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Small Business Statistics

Last updated 8th Aug 2022
Disclosure

Small businesses are an important component of any economy in the world. They provide services that fill the gap of many big companies that stick with mainstream products. Also, many families run small businesses to support their lifestyles. It’s a viable alternative to climbing the corporate ladder.

This page will explore interesting and informative small business statistics that give you insight into various aspects of the topic. You’ll learn about the trends and success rates of small businesses to better understand the ease of starting a new business. Also, don’t skip the section at the end to learn about the commonly asked questions of small businesses.

Top Small Business Statistics and Facts of 2022

  • 90% of companies in the world are made up of small businesses

  • 1.6 million jobs are generated by small businesses in the United States

  • The average income of small business owners is $64,709

  • Becoming your boss is one of the main reasons why small businesses are started

  • Cash flow problems are one of the main reasons why small businesses go bankrupt

  • 50% of small businesses are started at home

  • The average business borrowed $10,000 when getting started

  • 72% of small business owners are optimists about future success

  • Food and restaurant businesses are the fastest growing among all industries

  • 53.7% of small business owners have a bachelor’s degree or better

General Small Business Statistics

This section shares the general small business statistics that provide an overview of the topic. This is a good starting point to get the lay of the land. You’ll learn about the total percentage of businesses that are classed as small and other related statistics.

90% of all companies worldwide are small businesses

This telling statistic shows that the vast majority of businesses are classed as small. The majority of businesses shut down within the first few years of operation and they don’t make it to medium or large size.

It takes a long time for a small business to grow and move up in scale, which is part of the reason for this statistic.

Source: World Bank

99% of businesses in the United States are small businesses

The United States has a culture where people are encouraged to live the dream by being ambitious and opening a business or side hustle. Therefore, many people try their luck by registering a new business in an attempt to become rich.

Therefore, most businesses are small and are started by regular folk looking to make a living for themselves. The portion of small businesses in other countries differs and is indicated by the stat above.

Source: JP Morgan Chase

In 2020, small businesses were responsible for 1.6 million jobs

Small businesses cannot hire many people individually because of their nature, but overall many people work for small companies because so many exist. The number of small businesses is predicted to increase in the coming years, which means even more people will be hired by such companies.

However, the same job progression is typically not available at smaller companies. That’s because there are fewer positions and such businesses have less money to spend on expensive managers or CEO’s.

Source: CDN Office of Advocacy

The portion of small businesses started at home is 50%

This statistic is unsurprising because the internet has made it easy for anyone to start a business at home. You only need an internet connection and a computer to run a business that could generate millions in revenue per year.

Furthermore, the improvement in delivery services worldwide means business owners can use their garages like storage units. This allows people to sell physical goods without needing a business location.

However, according to small business website statistics, 36% of small businesses don’t have a website, which means they are potentially losing money in comparison with their competitors

Source: SBA

29% of people that start a business to become their own boss

The biggest reason why people start their own business is to become their own boss. Other reasons include due to an opportunity and being dissatisfied with the workplace.

Social media has created a culture where it is cool to start your own businesses in the pursuit of creating the next big company. This pressures more people to think about leaving their job and starting a new small business.

Source: Guidant Financial

For small businesses the service industry is the most popular

Many small businesses are in the service sector. This includes companies that cater weddings, restaurants, and fast food stores. It makes sense that these would make up a large portion of small businesses. That’s because they are mostly location-based and grow big enough to facilitate the local footfall.

Source: Guidant Financial

Small Business Owner Statistics

Now let’s turn our attention to the statistics that focus on the owners of small businesses. They are the engine that makes small businesses run and grow. That’s because they take on the majority of the responsibility and roles. Mostly because they need to learn the ropes of running the businesses and don’t have the funds to outsource many tasks.

81% of business owners work over time

Many small businesses are on the verge of going bankrupt and the only way the owners can make ends meet is to work overtime. Even small businesses that are flourishing require a lot of overtime to grow.

Eventually, the owners can reduce the amount of work time required to maintain the business. This happens when more employees are hired to fill time-consuming roles. Additionally, 89% of owners work weekends to ensure the business runs smoothly.

Source: Fundera

The portion of small business owners who struggle to find the right employees is 56%

Talented employees are hard to find for small business owners because they might not provide the right working conditions. Larger companies may offer better opportunities for ambitious employees.

Also, many people have quit their jobs during the pandemic and are becoming very picky about the job conditions. For instance, if remote work is not offered, then many job-seekers will avoid the job offer.

Source: Indeed

58% of small businesses are started by new operators from scratch

This stat shows that many businesses are started by amateur business owners that are trying to make a name for themselves for the first time. The high portion of first-timers also contributes to the failure statistics.

That’s because the average business owner will need to fail multiple times before launching a successful business.

Source: Thrive My Way

53.7% of small business owners have a bachelor’s degree or better

This shows that many small business owners have options on the job market, but decide to go down their own path. The attraction of being your own boss is such a big advantage to small businesses that are not offered when trying to climb the corporate ladder.

The education provided by a degree can help new business owners meet the basic challenges of running a company. This might be figuring out cash flow or completing the taxes.

Source: Fundera

The portion of business owners that are in the 39 to 54-year-old range is 44%

Many business owners don’t start running their own company until they have funds to invest or have become disappointed from working for a company. Therefore, they are more likely to start a new company in their late 30s or early 40s.

This general statistic can be broken down by industry and annual revenue to get even more insight into the age demographics of small businesses.

Source: Guidant Financial

Financing Statistics of Small Businesses

Now we will look at the statistics that relate to the financing of small businesses. The biggest reason why small businesses fail during the first few years of operations is going bankrupt. Running out of funds is common when unforeseen circumstances hit a business.

Most small businesses close down because of cash flow or sale problems

1 in 12 small businesses close down every year and the biggest reasons are cash flow or sales. This can happen for multiple reasons, such as not researching market expectations, providing a good product, lack of marketing, or healthy accounting practices.

Funding can help businesses stay afloat for longer to prove their profitability. However, that requires a track history. Small businesses are on the clock to ensure they can generate good monthly revenue.

Source: SBA

The cheapest companies to start are micro businesses

Micro businesses can be defined as having less than 10 employees and starting costs of around $3,000. In some industries, these starting costs would be impossible to work with. However, the running cost of home-based businesses can be $2,000 to $5,000, which fits in the micro-business category.

Business owners that do not have a lot of funds, or understand how to secure funding from external sources, will only have the option of starting a micro business.

Source: Business News Daily

$64,709 is the average income for small business owners

Most small business owners are not making millions, the wages are similar to the average, but it is higher than the average annual income for regular jobs. Most business owners pay themselves a relatively small annual salary in the hopes of growing their business.

This average annual income is nothing to get excited about, but the lifestyle might be worth it for some. Also, this is not a fixed income and has the potential to greatly increase in future years.

Source: Payscale

$5.2 trillion annually is the unmet funding for small businesses

Most small businesses need extra funds, whether that is to stay afloat or grow. Unsurprisingly, the majority of small businesses would be bigger given a choice, so they would report as having a lack of funding.

Most investors look at many factors when deciding where to allocate their investment portfolio. This includes the growth potential, product quality, and the business owner's work ethic.

Source: World Bank

$10,000 is the average amount of money borrowed to start a business

$10,000 is a feasible amount for banks and investors to take a gamble on a business and provides the required resources to get many businesses off the ground. However, the figure changes depending on the industry.

For example, the average technology industry startup can raise around $80,000. That’s because they are in fashion and have the highest potential to grow big. Therefore, investors are drawn to technology companies and willing to invest more money than most other industries.

Source: SBA

In 2019, the portion of entrepreneurs that felt they didn’t have enough money is 65%

This means that there are many potential small business owners that would like to get started but do not have the required funding. It reflects the current culture where many people would rather start a business than work for somebody else.

However, many people do not have the funding required to get their projects off the ground. Also, some potential business owners might feel like they need more money than is actually needed.

Source: Kabbage

Small Business Survival Statistics

Now we will explore the small business survival statistics that indicate the chances of success. This information is important for new business owners to understand so they get a good perspective of what to expect. However, these are general statistics that do not reveal anything about specific industries. Relevant industry statistics are always best to get an accurate account of business chances of success.

Only around 11% of small business owners are confident in growth

This means that a small portion of small business owners has confidence in their company growing. That might be because of market conditions or no plan to make the business grow. Also, many small business owners do not understand how to read the data determining whether their business will grow or stagnate.

Source: Guidant Financial

The number of small businesses surviving over 5 years is only 50%

Around half of the businesses fail during the first 5 years of operation. That’s because they declare bankruptcy due to running out of money. However, the reason for running out of money is the real cause of the failure.

It might be because the products have become obsolete, better competitors have come to the market, the market has shrunk or there is no longer any demand for what the company was created to sell.

Source: SBA

During the pandemic the portion of small businesses that closed is 60%

Since April of 2020, a disproportionate number of small businesses have had to shut down because of new laws. Some businesses are simply forced to shut their doors or have to deal with unfamiliar market conditions.

For instance, many customers started buying goods online, which large retailers were in a position to facilitate. Whereas many smaller businesses that rely on local footfall would naturally not compete.

Source: Yelp

During the Covid pandemic only 63% of businesses were able to retain profitability

The lucky businesses that were able to continue operations during the pandemic struggled to make the same number of sales as before. That might be because restrictions were in place, meaning fewer people could be served at a restaurant or each store could only allow a small number of people to enter.

An increase in the difficulty of the rules lasted for such a long time that it eventually had a detrimental effect on most businesses.

Source: Guidant Financial

92% of small business owners have no regrets about starting a company

Most small business owners have no regrets about starting a company, which is an interesting statistic because many have difficulties. This might be because the difficulty of starting a business is anticipated.

Also, many owners might have the viewpoint that stating a business is failing rather than never giving it a try in the first place.

Source: Fundera

Small Business Trends and Statistics

This section takes a peek at a few trends that small businesses are currently undergoing. This provides insight into upcoming industries where starting a small business is a great idea.

The portion of small business owners feeling optimistic about the future is 72%

Feeling optimistic about your small business is a good attitude – otherwise, you won’t have the required strength to make it through difficult times. Most business owners are proud of what they have created and are working to grow. Therefore, they will naturally feel like they are optimistic about future growth potential.

Source: Salesforce

The fastest-growing industries are restaurant and food businesses

Small business owners that are looking for a new business idea should consider restaurants and food. That’s because there is a huge demand for such services in most locations around the world. Some locations have too many choices of specific food types.

However, there are always gaps in the market that allow new small business owners to generate a lot of interest in a highly contested location.

Source: Guidant Financial

30% of small business owners that started during the pandemic share they would never open a physical store

Unsurprisingly, many people that got started during the pandemic did so through tough conditions. They arguably steered away from physical-based businesses because of the negative impact of the pandemic on such business types.

Also, most people view online-based businesses as easier and cheaper to operate because there is no need to maintain a physical location.

Source: Salesforce

Small Business Statistics Bottom Line

To conclude, there is a large number of small businesses that are being started by individuals that strive to get out of the rat race. However, the statistics reveal that the average business owner works overtime and does not earn significantly more than the average income in the United States.

The statistic reveals that most businesses fail within the first 5 years and seek to get around $10,000 in funding. The lower barrier to starting a business because of the internet means that many business owners start from the comfort of their own homes.

FAQs

What should a small business owner know before starting?
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References

Our content quality team consulted the following expert sources to maximise the value and accuracy of this page:

  1. JP Morgan
  2. SBA
  3. Guidant Financial
  4. Fundera
  5. Indeed
  6. Thrive My Way
  7. Business News Daily
  8. Payscale
  9. Kabbage
  10. Yelp
  11. Salesforce
Keith Hodges

Keith Hodges