From how many exist and how they started, small businesses have many myths surrounding them. To help you separate fact from fiction, here is a list of statistics and facts about small businesses.
What is a small business?
- A small business is defined by how many employees a company has based on what industry they’re in. Generally, if a company has less than 500 employees, they are considered a small business, as of 2020. (SBA)
How many small businesses are in the U.S.?
- There are 28.8 million small businesses in the U.S., as of 2020. (Fundera)
- 99.7% of all U.S. businesses are small businesses, as of 2020. (Fundera)
What is the small business failure rate? Success rate? How many small businesses fail every year?
For small businesses created in 2014:
- 80% of all small businesses made it to their second year, as of 2019. (Small Biz Trends)
- 70% of small businesses made it to their third year, as of 2019. (Small Biz Trends)
- 62% of small businesses made it to their fourth year, as of 2019. (Small Biz Trends)
- 56% of small businesses made it to their fifth year, as of 2019. (Small Biz Trends)
- Overall, the survival rate for any small business is 50% after the first four years. (Small Biz Trends)
Why do small businesses fail?
- The number one reason small businesses fail is their product or service has no demand, as of 2019. (Entrepreneurs)
- 29% of small businesses fail because they run out of cash, as of 2019. (Small Biz Trends)
- 23% of small businesses claim they do not have the correct team, as of 2019. (Small Biz Trends)
- One in seven, or 14%, of small businesses, fail due to poor marketing, as of 2019. (Small Biz Trends)
What is the average revenue of a small business?
- When small businesses have only the founder, their average annual revenue is $46,978, as of 2020. (Fundera #2)
- The average small business owner makes $71,813, as of 2020. (Fundera #2)
- In fact, 86% of small business owners make less than $100,000 per year, as of 2020. (Fundera #2)
How many small businesses reach $1 million in revenue?
- Of single person small businesses, less than 2% had $1 million in revenue, as of 2016. (Fundera #2)
- However, small businesses with 5 - 9 employees tend to have just over $1 million in revenue, which is about 15% of small businesses, as of 2019. (The Kick)
How many small businesses are profitable?
- 40% of small businesses are profitable, as of 2020. (Guidant Financial)
- Of the remaining 60%, 30% break even and 30% continue losing money, as of 2020. (Guidant Financial)
What small business industries are the most profitable?
- Accounting, Bookkeeping, Payroll, and Tax Preparation are the most profitable small business industries with a net profit margin of 18.4%, as of 2019. (Abrigo)
- Small businesses who lease real estate and conduct legal services have a net profit margin of mid 17%, as of 2019. (Abrigo)
- Other top net profit margin small business industries include management, other real estate companies, dentist offices, health practitioner offices, as of 2019. (Abrigo)
What are the best cities for startups?
The Kauffman Foundation scores cities based on its environment for success, the cost of doing business, quality of life, labor force, and diversity. Based on these factors, each city is given a score out of 1,500 points on how well a small business can perform. Below are the top three cities to start a small business in. (CNBC)
- The number 1 city for startups is Austin, Texas, with 926 out of 1,500 points, as of 2016.
- The number 2 spot goes to Provo, Utah, with 910 out of 1,500 points, as of 2016.
- The number 3 spot is the nation’s capital, Washington D.C, with 877 out of 1,500 points, as of 2016.
- The number 4 spot goes to Denver, Colorado with 863 out of 1,500 points, as of 2016.
- The number 5 spot goes to Charlotte, North Carolina with 862 out of 1,500 points, as of 2016.
- Small Biz Trends
- Fundera #2
- Guidant Financial
- The Kick
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