38 Essential Small Business Statistics For 2021

Last modified: April 30, 2021

According to the Small Business Administration (SBA), a small business is any company, firm, or organization which employs fewer than 500 people. For some people, starting up a small business is simply a side job, an extra source of income; for others, it’s everything.

Owning a business provides control, and you get to work on your own terms. However, starting up your own business might seem scary and complicated. 

We have put together some of the most relevant statistics for small business owners and aspiring entrepreneurs

Fascinating Small Business Statistics (Editor’s Pick)

Although small businesses have the potential to be profitable in the long run, it requires hard work and dedication. Of course, a bit of caution won’t hurt – protect your business and check on business insurance options.  Below are some intriguing statistics on small businesses.

  • There are 30.7 million small businesses in the US.
  • Small businesses account for 99.9% of all US businesses.
  • 50% of small businesses fail within five years after opening.
  • 20% of small businesses fail in their first year.
  • About 69% of US entrepreneurs start their businesses at home.

The statistics mentioned above show that while small businesses are the backbone of the economy, they carry risks and, thus, should be well planned. To learn more about the world of small businesses, keep reading.

General Small Business Facts and Statistics

In this section, we have researched some general facts that are a must-read for every small business owner or aspiring owner. 

  • Small businesses account for 90% of all businesses worldwide.

(Source: IFAC)

Small businesses are the backbones of economies in developed countries. Statistics show that they account for 60%-70% of jobs in developed countries. Consequently, they make up a whopping 55% of GDP in developed countries

  • There are currently 30.7 million small businesses in the US.

(Source: Oberlo)

Small businesses in the US have an estimated 59.9 million employees, making up an impressive 47.3% of all employees in the United States. Additionally, SMB stats show that small businesses with about 100 employees make up 98.2% of businesses in the US, while businesses with less than 20 employees make up 89%. 

  • Small businesses account for 99.9% of all US businesses.

(Source: Oberlo)

In 2017, small businesses accounted for 99.7% of all US businesses. Today, it makes up nearly half of the employment in the US private sector.

  • Small businesses create 1.5 million jobs every year.

(Source: Fundera)

Small businesses in the United States are a vital part of the country’s economy. Statistics of US businesses revealed that small businesses accounted for 64% of all new jobs created between 1993 and 2011. Additionally, small businesses make up about 95% of all US companies.

  • 50% of small businesses fail within five years after opening.

(Source: Fundera)

When it comes to longevity, small businesses generally have a 50% survival rate. Small business success rate statistics revealed that of all small start-ups registered in March 2012, only 50.2% survived until March 2017. 

  • 20% of small businesses fail in their first year.

(Source: Fundera)

According to statistics, if you’re willing to take the risk, your business would most likely make it through the first year. Also, 80% of small businesses with employees, survive their first year. Small business survival rate shows that of all small businesses which took off in March 2016, 79.8% remained active in March 2017. 

  • 42% of small businesses fail due to a lack of demand.

(Source: CB Insights)

The primary reason for the failure of many small businesses is the lack of understanding or inability to choose the right product. Further statistics show that improper management of money is the second major reason, and it accounts for 29% of the small business failure rate. Other factors, such as not having a good team, poor marketing strategies, and getting outcompeted, also contribute to small businesses failing.

  • One-third of small business holders launched with less than $5,000.

(Source: Small Business Trend)

Lack of capital remains one of the major reasons why many people can’t start their dream business. It has also contributed to the reason why a significant amount of start-ups fail. In a survey of over 600 small business holders, 58% started their business with less than $25,000. 93% of them admitted they expected to last for just 18 months, as they lacked appropriate funding.

  • 52% of business owners say it’s hard to find qualified workers.

(Source: Survey Monkey)

Small business problems statistics from 2019, show that more than half of the SMBs in the United States struggled to find qualified employees. Also, for businesses with more than 50 employees, 63% of its owners stated that it was harder to find qualified individuals

  •  About 69% of US entrepreneurs start their business at home.

(Source: Small Business Trend)

Thanks to advancements in technology and other factors, US entrepreneurs kick off their dream business from their couch. Statistics show that at least 50% of small businesses are operated from home, including 60.1% of firms and companies without employees.

  • Non-employer businesses account for 60% of home-based businesses.

(Source: Fundera)

Non-employer businesses are simply businesses with no paid employees. Statistics show that in 2016, non-employer businesses contributed to 76.2% of businesses in the US. These companies do not have a yearly receipt of more than $1,000 or $1 in the case of construction companies. Information industries are 70% more likely to be home-based, while construction companies have a 68.2% chance.

  • Social media is the most popular advert platform for small businesses.

(Source: The Manifest)

About 87% of small businesses advertise their products through online platforms. Social media remains the most used platform at 64%, while 49% use other platforms. More small business statistics revealed that Facebook is the most used social media application at 86%. YouTube, Instagram, and Twitter followed at 51%, 47%, and 41%, respectively. 

  • 57% of small businesses use traditional media for advertising.

(Source: The Manifest)

Social media might be one of the easiest ways to get your products to the target audience, but traditional advertising remains undefeated. Statistics for business show that print is the most popular method of conventional advertising at 36%. TV and Radio followed with 22% each. 

  • 31% of US small businesses are inactive due to Covid-19.

(Source: Oberlo)

About one-third of small businesses across the country are not functional due to the COVID-19 pandemic. In March 2020, more than 70% of small businesses had to shut down to curb the rapid spread of the virus. This led to a 51% increase in online interaction with customers.

Small Business Owners Statistics and Facts

Small businesses are owned by diverse groups of people all over the country. While some groups still dominate, it is clear that small businesses are for everyone. Check out some of these statistics and facts on small business owners.

  • People aged 50-59 are the most common small business owners.

(Source: Small Business Trends)

People in this age bracket account for 35% of all small business owners, make them the most popular group. This is followed by people aged 40-49 at 25% and 60-69 at 18%.

  • 73% of small business owners are men.

(Source: Small Business Trends)

Men make up more than half of small business owners in the US. Small business statistics show that people who identify as women make up just 25% of small business owners. 

  • Women own the majority of home-based businesses.

(Source: Fundera)

Women are more likely than men to own businesses that operate from home. Statistics show that women run about three-quarters of all home-based businesses. More stats showed that home-based businesses accounted for 58.2% of all small businesses owned by women in 2011.

  • 71% of business owners are white.

(Source: Small Business Trends)

White people mostly dominate small companies, brands, and firms in the US. The difference is so vast that the second ethnic group that comes close is the Asians/Pacific Islanders at 11%. Black/African American and Hispanic/Latino followed at 7% and 6%, respectively.

  • The majority of business owners are only educated to the high school level.

(Source: Small Business Trends)

Statistics show that most business owners are educated to just the high school level, making up an impressive 33%. Owners with a Bachelor’s degree followed at 29%. Associate degree and master’s degree came in at 18% and 16% respectively. The doctorate was last at 4%.

  • Millennials are 188% more likely to create a business as a side hustle.

(Source: Salesforce)

Compared to the baby boomers, millennials’ small businesses are usually a side job as an extra source of income. This is thanks to advanced technology that makes it easy to run your business activities from home. New business statistics revealed that millennials are 48% more likely to have created their business from an idea they are passionate about when compared to baby boomers. 

Small Business Growth Statistics and Trends

While your small business’s likelihood of making you a millionaire is slim, it still serves as a healthy source of income. Significant stats and trends for small businesses are highlighted below.

  • Small business GDP noted a 1.4% increase in 16 years.

(Source: SBA)

Small businesses make up 44% of the US economic activity. However, between 1998 to 2014, small business GDP share declined from 48% to 43.5%. Regardless, small business GDP grew by 25% in real terms over the same period. Although the growth rate of small businesses is not jaw-dropping impressive, they remain vital to the country’s economy. 

  • There has been a 38% drop in the share of first-year business owners.

(Source: Guidant Financial)

As 2020 continues to unfold, many have predicted that the United States might suffer from an economic recession. This has significantly affected small businesses and has led to a drop in shares. Statistics show that there has been a 13% decrease in the shares of small businesses looking to open up an additional location.

  • The demand for self-employed software developers is projected to increase by 21%.

(Source: The Balance Small Business)

Small business growth statistics show that the continuous need for software developers would spike to 21% by 2028. There would be a corresponding increase in their wages. In 2018, the average pay for software developers and engineers was $105,540

  • 8% of small businesses use AI.

(Source: Salesforce)

Gone are the days where AI was just a thing for big companies. Today, AI is one of the most prominent small business trends as business owners are now buying the idea. 

Statistics show that 46% of SMB owners believe that their business is ready to utilize AI. Additionally, 32% of SMB owners already have plans to implement AI in their business. Consequently, there will be a 310% growth rate in the next 2-3 years. 

  • Small business owners predict an increase in the cost of labor.

(Source: Survey Monkey)

In a 2019 survey, about 44% of small businesses with over 50 employees, stated that there would be an increase in the cost of labor in the coming years. This increase would be faster than the cost of raw materials and will consequently lead to a rise in wages.

  • Small business proprietors make an average of $100,000 yearly.

(Source: Fundera)

Small business revenue statistics revealed that businesses without employees have a revenue of about $46,978. The average small business proprietor makes about $71,813 annually. In the case of income, an estimate of 86.3% of them make below $100,000 yearly. 

Popular Small Business Category Statistics

From retail to manufacturing companies, the possibilities are almost endless. Small businesses have broad categories that are usually all-encompassing. Below are some very amazing stats on some SMB segments.

  • Retail and business services account for 13% in shares.

(Source: Guidant Financial)

Small business statistics from 2020 revealed that retail and business services are the most popular categories as they are tied to the number one spot. The construction and contracting industry immediately followed at 12%. Other sectors such as food, restaurant, residential, and commercial accounted for 9% of the total share each. 

  • Small businesses with 50 or fewer employees account for 98.6% of all retail firms.

(Source: Small Business Trends)

Small businesses also hire 39.8% of all employees involved in retail. The average monthly revenue from retail firms is $22,341. These firms have an average gross margin of 51%, and the owners tend to reinvest in large local chains when they earn their profit.

  • Franchised small businesses employ 8 million people.

(Source: Grasshopper)

Franchises form a significant part of the economy that helps curb the unemployment rate in the US. Statistics show that franchised small businesses represent 40% of the total retail jobs in the United States.

  • Small businesses make up 98.6% of all manufacturing companies.

(Source: Score)

Small businesses dominate the manufacturing industry, and the majority of them have no employees. Statistics show that 355,467 manufacturing companies have no employees. 187,862 companies have 1-20 employees, 21-499 companies have 60,099 employees, while 3,183 have more than 500 employees.

  • Small business manufacturing in the US accounted for 11.6% of the economic product in 2018.

(Source: Score)

Small business statistics revealed that companies with a little over 20 employees represent 75.3% of the US manufacturing industry. Apparel is the most manufactured product accounting for 22.9% of products created by these companies. Other products, such as furniture and fabricated metal products, followed at 18.4% and 16.4%.

  • 89% of manufacturers cannot occupy job vacancies.

(Source: Score)

Today, there are about 12.75 million people employed in US manufacturing companies. They make up 8.6%, but small business owners still struggle when recruiting. This is partly due to a lack of skills and advanced technology.

  • Over 37% of small businesses have outsourced their business processes.

(Source: Daxx)

Today a lot of small businesses have outsourced at least one part of their business process. Experts say that about 52% of these small businesses will still outsource jobs this year. Furthermore, small businesses are expected to increase their software budget from 6.0% to 9.1%.

  • Outsourcing in small businesses declined to 35% in three years.

(Source: Daxx)

Compared to 59% of small businesses outsourcing in 2016, only 35% were still outsourcing in 2020. This dramatic shift was mainly a result of an increase in quality-oriented outsourcing. Further stats show that 18% of small businesses will continue to outsource to obtain talent and skills they can’t find locally.

Small Business Financing Statistics

Availability of money or lack thereof remains a principal determiner as to whether or not a business would kick off or survive the long run. Some statistics on financing are mentioned here. 

  • Cash is the most popular form of small business financing.

(Source: Guidant Financial)

For the third year in a row, cash stays the most popular form of financing of small businesses. It currently accounts for 37% of the share used by small business start-ups

Rollovers for Business Start-ups (ROBS) came second, for the second year in a row at 13%. Finances from friends and family experienced a 22% decline, while the use of a line of credit increased by 10% from the previous year. 

  • Cash flow is the biggest challenge faced by most business owners.

(Source: Fundbox) 

A survey carried out showed that 33% of small business owners admitted that cash flow poses their most significant business challenge. The worst part about it is that cash flow is constant. So business owners are faced with it, regardless of their assets or the years spent in business.

  • White-owned small businesses have the highest approval rate for business loans.

(Source: Cogneesol)

Compared to other minority groups at 29%, white-owned businesses are 57% more likely to get a business loan approved from SBA. More SBA lending statistics revealed that this is also true for gender. Men-owned businesses have a 71% approval rate than females at 29%. More stats show that existing firms have a 67% approval rate, and urban companies have an 83% loan approval rate.

  • Large banks are least likely to approve SMB funding requests.

(Source: Cogneesol)

Large banks have the lowest approval rate for loans for small businesses, at just 23%. Small business loan stats show that institutional lenders are 62.8% more likely to fund small businesses. Alternative lenders, small banks, credit unions followed at 60.7%, 48.7%, and 42%.

Conclusion

The statistics mentioned above make it clear that small businesses play a huge part in the economy. Still, they are faced with funding issues as most large corporations, such as banks, do not fund small businesses. Lack of cash has shortened the lifespan of a lot of businesses. 

Statistics show that several factors, including race, gender, and the business’s location are also of importance. 

FAQs

How many small businesses are there in the USA?

No economy would survive without small business, and they remain the backbone of the US economy. About 30.2 million small businesses are scattered all over the United States. Additionally, they account for 99.9% of businesses in the country. 

How much does a small business owner make in a year?

A small business owner’s earnings are determined by a couple of factors such as the time of business and whether there are employees or not. Studies suggest that the average revenue earned yearly by small businesses without employees should be around $44,000. This is dramatically lower and quite insignificant compared to the average revenue of small businesses with employees, which is $4.9 million.

How many new businesses start each year?

Regardless of the scary failure statistics, thousands of new businesses open up every year. Impressively, about 69% of entrepreneurs in the United States, start their businesses at home. Statistics show that 543,000 new businesses kick off every month. This means that approximately 6.5 million new businesses are started each year. In addition, a whopping 80% of these small businesses make it through their first year.

What percentage of businesses are small businesses?

They are about 28.7 million firms in the US, and small businesses consist of 29.6 million, making it the majority. More than 99% of firms, companies, and brands in the United States are small businesses. 80% of small businesses in the US do not have an employer. More stats show that 88% of employer firms have just a little above 20 employees.

What percentage of small businesses fail?

Small businesses have some mind-blowing failure rate, but it hasn’t stopped entrepreneurs from pursuing their dreams. Statistics show that about 20% of small businesses fail in their first year, while 30% fail in their second year. 

Additionally, 50% of small businesses fail after their five active years in business. Conclusively, 70% of small businesses do not make it through the long run as they fail in their tenth year.

How many small businesses contribute to the GDP of the USA?

Between 1998 to 2014, the GDP of small businesses fell from 48% to 43.5%. Nevertheless, small businesses remain the lifeline of the US economy and account for 44% of its gross domestic product (GDP). Small businesses are responsible for over 60% of employment in the US. Additionally, small business statistics show that more than 80% of new job opportunities created in the country come from small businesses.