By Raj Vardhman | February 17, 2020 | 0 Comments

30+ US Small Business Statistics You Should Know in 2020

Small enterprises have become widely popular and lucrative in the United States, recent small business statistics show. Entrepreneurship is a fundamental political and economic element in any free society. Everyone dreams of being their own boss! 

But if we were all our own boss, who would do the rest of the work?

Today, small businesses employ approximately 59 million people in the US. That’s 47.5% of the total population of the country’s labor force.  

In this article we’re answering some frequently-searched queries such as how many small businesses in the US, how many jobs small businesses create, etc. We’ll also talk about the growth of the US small businesses, as well as some failure and success stories. 

Let’s dive right in:

US Small Businesses Stats: Editor’s Picks

  • The United States has 30.2 million small businesses.
  • 69% of US startups’ original HQ’s are their founders’ home.
  • By 2020, 1/2 of all small business employees will be freelance workers. 
  • 59 million people are employed by small business in USA. 
  • Small businesses take up 99.7% in the entire US business industry.
  • 62% of all new small businesses make it to the 4th year.
  • Montana employs the least of small business employees in the US. 
  • Small businesses owned by Black Americans increased by more than 400% between 2017-2018.
  • 83% of small business entrepreneurs earn around $100,000 per annum.
  • 65% of firms in the construction industry don’t survive their 5th year.

Small Business Statistics You Should Know

1. The SBA characterizes small businesses as firms with less than 500 workers.

(SBA.gov and APH.gov) 

Small Business Agency, an autonomous government agency that assists small businesses in accessing financial products, defines small businesses as organizations with 500 employees.

However, in Australia, small businesses are considered those with between 5 and 10 employees. 

But what about the EU?

Here it comes:

2. The EU classifies small businesses as firms with less than 50 workers.

(Investopedia)

And medium-sized companies in the EU are those with less than 250 employees.  So a small business in USA will be considered a medium-sized company in the European Union. 

But size doesn’t matter… right?    

3. Small businesses take up 99.7% in the entire US business industry.

(SBECouncil)

Almost all of the businesses in the United States of America are small businesses. According to 2016 figures, there are more than 5.6 million businesses employing people in the country. And small business statistics reveal that 99.7% of most of the businesses have less than 500 workers. In fact, businesses with below 100 workers account for 98.2%. 

4. By 2020, 1/2 of all small business employees will be freelance workers.

(Forbes)

Freelancing is the future or so it seems. Expert analysis and employment statistics all point to this. 

Freelancers are proving to be better investments for small businesses. Especially startups as they have limited resources. This growth of gig economics offers micro, small, medium companies the chance to hire professionals at fixed periods of time, terms, and relatively affordable prices.

However, many small businesses still employ full-time employees, both when they have enough tasks and insufficient tasks, according to small business stats

5. 19% of owners of small firms work for more than 60 hours every week.

(Fundera)

Startup statistics show that insufficient human resources lead to staff burn-outs. The people behind 1 out of every 5 small businesses or startup entrepreneurs have to put up several extra hours at work to ensure they keep their companies afloat. 

6. 69% of  US startups’ original HQ’s are their founders’ home. 

(Zapier and SmallBizTrends)

69% of all startups begin from the comfort of their owners’ homes. Only 31%’s original HQ’s are based somewhere else, startup statistics from the GEM Entrepreneurship Data show. 

However, there are 59% of established businesses are still navigated from someone’s personal home. Although there are the challenges – interruptions, finding consistency (issues of overworking and underworking), loneliness and communication issues.

Unfortunately,  businesses don’t have the resources to own a physical office or working space. 

7. 81% of small business owners work at night.

(Fundera) 

Interestingly, 89% of these entrepreneurs work during weekends. 81% of them are night owls at work, small business stats show.

We should seriously research how much coffee does a small business owner working at night drink.

8. 1 out of every 2 small firms is run from home.

(SBA.gov)

Working from the comfort of their homes is the dream of every worker. It is also the solace for almost every franchises, startups, micro or small businesses, especially in the case of a sole proprietorship, small business statistics show. 

Since millions of Americans have an internet connection, it’s much easier to work for them from home. In fact, the hours and mental strength expended to maneuver the traffic, to and from work, can equate to several working hours every week. 

How many small businesses in the US?

9. The United States has 30.2m small businesses.

(Sumup)

So, how many small businesses in the US are there exactly?

Recent figures by the Small Business Agency have revealed that the number of small businesses in the United State is 30.2 million, approximately. These businesses account for as much as 99.9% of the entire businesses in the country, according to a Sumup report which shows small business numbers in the United States of America.

10. 50% of Americans own or work for a small business.

(Sumup)

Small businesses are the pillar of the American industry. Around 1 out of every 2 Americans either owns one or is working for one. These firms create a staggering number of jobs in the country and contribute significantly to the revenues collected from taxation. 

Small business growth statistics

11. Small businesses have 7.8% of annual growth rate.

(Forbes) 

What’s the year-on-year growth rate of small businesses? According to Forbes in 2015, firms with fewer than $5 million annual revenue have a 7.8% growth in annual sales when compared to the year before. 

12. 543,000 new businesses open every month in the US.

(Yahoo)

How many small businesses are created per year in the US? According to Yahoo, more than half a million businesses on average are opened every month. That’s more than 6.5 million new businesses per annum. 

However, because the competition is stifling, just a few survive. A small business that wants to survive and thrive will have to work on its marketing, professional employee retention, ways of seeking funding, and improving on its staff’s welfare benefits.

Small Business Financing Statistics 

13. Small banks approve more than 50% of every loan applications by small businesses. 

(Yahoo)

The approval rate of loan applications from small businesses by big banks is very low. It is around 27.7%.  Meanwhile, there’s a higher chance with smaller banks. Alternative lenders, however, approve 56.8% of small business loan applications. 

14. Small businesses in the restaurants and accommodation industries have the highest loan approval rate.

(Forbes)

The industry determines small businesses’ approval rates. According to statistics for businesses, while restaurants and accommodation have a 51% approval rate, social assistance and health care come have 37%. Next come retail trade and IT with 36% and 35% respectively. They are followed by professional services and personal services, with 31% and 16% respectively. 

15. Close to 50% of small businesses still depend on traditional banks.

(Fitsmallbusiness.com)

About half of small businesses still send their loan requests to small and large traditional banks. Meanwhile, some are starting to use alternative Financial Technology (Fintech) lenders such as online lenders (24%) and credit unions (9%).

Small business revenue statistics

16. 83% of small business entrepreneurs earn around $100,000 per annum.

(Fundera) 

What is a small business owner’s average salary per annum? Well, to Fundera’s 2019 report,  $66,373 is the take-home of an average small firm owner. However, 30% of them report that they do not get salaries at all, according to US small businesses statistics. When compared to other large businesses, this might be discouraging. But the idea of being your own boss and the hope of upgrading supersede every current financial gain. 

17. District of Columbia pays small business employees an average of $63,000 approximately.

(Forbes)

How much do small firms pay their workers on average?  Well, there’s no definite number as the figures vary according to the state and industry. However, according to 2012 data on small business employment, DC pays the most average salaries ($62,929). Next is Massachusetts ($49,000), New York ($49,000), and Connecticut ($49,000), approximately. It is also worth noting that the District of Columbia is one of the states which pay the highest average annual salaries across all industries and businesses. 

18. Small businesses with no employees make $44,000 per annum on average.

(QuickBooks)

How much do small businesses with no employees make? According to statistics, small businesses make receipts/revenues (not profit) of $44,000 every year on average. In fact, 2/3 of small businesses can earn fewer than $25,000 per annum. 

Small businesses demographics 

19. 45% of small firms are owned by minorities.

(Guidant Financial)

A survey on American small businesses has revealed that there’s an increase in small firms started and ran by minority races in the US. 

20. Small businesses owned by Black Americans increased by more than 400% between 2017-2018.

(SmallBizTrends) 

There’s a growing number of African American entrepreneurs. And small businesses by race statistics has done justice to that fact. 

21. There have been 31 times growth in women’s ownership of businesses from 1972-2018.

(AmericanExpress)

More than 40 years ago, in 1972, of all businesses in the country, only 4.6% were owned by women.  This number has increased by 31 folds as the years roll by.

22. Most of small business employees in the US are being employed in Montana. 

(Matr.net) 

Which states employ the most workers into small businesses in the US? Montana has the smallest business employees in the country, according to small business demographics by state. 70% of the total jobs in the state are provided by small businesses; the highest in the States. In fact, just 18 firms in Montana are regarded as large businesses.

23. New York City is the best city to start a business in the US.

(CNBC) 

Forget about the Silicon Valley in California! New York City is the best state to begin a business. In fact, businesses in this city see revenue of $1.016 million on an average every year. 

Small business employees stats

24. Nevada employs the fewest amount of small business employees.

(Fundera)  

Which states in the United States do small firms employ the least workers? Small businesses in Florida and Nevada employ 43.3% and 40.8% respectively of their states’ total workers. Those numbers are the lowest in the United States.

25. Small businesses provided 8.4 million new jobs from 2000-2017.

(SBA)

How many jobs do small businesses create? They created 8.4 million jobs in 17 years, that’s an average of 494,119 jobs per year. During this period in the United States, they accounted for 65.9% of the net new employment creation. 

26. Approximately 59 million people are employed by small businesses in the US. 

(SBA.gov)

How many people do small businesses employ in the United States? According to small business statistics, a whopping 58.9 million citizens! That also accounts for 47.5% of the US’s total workforce, according to statistics from the Small Business Agency (SBA).

27. Small businesses create 2 out of every 3 new jobs each year.

(SBA Advocacy and SBA)

What percentage of new jobs come from small businesses? Although it’s difficult getting the actual total number of employments newly created across all industries in the United States, whether large or small. However, in 2015 alone, this industry created a whopping 1.9 million jobs. The number keeps rising every day, since it’s so easy to start a small business in America, filing paperwork for a firm in America virtually takes just a few days. Hence, everyone is jumping at the idea of small enterprises, since you can start anywhere. 

Startup Statistics: Failure and Success

28. 1/2 of new small businesses survive more than 5 years.

(Fitsmallbusiness.com)

One of the first aspects to consider for starters is the average lifespan of the industry or type of business. However, according to figures from the United States Bureau of Labor Statistics (BLS), 50% of these new businesses will last more than 5 years. And also, 1 out of 3 businesses will last for more than a decade. 

29. Lack of capital resources is the topmost challenge of small businesses. 

(Guidant Financial)

What’s the most common reason a startup fails? According to statistics from a study published by Guidant Financial, lack of capital or cash flow represents small businesses’ major challenge (33%). Next comes marketing with 15%. Then comes time management and recruitment/retention of employees, which both come at 13%. Other major challenges include managing work and providing welfare benefits. 

30. Around  1 out of 12 firms shut down every year. 

(Fitsmallbusiness.com)

How often do businesses fail? According to statistics from the SBA, about 1 out of every 12 businesses close shop every year.  In fact, there are so many reasons why a business could shut down. Some include low sales, a retiring owner, total business buyout/acquisition, or the entrepreneur wanting to begin a new firm. 

31. 62% of all new small businesses make it to the 4th year.

(SmallBizTrends)

Whether small or large firms, businesses come with constant risks but varying risk levels, depending on the industry. According to statistics for businesses, of the small firms opened in the year 2014, 80% of these survived at least up to 2015. 70% saw 2016, with 62% making it into 2017 (the fourth year).

32. 65% of firms in the construction industry don’t survive their 5th year. 

(Fundera)

The construction industry is one of the toughest to go into due to the high rate of failure there. While 75% make it through the first year, only 35% of new firms make it into their sixth year. 

 Bottom Line

Well, that was quite the journey!

We talked about how many small businesses in the US there are, the challenges they face, the industries where they survive most and struggle most in. We discussed their source of financing, the strength of resources among others and how they fared in different years. 

You can and absolutely should use these small business statistics when writing your business plan! We promise they will increase your chances of success.

Sources

Investopedia

SBECouncil

SmallBizTrends

Zapier

SBA

Sumup 

AmericanExpress

SmallBizTrends

Guidant Financial

Fitsmallbusiness.com

Fundera

Forbes

Biz2Credit

Finder

Fundera

Smallbusiness.chron

SBA

Matr

QuickBooks

Yahoo

WBENC

CNBC

Forbes

Yahoo

SmallBizTrends

Fundera

SBA

APH

Advocacy.SBA

Fundera

Forbes

Guidant Financial

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