Getting a small business going from the ground up is no easy task. Many difficult tasks lie ahead for the enterprising entrepreneur: crafting a business model, selecting a location, securing funding, breaking even (or turning a profit), and more. Knowing the facts and statistics regarding the creation of a small business can help people plan wisely and avoid common pitfalls.
You’ll find that many of commonly shared notions about small businesses, like the often repeated “fact” that 90% of restaurants fail within the first year, turn out to be false, while a lot of figures will surprise you. With ado, here are the key statistics everyone should know before diving in.
Growth and Survival Statistics
What is the success rate of small businesses?
This depends on the time frame you’re looking at. About 80% of small businesses survive their first year, while that number drops to 70% at the end of the second year. Five years after being established, around 50% of small businesses are still afloat. That being said, a large percentage of small businesses fail within the first few years.
How many small businesses are started each year?
From 2009-2016, the number of small businesses started each year hovered around 400,000.
What number of employees must a business have in order to be defined as a small business?
The SBA’s Office of Advocacy defines a small business as one with less than 500 employees.
How many small businesses are there in the United States?
As of 2018, there are 30.2 million small businesses operating in the United States.
How many small businesses in the United States are individually operated?
22 million of the small businesses in the United States are individually operated, meaning that they have no other employees other than the owner.
What percentage of businesses in the United States are small businesses?
A whopping 99.9% of businesses in the United States are small businesses, owing to the rather large threshold of 500 employees, or fewer.
What percentage of people work for small businesses?
Nearly half of the nation’s workforce (49.2%) are employed by small businesses. This amounts to 120 million people.
What percentage of new jobs come from small businesses?
In a given year, small businesses account for 60-65% of net new jobs. Specifically, this amounts to around 2 million jobs a year. For example, small businesses brought 1.9 million jobs in 2015.
What percent of small businesses fail in the first year?
Consistently, about 20% of small businesses go under in the first year.
What’s the most frequent reason for small business failure?
When the owners of failed small businesses are surveyed, almost half of them claim that lack of funds resulted in the failure of their business. In these cases, not enough money was coming in for them to pay employees or deal with other expenses.
Following inadequate funding, poor planning and bad management were the next most common issues to blame for small business failure.
In which industries are startups most likely to succeed?
Healthcare and social assistance is the industry where small businesses succeed the most: 85% of small businesses in this industry are still up and running after one year, 5% above the average survival rate.
In which industries are startups most likely to fail?
While it is commonly believed that the restaurant industry is the hardest to break into, with an obscenely high percent of restaurants closing in the first year, the truth is that only 17% of restaurants actually close within a year of opening. This is slightly below the average failure rate for small businesses, overall.
The construction and warehouse and transportation industries are the most difficult to break into, with each boasting a 75% failure rate in the first year.
How many small businesses are profitable?
40% of small businesses are turning a profit. Of the remaining 60%, half are breaking even, and the other half are losing money.
What percentage of U.S. businesses are run from the home?
52% of small businesses in the United States are home-based.
What is the median income for self-employed entrepreneurs?
In 2016, individuals employed at their own businesses earned an average of $50,347 a year.
Find more information on How to Start a Business here.
How much capital is needed to start a small business?
The amount of funding needed to launch a small business can vary widely according to an entrepreneur’s business plan. For a home-based business, $5000 may be enough to get off the ground, while opening a restaurant in a centrally located area can cost up to $500,000.
The Ewing Marion Kauffman Foundation estimates that $30,000 is the average cost of starting a small business.
What percentage of small businesses are self-financed?
Around 75-80% of small businesses are self-financed. Most of these businesses are small, home-based operations with few or no employers beyond the owner.
What percentage of small businesses are financed by other means?
16% of businesses are funded by bank loans, while loans from family and friends account for 2-6% of initial small business funding.
What’s the approval rate for small business loans?
Higher interest rates have accounted for better loan approval rates in the past two years. However, approval rates vary depending on the institution type. As of July 2018, institutional lenders approve 64.8% of requests, big banks approve 26.3%, and small banks approve 49.7%
How much is the average SBA 7(a) loan amount?
The average SBA 7(a) loan in 2018 is a rather large sum: $417,316.The average SBA microloan is far less: $13,000.
How long does it take to receive financing after your loan’s been approved?
Usually it takes about 6 months after being approved to receive SBA loan funds; however, an individual can take steps to expedite the process and receive the loan in 2-3 months.
How many small businesses use accountants?
Only about a third of small businesses employ the services of a professional accountant, yet 82% of businesses use accounting software to balance their books.
What’s the most common type of legal structure for a small business?
Nearly half (47.3%) of small employer businesses (businesses with 1-100 employers) are S-corporations, which is the most common type of organization for this type of business.
A whopping 86.4% of non-employer businesses are sole proprietorships, while just 14.4% of small employer businesses are sole proprietorships.
What is the average tax rate that a small business pays?
Small businesses in the U.S. pay an average effective tax rate of 19.8%.
Women and Minorities in Business Statistics
What percentage of small businesses in the U.S. are women-owned?
Women own 11.6 million small businesses in the United States. Overall, this is 38.7% of small businesses in the United States. Together, these businesses employ 9 million people.
What are the fastest-growing states for women-owned businesses?
According to a recent report commissioned by American Express, five urban areas show the most vibrancy for women-owned businesses: Austin, Texas; Indianapolis, Indiana; Raleigh, North Carolina; Salt Lake City, Utah; and San Antonio, Texas.
What percentage of U.S. businesses are minority owned?
8 million small businesses in the United States are minority-owned, accounting for 26.5% of small businesses in the country.
How many veteran-owned businesses are in the U.S.?
In the United States, 2.4 million businesses are owned by veterans, which is about an 8% share of small businesses, overall. These businesses employ 5.8 million people and pay them $210 billion a year.
How many small businesses have a website?
71% of small businesses have a website, according to a recent survey. Of those with websites, 79% claim that theirs is mobile-friendly. Tellingly, 92% of the 29% of small businesses without a website plan to have one up and running by the end of 2018.
What percentage of small businesses use social media?
71% of small business owners hope to attract new business through the use of social media in 2018. Of the social media networks, Facebook is the most commonly used by small businesses as 75% utilize the website to attract customers. After Facebook, there is a significant drop-off, as just 37.5% of small businesses include Instagram in their small business plan.
What percentage of small businesses have mobile apps?
42% of U.S. small businesses have mobile apps, though this number is higher for small businesses owned by millennials, 55% of which have a mobile app.
How much money is spent on social media advertising?
32.7% of small businesses spend over $100 per week on social media advertising, while 13.2% of businesses spend $50-100 per week. 30.5% spend $11-50 a week in the lower brackets, and 23.64% spend less than $10 a week.