Venturing into business carries risks. American Express identifies seven categories of risk in particular: economic, compliance, security and fraud, financial, reputation, operational, and competition.
But many of those who entertain the idea of setting up a small business are only concerned about financial risks. After all, starting a business requires capital. And if it doesn’t go well, then that’s a lot of hard-earned money down the drain.
Those who are hesitant about putting up a small business should think, however, that if it succeeds, the benefits are innumerable. You become your own boss, you can report to work on your own terms, you name it.
Still not convinced?
Here are 20 small business statistics and facts. We’ll also look at important trends you should consider if you decide to venture into entrepreneurship.
- 1. 77 million people make up the US small business workforce
- 2. 60% of people who start small businesses are between the ages of 40 and 60
- 3. Only 22.5% of small businesses close during their first year.
- 4. 64% of business owners start their business with only $10,000 in capital.
- 5. 72% of small business owners in the US don’t know their business credit score
- 6. 45% of small business owners in the US don’t know they have a business score
- 7. Small businesses with two founders raise 30% more money on average
- 8. Only 4.1% of small business owners inherited their business
- 9. 44% of small business owners are Gen Xers
- 10. 32% of small business owners don’t have any form of business education
- 11. Small businesses owned by women generate $1.8 trillion in revenues
- 12. Retail and business services are the most popular small business industries with 13% of the total share
- 12. About 82% of small businesses earn more than $100,000 in revenue in the US.
- 13. Income for small businesses has increased by 75% from 10 years ago
- 14. 23% of small business owners believe sales to be the most important role in their firm’s success
- 15. Small businesses create 4.1 million more jobs than large businesses
- 16. More than 70% of small businesses increased their benefits offerings to retain employees
- 17. 19% of small business owners work over 60 hours a week
- 18. 61% of small businesses invest in social media marketing
- 19. Only 64% of small businesses have their own website
- 20. Among small businesses, the health care and social assistance industry has a survival rate of 85%
- Small Business Stats and Trends
1. 77 million people make up the US small business workforce
This is quite a lot, considering that it is more than ¼ of the entire US population as of 2019.
In fact, according to Dynadot, if 77 million people create their own country, that country would be one of the most populous countries in the world.
2. 60% of people who start small businesses are between the ages of 40 and 60
This is data from the 2019 small business study made by Guidant Financial. The study, reported by Small Business News, was based on surveys of more than 2700 small entrepreneurs in the US.
Interestingly, of those surveyed, 4% were even older, being over the age of 70.
The bottom line is this – it’s never too late to start your own business.
3. Only 22.5% of small businesses close during their first year.
This is obviously a good thing since 22.5% is not that high.
According to Small Business News, only around half of all small companies, however, survive for at least five years.
And then the number becomes smaller, with only a third of those companies lasting for 10 years.
But don’t be discouraged. The fact remains that nearly 80% of start-up businesses survive the first year. The chances of you making it to the finish line the first time around then are high.
Once you’re done with your first year, all you need to do is to ensure that you make the good decisions that will make you part of that one-third of companies that last for ten years.
4. 64% of business owners start their business with only $10,000 in capital.
More than half of business owners start their business with only $10,000 in capital. It doesn’t seem like a lot, but for those who plan to run their businesses from their homes, it’s more than enough.
The even smaller businesses can be started for as low as $3000. And then there are the luckier ones that have no financing whatsoever.
5. 72% of small business owners in the US don’t know their business credit score
A small business owner can get their capital from bank savings. But if they don’t have savings, they need to go to the bank and ask for a loan.
The thing is, though, a significant number of small business owners in the US don’t even know their business’ credit score.
A high business credit score is vital since it is at least one of the many factors for determining if one qualifies for a bank loan.
Sure, other small businesses that are structured differently qualify because of their personal credit scores, but that’s another story.
The main difference between personal and business credit scores is this: Unlike personal credit scores, which range from 300-850, most business credit scores rank out of 100.
They both work the same way, though: the higher the score, the better.
6. 45% of small business owners in the US don’t know they have a business score
Here’s a possible reason for fact number 5, though: 45% of small business owners in the US actually don’t know even if they have a business credit score, according to the US Small Business Administration.
It’s not the end of the world, though. Small business owners can always go to any of the reporting agencies – Dun & Bradstreet, Experian, and Equifax to ask for it.
Unlike the personal score which is given for free, you will have to pay a fee to secure the document.
Banks are typically looking for a business credit score of 75 or above.
7. Small businesses with two founders raise 30% more money on average
If you’ve dismissed the idea of getting a co-founder for your company, then think again.
Investors are actually more likely to fund small companies with two founders since they see this as an indication of balance and well-roundedness.
Start-ups with two co-founders then are more likely to see success or an average of 30% more capital than if a lone wolf raised it, Fundera said.
Also, the more people involved in the setting up of the business, the more the risks are dispersed.
This means that if for some reason, the business doesn’t work out, you will lose just your 50% share in the company (assuming you got a 50% control of the company).
Although that might still be a lot of money, it’s still better than losing 100% of the start-up capital.
8. Only 4.1% of small business owners inherited their business
Not all people are like the 69.7% who set up their small businesses from scratch.
Sometimes, they were just lucky to be part of an entrepreneurial family.
When the parents pass on, they inherit the business. But that’s a meager 4.1% of small business owners, the United States Census Bureau said.
There are other small business owners, or 7.3%, who said their small businesses were a gift.
Over 21% said they purchased their small business.
9. 44% of small business owners are Gen Xers
Almost half of small business owners in 2020 are aged between 39 and 54 years old. But following closely behind are baby boomers – those aged 55 to 73 at 41%.
Millennials, or those aged 23 to 38, are in third place, at 12%. They are followed by those aged 74 years old or older.
The bottom line is this: Although there are more middle-aged small business owners, entrepreneurship cuts across almost all adult age groups.
10. 32% of small business owners don’t have any form of business education
Don’t think that you can’t be a small business owner if you don’t have a high level of education.
Studies have shown that not all business owners actually have a college degree.
In fact, 33% had high school as their highest educational attainment. Those with a bachelor’s degree ranked only second, with 29%.
This makes sense since there is no correlation between the level of education attained and the small business’s increase in profits. Profits come if you’re a good businessman, with a solid business development strategy, that’s it.
11. Small businesses owned by women generate $1.8 trillion in revenues
This is not so much, especially since it actually only represents 4.3% of total private-sector revenue.
But don’t be mistaken.
The figure from the Women’s Business Enterprise National Council is less reflective of the capacity of women to lead but more proof of discrimination against women in the business world.
Sometimes, the business environment is highly patriarchal. It’s tricky for women to forge deals with certain men, for instance.
But it’s not all dark and gloomy.
Overall, you have to note that there are an incredible 114% more women entrepreneurs now than there were 20 years ago. In the US, for instance, there are already 12.3 million women-owned businesses.
Retail and business services account for 13% of the total share of small businesses in 2020.
They are followed by construction and contracting, at 12% each.
The food and restaurant industry and residential and commercial service industries each have a 9% share.
Business services, retail, and the food and restaurant industries have been in the top five most popular small business industries year after year.
12. About 82% of small businesses earn more than $100,000 in revenue in the US.
Only 1.7% of small businesses earn less than $10,000 per year. Those that earn $10,000 to $49,999 are at 7%, while those earning within the range of $50,000 to $99,999 are at 9%.
The point is this. Even if you become part of the 1.7% that earns less than $10,000, that’s still a lot of money. Add to that your newfound freedom and other perks as a small business owner.
13. Income for small businesses has increased by 75% from 10 years ago
Since businesses are booming, income for small businesses is now 75% up from 10 years ago.
This is despite what as much as 73% of businesses said was the increase in input costs.
If the upward trend continues, who knows how much your small business will earn in a few years.
14. 23% of small business owners believe sales to be the most important role in their firm’s success
In short, the more of the products you sell, the more successful your company will be in the future.
This is followed by 24.6% of businesses who believe customer engagement and retention have the most important role.
In comparison, 17.1% believe in building brand awareness.
Regardless of what they believe in, studies show that 78% of small business owners actually have a positive outlook on the future.
15. Small businesses create 4.1 million more jobs than large businesses
Over the last five years, small businesses created a net of 6.8 million jobs. According to Value Penguin, this is 4.1 million more than the 2.7 million new jobs large companies created.
In short, small businesses contribute more to the local economy in terms of job generation, at least.
Small businesses have a share of the employment pie in practically every industry in the US.
16. More than 70% of small businesses increased their benefits offerings to retain employees
Over the last 12 months, more than 70% of firms increased their benefits offerings to retain employees and attract new talent, the Small Business Administration said.
Here are only some of the benefits small businesses offer, and the corresponding percentage of small businesses that offer them:
|Benefits||% of small businesses that offer the benefit|
17. 19% of small business owners work over 60 hours a week
Small business owners have to exert a lot more effort than large businesses.
Small businesses, after all, are just starting out, which means there is a lot of room to grow. Since small businesses don’t typically have enough employees, it’s usually the owners who take on multiple roles in the company.
The result? Only one person is the social media manager, website manager, HR manager, you name it. The use of technological innovations, such as a timesheet app, can help improve time management.
Look at the bright side, though. The percentage of small business owners who work over 60 hours a week is only 19%.
When you run a small operation, you often have to either take on roles yourself or outsource them. Both can be done with social media marketing.
Opening social media accounts is, after all, free. Once you have those accounts, you can promote your products. If you love social media, then doing all these things won’t even feel like a burden to you.
19. Only 64% of small businesses have their own website
This is weird, since 92% of business owners, including small business owners, believe that having their own website contributes effectively to their digital marketing strategy.
Almost half, or 47%, emphasize marketing in general as their top growth strategy.
Moving forward, though, small businesses should take advantage of the power of the Internet and come up with a website to reach as many people as possible.
The 85% survival rate is for the first year. This goes down to 75% in the second year and to 60% in the fifth year.
But even if the rates go down, they are still relatively high. According to the Bureau of Labor Statistics, the health care and social assistance industry is actually projected to grow by 21%. This is the fastest job growth rate of any other industry so far.
Small Business Stats and Trends
In this article, we looked at the benefits of setting up a small business: you’re your own boss, you report to the office whenever you want to, you name it.
Although setting up a small business carries with it risks, financial risks in particular, then, these benefits far outweigh the costs.
These statistics, trends, and facts about small businesses are some of the things you need to know. Although all are for informative purposes, others are there to give you that nudge towards the path of entrepreneurship.
Make that leap and take that risk.
You won’t regret it.
2-3. Small Business News
4. Small Business Genius
5. Small Business Trends
6. US Small Business Administration
8. United States Census Bureau
9. Guidant Financial
10. Small Business Genius
11. Wommen’s Business National Council
12. Guidant Financial
13. Value Penguin
14. Blue Corona
15. Small Business Genius
16. Value Penguin
18-19. Small Business Genius