Small business owners likely make up the bulk of the businesses in the U.S. From restaurants and grocery stores to farms, real estate agencies and mechanics, businesses owned by locals with fewer than 100 employees are considered small businesses.
These small businesses are operated by a variety of types of people, and no business will look the same. From the number of employees to the revenue each business brings in, small businesses come in all shapes and sizes. Let’s take a closer look at a few facts about small businesses.
Key takeaways
- There are 31.7 million small businesses in the U.S. as of 2020, accounting for 99.9% of all U.S. businesses. (U.S. Small Business Administration)
- More than half of small business owners are 55 and over. (U.S. Census Bureau)
- 9.1% of small business owners are veterans. (SCORE)
- One of the most common reasons people start their own business is to be their own boss. Sixty-six percent of those surveyed in Cox Business stated this is why they opened their small business. (Cox Business)
- 82% of small businesses survive one year; 50% survive to the five-year mark; just 35% survive ten years. (Bureau of Labor Statistics)
General small business statistics
Whether or not a business qualifies as a small business is typically defined by how much revenue it makes and how many employees it has. The Small Business Administration has outlined parameters by industry. For example, a small business in the logging industry would have less than 500 employees, but a small soft drink manufacturer could have as many as 1,250 employees. As for revenue, this is also a large range depending on the industry, with small businesses generating on average between $1 million (or less) and $41.5 million in annual revenue.
Small businesses exist within nearly every industry. Freelance writers can qualify as small business owners, and so can retailers, hairdressers, tax experts, lawyers and even private-practice doctors.
There are 33.2 million small businesses in the U.S., composing 99.9 percent of all American businesses, according to the Small Business Administration. Even some of the big-name chains you see could be locally operated and qualify as small businesses. Guidant Financial surveyed 4,500 current and aspiring business owners and found that 41 of surveyed respondents owned franchise businesses.
Small business industries
While small businesses exist in nearly every industry, there are a few that dominate. Below is a chart, based on a survey by Guidant Financial, that shows some of the biggest players in the small business world.
| Food and Restaurants | 12% |
| Retail | 11% |
| Business Services | 11% |
| Health, Beauty and Fitness | 9% |
| Residential and Commercial Services | 7% |
Business ownership statistics
The business world is diverse, yet certain groups are more likely to start businesses. Note that the statistics referenced in this section are for all business owners in the U.S. — not just those that qualify as small businesses. However, remember that small businesses compose 99.9 percent of all U.S. businesses.
Business ownership by gender
Men currently own more small businesses than women. The Census Bureau’s most recent Annual Business Survey found that just 1 in 5 employer firms in the U.S. are owned by women. The number of female-owned businesses grew 0.6 percent year over year, however.
Business ownership by race
Just like there’s a gender divide in the small business community, there’s a clear racial divide, too. The U.S. Census found that not only are businesses mostly male-owned, but most of them are also run by white men. The chart below breaks down ownership by different groups.
| White | 70.8% |
| Hispanic or Latino | 14.4% |
| Asian | 6.2% |
| Black or African American | 6.0% |
| Unknown | 2.1% |
| American Indian and Alaska Native | 0.5% |
Business ownership by age
Small businesses are owned and operated by folks of all ages. Still, it’s not a surprise that individuals from older generations tend to own businesses more than younger adults. Older adults have had more time to build credit, making it easier to secure financing. They also have more experience in the working world and have had more time to save money to invest in their businesses.
| 40+ years old | 63% |
| 30-40 years old | 30% |
| 20-30 years old | 7% |
Business ownership by education level
Having a higher education level doesn’t necessarily qualify you to run a business, but it can make the financial component easier. Additionally, attending college can build a network and support system that can provide the capital or contacts needed to get you started in business.
As you’ll see in the chart below, those with bachelor’s degrees are the highest percentage (52 percent) of business owners. But bachelor’s degrees aren’t necessary for every industry, and those with associate’s degrees also make up a significant portion of the business world.
| High School | 10% |
| Associate | 21% |
| Bachelor’s | 52% |
| Master’s | 9% |
Small business financial statistics
Small businesses have unique financial needs compared to larger corporations. Small businesses’ average revenue looks different, payroll looks different and borrowing needs look different.
Business revenue statistics
How much a small business makes largely depends on the industry and where the business is located. Of course, a restaurant in a large city like Los Angeles or New York City is going to make substantially more than the only diner in rural America. The U.S. Census’s 2019 Statistics of U.S. Businesses Survey (released in 2022) found that the median income for self-employed individuals at their own incorporated businesses was $55,858. And thankfully, the majority (63 percent) of existing businesses report that they’re profitable.
Just as there’s a gap in ownership between men and women, there’s also a substantial gap in revenue. Biz2Credit found that businesses run by women have an average annual revenue of $475,707, while male-led businesses earn $675,643 on average in annual revenue.
Small business financing statistics
While 78 percent of startups use solely their own money to launch their businesses, many small businesses will need funding at some point. After all, the amount of outstanding small business loans reached $645 billion in 2019. This number is so high in part because the average SBA loan is $417,316.
While loans are an option for businesses that need large amounts of financing, business credit cards are another common method businesses use to pay for expenses. Credit card interest rates tend to be much higher than that of business loans, so they aren’t the best option for long-term financing. However, they are sometimes more accessible and offer rewards and perks that business loans don’t.
Small business success statistics
Despite the wealth of entrepreneurship in the U.S, the road of a small business owner isn’t easy. Unfortunately, 18 percent of businesses fail within their first year, 50 percent after five years and 65 percent by year 10, according to the Bureau of Labor Statistics.
Geographic location may also play a factor in this failure. Zippia found that, as of 2019, Washington, Michigan and Kansas are the three states with the highest rates of business failure. On the other hand, California, Louisiana and Massachusetts have the highest success rates.
Another factor in small business success is industry. Unsurprisingly, the healthcare industry has the highest rate of success, with 60 percent of small businesses staying open past their fifth year. Warehousing, transportation and construction, on the other hand, have the worst success rates at 30 percent and 40 percent, respectively, after five years.
So why do small companies fail? CBinsights’ survey revealed that the main reason businesses fail is due to running out of money and an inability to secure more. A product becoming obsolete and getting outcompeted are two other common reasons some businesses fail.
| Within 1 year | 18% |
| After 5 years | 50% |
| After 10 years | 65% |
The bottom line
The statistics in this guide are both encouraging and daunting to aspiring business owners. Starting your own business can feel both high risk and high reward, but you don’t have to invest huge amounts of money and time into your business before you know whether it’ll be profitable. Read our guide to starting your own business to learn how to formalize your idea and start earning a living from your passion.
FAQ section
https://www.bankrate.com/finance/credit-cards/small-business-statistics/