Business Statistics - Facts & FAQ

Business Statistics – Facts & Faq

Launching and growing a small business is fulfilling yet challenging. You need to know the ins and outs of what makes a small business succeed, as well as what can cause a small business to fail. If you’re currently a small business owner — or plan to become one — it’s important to stay abreast of the most important small business facts and trends. Review the small business facts, trends and statistics below to learn how to avoid common pitfalls and position yourself for success.

What is a Small Business?

According to the Small Business Administration (SBA), in the United States, a small business is any firm with fewer than 500 employees. The majority of high valued startups fit within this definition.

The definition of small business varies throughout the world. In the European Union, any business with fewer than 50 employees is considered a small business. In Australia, if your firm has fewer than 15 employees you’re considered a small business.

What is the average size of a small business?

The average size of a business in the U.S. is 10 employees. 5,305,960 small business have between 1 and 19 employees. 629,025 small businesses have 20 to 499 employees. There are 24,813,048 small businesses in the United States have no employees (“nonemployer businesses”).

What is the Most Common Type of Small Business Legal Structure?

Identifying the correct business structure for your small business is crucial. The following is a summary of the types of business structures being employed by small businesses in the United States (source: NSBA):

  • Sole Proprietorship – 14%
  • Partnerships – 3%
  • Corporations – 18%
  • S-Corporations – 33%
  • Limited Liability Companies – 33%

Research your state’s laws for each of these entities and consulting with an attorney or qualified CPA before selecting a business structure.

What is the Average Age of a Small Business Owner in the U.S.?

Over half (50.9%) of small business owners in the United States are 50 or older. Age of small business owners is as follows:

  • Under 35 years – 15.9%
  • Age 35 to 49 – 33.2%
  • Age 50 to 88 – 50.9%

While many small business entrepreneurs are young, the majority are over the age of 50. For successful small businesses that have been around for years, the owner has aged along with their business. [1]

How Much Does a Small Business Owner Make?

While the majority of small business owners a not wealthly, the majority of the wealthy are small business owners. According to the American Community Survey, U.S. Census, 2017, the mediam income for small business owners is:

  • $51,419 for owners in incorporated businesses.
  • $25,240 for owners in unincorporated businesses.

A different set of figures Payscale suggests that the average small business owner makes $69,532 a year — ranging between $30,000 to $149,000 annually. Successful small business owners can make between $100,000 and $500,000 a year.

How Many Small Businesses Are There in the U.S?

There are 30.7 million small businesses in the United States, according to the SBA’s Office of Advocacy, which account for 99.9% of all business in the U.S. (30.6 million). 89% of business in the country have fewer than 20 employees. [1]

How Many People are Employed by Small Businesses?

59.9 million people in the U.S. are employed by small business. 47.3 percent of the U.S. private workforce is employed within the small business sector. (SBA.gov) [1]

Which industries have the most small businesses?

  1. Other Services (4,369,360)
  2. Professional, Scientific and Technical Services (4,243,655)
  3. Construction (3,153,318)
  4. Real Estate, Rental and Leasing (2,976,866)
  5. Retail Trade (2,652,398)
  6. Health Care and Social Assistance (2,611,113)
  7. Administrative, Support and Waste Management (2,419,721)
  8. Transportation and Warehousing (2,044,156)
  9. Arts, Entertainment and Recreation (1,509,282)
  10. Finance and Insurance (953,064)
  11. Accommodation and Food Services (908,281)
  12. Educational Services (808,345)

How many jobs are created by small businesses?

Small businesses generate the vast majority of jobs in the United States. Small businesses account for over 1.5 million new jobs annually – over 64% of all new jobs (Small Business Administration).

Even though on a per capita basis small businesses don’t contribute to job growth at the same level as larger corporations, as a whole small business is the powerhouse behind the U.S. economy. Small businesses have always been and will continue to be an integral part of economic growth and prosperity.

What Percentage of Small Businesses Fail?

According to data from the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within their first year. By the end of their fifth year, roughly 50% of small businesses have faltered. After 10 years, only 30% of small businesses still have their doors open.

Surprisingly, during periods of economic growth or downturn, small business failure rates remain relatively consistent. The smallest businesses — those with 5 or fewer employees — are usually the first to fail. However, COVID-19 tested the notion that economic factors don’t influence business failure rates. In it’s Local Economic Impact Report from June 2020, Yelp reported that 41% of all business closures noted on their site since March, were permanent. [3]

Why do Small Businesses Fail?

Several organizations, including CB Insights and Investopedia, identify several reasons (that they associate with percentage rates) for small business failure. However, business failure can be complex and is often the result of several factors — not just one. Based on our community input we’ve compiled — in order of frequency and severity — the factors contributing to small business failure.

  1. No market – businesses fail when they don’t solve a market problem
  2. Insufficient cash – when business run out of cash, they shut their doors
  3. Poor Management – having a competent management team is crucial to business success
  4. Lack of Talent – having the right talent is key to maintaining competitiveness
  5. Not competitive – businesses often failure because they are not competitive
  6. Costs – when business costs exceed business revenues they go out of business
  7. Poor marketing – small businesses fail when their marketing fails
  8. Poor customer experience – failure to stay customer focused can lead to business failure
  9. Overexpansion – growing too fast often leads to business bankruptcy
  10. Loss of focus – loss of focus can lead to small business failure

Which industries have the highest survival rate?

The Bureau of Labor Statistics predicts the following jobs and industries to have the highest growth through 2028.

  1. Local Messengers and Local Delivery (48%)
  2. Services for the Elderly and Disabled (44%)
  3. Timber Tract Operations and Forest Nursery/Gathering Forest Products (44%)
  4. Solar Electric Power Generation (42%)
  5. Offices of Specialty Therapists (34%)
  6. Support Activities for Mining (32%)
  7. Wind Electric Power Generation (32%)
  8. All Other Ambulatory Health Care Services (31%)
  9. Offices of All Other Health Practitioner (31%)
  10. Offices of Mental Health Practitioners (31%)

Which industries have the lowest survival rate?

The Bureau of Labor Statistics predicts the following jobs to have the lowest growth through 2028. [3]

  1. Wired telecommunications carriers (-127%)
  2. Printing and related activities (-85%)
  3. Apparel and leather manufacturing (-40%)
  4. Communications equipment manufacturing (-24%)

The business failure rate in these industries are predicted to be higher than average.

How many small businesses apply for a loan?

In 2019, about about half of small businesses applied for a loan. As reported by the Federal Reserve’s Small Business Credit Survey, 43% of small businesses submitted an application for financing to a small business lender.
[2]

What is average small business loan approval rate?

At 66%, institutional lenders offer the highest loan approval rate of any type of small business lending institution. Other small business lending institutions provide the following approval rates: [2]

  1. Alternative lenders 56.8% approval rate
  2. Small banks – 50.1% approval rate
  3. Credit unions – 39.9% approval rate
  4. Big banks – 27.7% approval rate

What is the average small business loan amount?

In 2018, the average loan extended to U.S. businesses was $663,000. However, depending on the type of loan and lending institution, averages may range from $13,000 to $1.2 million. The average SBA 7(a) loan was $417,316, while SBA microloans on average were roughly $13,000.

Average loan amounts by business type:

  • Large national banks – $593,000
  • Small national or regional banks – $146,000
  • Foreign banks (made by U.S. branches) – $8,512,000
  • Alternative lenders – $50,000 to $80,000

Sources:

[1] advocacy.SBA.gov
[2] Federal Small Business Media Library
[3] BLS.gov

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