country.
The Mid-Atlantic region is the second most populated by small businesses at 22%. The Farm Belt and New England have the lowest concentration of small businesses, at a meager 5%. Meanwhile, the Great Lakes, Mountain, and Pacific regions all fall within a 12%–15% concentration.
12. Small businesses name health care costs and uncertainty about the economy among their top challenges.
According to the small business statistics, another 26% cite a lack of qualified employees as a leading concern. Other major challenges to growth include restrictive regulations or customers not spending as much as they had in the past. Only 6% of respondents professed to have no major challenges whatsoever.
13. Competition from bigger companies is the primary concern among small business owners.
The previous five-year trend showed economic uncertainty as the top source of their worries. However, surveys show that only 11% are now concerned with it. This is a significant decrease from the 26% slice of the small business owner demographics who originally found economic problems worrying.
14. 53% of the small businesses that act as suppliers attend trade shows to form vendor/supplier relationships.
46% of them market directly to bigger companies, and 18% benefit from mentor-protege program participation. Overall, small businesses go to great lengths to acquire vendor contracts, with nearly 70% stating that they did so by getting in touch with purchasing departments directly.
15. Statistics on small businesses show that 42% employ freelancers.
The freelance industry accounted for almost 10 million new jobs between 2005 and 2015 according to a report from Harvard and Princeton. In the United States, 55 million workers freelance. That amounts to 35% of the country’s entire workforce.
16. 60% of small business owners require job applicants to pass a background check before they’re hired.
Those running background checks do so to protect their business from liability, keep customers safe, or because their contract with a larger firm requires it. In a similar vein, 71% of businesses inquire about past criminal convictions. As a matter of fact, 30% of employers already include this question in their application.
17. What percentage of jobs do small businesses create? 47.8%, according to 2017’s data.
This percentage equates to a colossal 57.9 million employees working for 29.6 million companies. It also represents a 1.1 million increase compared to the previous year.
18. 8 million small businesses in the United States are minority-owned.
Hispanic small business owners (3.3 million) claim the highest share of these. Meanwhile, 9.9 million small businesses are owned by women, and a stunning 14.8 million have male owners.
Statistics on Small Businesses and Financing
19. 57% of small business owners rely on personal savings as their top source of capital when starting a business.
Only 3% use their home equity, and 8% actually take out a bank loan. Business credit cards are the least-used method, with only 2% of businesses using them, while 6% use other options.
20. 77% of the small business owners who applied for loans from big banks were rejected.
The odds with small banks and credit unions weren’t all that better, with 52% and 42% rejection rates, respectively, based on small business lending statistics. Small businesses had better luck with institutional lenders, with 62.8% of these loans approved.
21. A majority of small businesses finance themselves using company earnings and credit cards.
32% of small business firms are earnings-based, 31% use credit cards, and another 29% take out loans from either large banks or community banks. Despite the popular notion that venture capitalists and angel investors play an active role in funding, in the big picture, they do so only for 3% of the country’s small firms.
22. Close to a third of small businesses didn’t use any sort of financing.
Meanwhile, small business loan statistics show that an impressive 55% have no outstanding loans, though 63% of small business owners do carry debt of some kind. Unfortunately, 31% of small firms have said they were unable to get sufficient financing in 2018. Data from 2017 echoes the same sentiment.
23. Nearly 20% of the small business owners who applied for credit were turned down.
This is according to a business survey conducted by the Kauffman Foundation. In contrast, the Census Bureau found that only 1% of businesses were unable to expand because of credit denial.
24. As far as small business starting capital goes, women are 50% less likely than men to get approved for a business loan.
Data finds women are more apt to start a business without any financing, and this factoid is likely one of the reasons why. And when a small business is equally owned by male and female owners, there’s a higher likelihood for personal assets to be taken down as collateral and credit cards to be used.
25. 22% of small business owners name their personal savings as the top financial resource for small business expansion.
Meanwhile, the small business lending statistics demonstrate that 8% relied on either their credit card or a loan from the bank. On the other hand, a huge amount of small businesses didn’t expand at all (57%), according to a survey released by the US Census Bureau in 2012.
26. On average, venture capital deals are at about $11.7 million, while angel investments are at $330,000.
Angel investors differ from venture capital firms in that they are typically individual investors. Many of the best angel investors are former startup founders themselves. Nevertheless, both modes of financing make up less than 2% of small business financing.
27. Small business loan statistics reveal loan defaults to be under 2%
This is a significant decrease compared to 2009’s 6% loan default rate. It’s handy to note that for small business owners, the industry they operate in affects their loan approval chances. Data shows, for example, that loan failure rates for full-service restaurants are at 19.5%. For firms in public finance this jumps to a rate of 58.33%.
Startup Statistics
28. 69% of startup businesses begin at home.
It’s no secret that huge companies like Apple and Amazon began as garage-founded startups. As far as most startups’ employee count goes, 90% keep 1–4 employees. Interestingly, over 50% of business owners continue to operate from home even after their business has taken off and they’ve hired employees.
29. According to industry estimates, around 90% of startups fail.
This totals a daily average of 123,000 business failures out of the 137,000 new businesses that spring up every day. Vine, Formspring, and Grooveshark are some companies you might be familiar with that now reside in the Startup Cemetery.
30. Startup statistics teach us that the top reason for a startup’s failure is because there’s no market for their product or service.
CBI Insights looked at over 100 failed startups to determine the top 20 reasons they didn’t make it. The lack of a market was first on the list, with 42% of startups failing because of this. Running out of cash and starting off with the wrong team took second and third place.
31. In a 2018 survey of over 500 founders, small business owner statistics showed that 75% of startups offer work-from-home benefits.
Other unique benefits include free rides (Uber), on-site spa perks, and dedicated time off for volunteer work. There’s still room for improvement, though. Two-thirds of male founders felt that startups considered parent needs, while only slightly over a third of women agreed.
32. 90% of startups don’t offer childcare support of any kind.
This likely plays a huge part in why 40% more female employees report feeling the negative impacts of parenthood than their male counterparts. Small business stats also show that 65% of startup firms who participated in First Round’s survey didn’t have a designated space for nursing mothers, which according to the Office of Women’s Health is legally required.
33. More than 50% of the founders surveyed believed the US would remain the center of technology after a decade.
Meanwhile, a surprising 39% of them felt that China would be the center of tech by 2028. Startup USA’s Global Startup Cities report backs this up. It also finds Beijing and the San Francisco Bay Area to be standout startup hubs, but London is quickly catching up.
34. Indeed, the United States and China house the most startups with the highest valuations.
Apart from being a startup powerhouse, China also has the largest ecommerce market with a market share of $740 billion, ecommerce statistics show. However, the most active region for startup companies is Latin America and the Caribbean, as revealed by recent international small business growth statistics. According to Statista, Nubank is the most successful startup in the region, with a giant funding pool of $527.6 million as of 2018.
35. An analysis of venture capitalists (VCs) by state determined 500 Startups to be the top VC in California.
Meanwhile, New York’s top VC spot goes to Lerer Hippeau Ventures. LinkedIn, Pinterest, and Twitch are all startups that took off with the help of venture capitalist firms. These three in particular received funding and mentorship from Bessemer, another East Coast firm.
36. Globally, 37% of the startups running for 5–10 years were acquired by larger firms in 2018.
Between 2010 and 2018, an astonishing 12,780 startups went on to be acquired. Contrary to what most people might think, acquisitions don’t simply occur because of financing challenges. Business statistics show that companies can enter new markets and access new products when they acquire a startup.
37. Uber is the best-funded startup in California, at $15.7 billion.
There are four US startups in total with funding exceeding $1 billion: Uber, Magic Leap, Infor, and Epic Games. As for Uber, there are currently 14 million rides transacted on the app every day. Its $11.3 billion in revenue in 2018 was huge but not unexpected considering there have been about 10 billion Uber trips completed worldwide.
38. Statistics for businesses place Uber at a $68 billion valuation.
It’s also the most valuable startup as of mid-2018. According to First Round, 23% of startup founders view Uber as the likeliest source of the next wave of startup founders. It’s also been hailed as the second most disruptive company of 2018 by CNBC (first place is held by SpaceX).
The Growth and Survival of Small Businesses
39. Based on trends in small business failure statistics, the rate of failure increases over time.
Specifically, 20% of small businesses fail in their first year, 50% after five years, and 70% fail after 10 years of operation. It’s probable that a combination of costs catching up and revenue slowing when there’s insufficient funding for expansion lower survival rates over time.
40. Only a third of small business owners have an exit plan.
Of the owner’s who do, the top two small business statistics are as follows: 27% plan on transferring the business to a relative, while 26% plan on dissolution. While transferring a business to a family member sounds convenient, the closeness of the people involved can cloud judgment. Another good option is to try selling to another entrepreneur.
41. In California, 34,630 small businesses exited the market in 2016.
As a result, there was a loss of 107,257 jobs. On a national scale, there were 872,000 jobs generated from businesses starting and 749,000 jobs lost due to firm exits in that year. To clarify, an exit is when a business goes from having employees to having none at all and stays closed for at least a year.
42. For US small businesses, statistics nationwide indicate that 82% of failures are the result of poor cash flow.
There are several ways cash flow management can go awry. Mainly, though, it hinges on timing. Business-to-business transactions don’t pay immediately, and neither do customer transactions under accounts receivables. Bills and daily operational costs, on the other hand, are spent regularly.
43. Businesses in health care and social assistance have the highest chance of survival.
Business statistics show that 85% of firms in health care and social assistance survive their first year. By the fifth year, around 60% live on. Health care is also the field expected to see the most employment growth between 2014 and 2024, with home health care proving to be the fastest-growing niche in the industry.
44. Construction, warehousing, and transportation have the lowest rate of survival.
What is the survival rate for new businesses in these industries? The outlook isn’t all bad. They still have a 75% chance of making it past year one. As with the majority of small businesses, cash flow problems remain a dominant cause. Another cause, according to Construction Business Owner, is the nature of construction companies as interdependent firms.
45. In another study, it’s shown that startup failures are highest in the information industry, at a 63% failure rate.
Finance, education and health, and agriculture have the lowest rates. There’s a 42% failure rate for finance and real estate companies, while agriculture as well as education and health both share a 44% rate.
46. Small business statistics from 2018 revealed a grand total of 4,822 startup exits globally.
And exit deals—when an investor sells their share of a company—were valued at $219 billion that year. According to TechCrunch’s CrunchBase, the average successful US startup raised about $41 million and exited at $242.9 million.
Small Business Marketing
47. 47% of small businesses spend under $10,000 on digital marketing.
Among SMBs, the favorite marketing platform seems to be social media since 96% of them say they include it in their online marketing approach. Along with social media, they also market via the company website, and email marketing, which, based on email marketing stats, has the highest ROI of $43 per every dollar spent. Even so, it’s alarming to note that less than 30% check their website analytics.
48. How many small businesses have a website? The answer is 61%, according to Clutch’s 2018 Small Business Survey.
And more than 80% of these firms assert that their sites are already mobile-friendly. Additionally, 68% of companies have integrated mobile marketing as part of their overall marketing strategy, according to the latest mobile marketing statistics.Those that still don’t have one plan on building one in 2018 (58% of them). Interestingly, even with a website, 80% of small businesses don’t bother with content marketing at all.
Staying Connected Matters
49. 40% of consumers value free WiFi in a small business establishment.
In an increasingly connected world, internet access is a basic staple of everyday life. People expect a certain level of comfort and convenience. Speaking of convenience, another 21% said they’d appreciate the availability of point-of-sale systems that accept mobile payments.
50. 60% of people surveyed would like to receive more emails from small businesses.
Small business marketing statistics revealed that 38% of the participants would like small businesses to have more social media engagement, and another 38% prefer in-person engagement through events. For businesses these days, omnichannel marketing is a must, so an approach that accommodates a variety of outreach options is best.
51. Younger consumers prefer to interact with small businesses on Facebook.
Respondents 45 years old and over, on the other hand, preferred email exchanges. Recent data shows that only 26% of small businesses actually invest in email campaigns. A huge 61% turn their money and effort more toward social media, and Instagram is the most popular choice for marketers. According to Instagram statistics, the social network has over 2 million advertisers every month.
National Pride and Activism Sell
52. Consumer Reports’ 2015 findings revealed that 80% of US shoppers prefer American-made goods over imported ones.
At the time, business statistics showed that over 60% were willing to pay 10% more for US-manufactured products. The American reputation for quality makes such products more desirable. However, it turns out it’s not easy trusting this claim—more and more manufacturers use it to describe items that only have American parts.
53. In a 2017 poll by Reuters, 70% of participants yet again viewed purchasing American-made goods to be important.
But as far as their actual willingness to spend, the findings were quite conservative compared to two years prior. Only 21% of respondents were willing to pay the 10% premium, and 37% refused to pay more. For new businesses, statistics like these are crucial to creating a cost-effective product marketing plan.
54. This 2019, a recent report found that over 70% of US respondents in 2019 would spend more at businesses selling American-made products exclusively.
What’s more, activism also seems to color consumer sentiment. 71% of consumers feel businesses should promote causes they care about. According to the same set of small business statistics, 70% of them would also spend more to support a good cause.
55. The Federal Trade Commission (FTC) is responsible for regulating the use of the “Made in America” tag.
The many variations on the “Made in America” tag, however, can mean everything from “manufactured in China but designed in America” to a product containing parts that are only “mostly domestic in origin.”
Conclusion
Despite the many small businesses that start up and flourish in the United States, there are still a lot of risks that plague potential business owners. For startups, market need—or rather, the lack of one—and cash flow problems are often an issue. Loans from big banks may be tough to get, but fortunately, there are funding alternatives available to small firms.
With a bit of research and good planning, the small business statistics still show that entrepreneurial success is entirely within reach. And even in instances when there are financial sustainability problems, there are many ways to exit the venture. So really, there’s no reason not to follow through and give your business idea a try.
We thought this article would be of interest to our site visitors. Article is from Mr Boskov from WebSiteBuilder.org.