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Small businesses are said to be the backbone of the US economy.
Is that really true?
Quick answer – Yes.
There are now more than 33.2 million small businesses in the United States and more than 1.5 million jobs are created by small businesses every year.
Small businesses contribute significantly to-
And so much more. To say that small businesses are important in the United States would actually be an understatement.
These 2024 small business statistics will tell you everything you need to know about the sector and where it’s going in the future.
Let’s jump into it!
What Will I Learn?
Every small business industry operates differently.
They face different economic challenges and require different strategies for success. There is no one size fits all.
The following small business statistics broken down by industry to help you understand the small business landscape better.
Just 12% of small businesses in the US operate in the food and restaurant sector. This actually makes it one of the biggest industries.
Why is this sector more popular than most industries?
Because consumer spending in this industry has been steadily increasing since 2014 by an average of 2.6%.
While it might not be the easiest industry to work in, if you are determined – you can create a steady business. The accommodation and food service industry is also expected to be worth $14.8 billion by 2025.
But it’s not all rainbows and sunshine for the alimentation sector. The COVID-19 pandemic hit hard, causing total sales to decline from 2019 to 2020 by 19.2%.
The good news is that it has bounced back stronger than ever as people have been able to dine out again.
The retail sector has also experienced a slowing of growth due to the COVID-19 pandemic.
Sales were down by 6% compared to before 2019. While it wasn’t hit as hard as some other industries, 6% is still significant.
Despite the downturn, 11% of all small businesses operate in the retail sector today, making it an important part of the US economy.
The current value of the retail sector is estimated at $4.56 billion and is expected to reach $5.52 billion by 2026.
That’s a significant expected increase of 21% throughout the next few years, indicating that there are still plenty of opportunities for development and growth in retail across the United States.
The business services industry took the biggest hit from the COVID-19 pandemic resulting in a 16% drop in sales during 2020 alone.
2021 also offered little hope with a very modest growth rate of just 0.15%. When you include inflation, this is a big loss for business services.
Today the professional and business services sector makes up 13% of the total US GDP. This means it’s an incredibly important industry in the United States.
The health, beauty and fitness services sector is considered one of the most resilient small business industries in the United States.
Why?
9% of US small businesses operate in this sector today.
COVID-19 also significantly impacted the industry, but not as much as people initially thought.
These are the forecasted values of each small business sector by 2026:
Health services alone are expected to experience the most impressive rebound from COVID, with a 16.6% growth rate.
Residential and commercial services make up 7% of small businesses in the United States.
While it isn’t the biggest sector in the small business world, it’s still important.
In 2019, there were 67,226 commercial and residential service franchises registered.
Despite the disruption caused by COVID-19, small business residential and commercial services was one of the few industries that could maintain strong growth in 2020, with an increase in registered franchises to 68,008.
The average annualized establishment growth rate between 2015 and 2019 was +1.09%. But this number increased further to 1.14% from 2019 until 2020.
That is right in the middle of the pandemic.
If you want to start a small business in an industry known to be resilient, take a look at residential and commercial services.
One of the cool things about most small business owners is that they come from all different demographics and backgrounds.
But the reality is that in the United States, you are most likely to be a successful entrepreneur if you are:
But that doesn’t mean you must fit that demographic to become a successful entrepreneur. These are simply the small business statistics about business owners in the US.
According to a 2018 US census report, just 5% of Black individuals are self-employed. This is primarily due to a lack of access to outside investments.
What does that really mean?
Black people in the United States have had to resort to personal savings or credit to get the necessary funding to start a business.
Even more than that…
A huge 17.6% of black Americans are forced to rely on personal credit cards to fund their new business.
This is very risky, and with such a high failure rate of new businesses across the country – the interest repayments on credit card debt can be enormous.
Minorities in general are far less likely to attract the financial resources required to get a thriving small business off the ground.
The truth is you can start a business in the US as long as you are over the age of 18.
But small business statistics show that your age can affect how likely you are to succeed in business.
On average, founders of startup businesses tend to be in their 40s. Small and medium-sized business (SMB) entrepreneurs are most likely to succeed between the ages of 30 and 50.
The likelihood of a startup succeeding decreases beyond age 50.
Why is this the case?
Experts speculate that below the age of 30, most people need more experience to make a business successful. Above 50 and the required energy to launch a business successfully might be too much.
Of course, there are always outliers to these statistics!
Education is often hailed as the best pathway to success – especially college and university education.
But the following small business education statistics say otherwise.
Only 44% of independent small business owners hold a bachelor’s degree or higher. That means most small business owners (56%) don’t have a college education.
31% of small business owners started a college course or an associate degree but failed to finish it.
20% of small business owners just have a high school diploma or a GED (General Educational Development) certificate.
5% percent never finished high school at all.
The big takeaway is that 95% of small business owners finished high school. But you don’t need to attend college to be a successful small business owner!
The average salary in the United States is now $54,132.
Small businesses that have no paid employees average $46,978 in annual revenue. But the average small business owner in the United States makes $71,813 annually.
A massive 86.3% of small business owners in the US earn less than $100,000 per year. That means only about 14% make more than 6 figures annually.
While the average small business owner might make more than that average employee, small business statistics show that you aren’t necessarily going to make a ton of money.
And to accomplish it – you will need to hire employees.
Women-owned businesses are on the way up.
By how much?
According to a new study, women started 49% of new businesses in the United States in 2021. This is way up from 28% in 2019.
Over half of US businesses (51%) are majority owned, controlled and operated by at least one or more women.
These statistics demonstrate the importance of female business owners in all small business sectors across the US. It also shows a generally equal small business ownership across the country.
What’s more?
Women-owned and led small businesses are responsible for employing close to 9 million people and creating $1.7 trillion in revenue.
That’s about 7.3% of the total US economy.
As of 2022, women majority-owned small businesses employ about 8% of all private sector workforce. They also generate 4.2% of total business revenues.
Over the last 20 years, female business ownership has exploded by 114%.
This is primarily due to more opportunities being opened for women across all small business sectors. 39% of US employer businesses are now women-owned!
And it doesn’t stop there…
46% of black entrepreneurs are women. This is one of the highest percentages of women-owned businesses of any race segment in the United States today.
Black women now feel empowered to make entrepreneurship an extremely viable career path.
Although there has been a big swing toward female business ownership, it comes with some significant challenges.
Other than COVID-19-related issues, these are the top 5 challenges faced by female entrepreneurs today:
| Challenge Faced | Female Business Owners Percentage (%) |
|---|---|
| Advertising & Marketing | 24% |
| Cash flow/Lack of Capital | 17% |
| Retention of Employees & Recruiting | 15% |
| Providing/Managing Benefits | 14% |
| Administrative Tasks | 17% |
How are all of these businesses funded?
Here’s the breakdown of expected financing methods by female-owned businesses this year:
| Financing Method | Female Business Owners Percentage (%) |
|---|---|
| Cash | 44% |
| ROBS (retirement funds) | 15% |
| Family & Friends | 13% |
| Small Business Administration (SBA) | 7% |
| Line Of Credit | 7% |
| Unsecured Loan | 5% |
| Equipment Lease | 3% |
| Other | 6% |
Cash on hand is the biggest way most women will fund their businesses.
This ultimately means that most female entrepreneurs will use their own money to get their businesses off the ground.
In a November 2022 study, it was reported that there are now 1.15 million minority-owned employer businesses in the United States.
This is an increase of 15% from 2019, when there were 1 million minority-owned businesses.
While this might not seem like a big jump over the 3 years, it’s actually considered very good because minority-owned businesses grew during and after the COVID-19 pandemic.
The below table shows a complete breakdown of employer businesses owned by minorities:
| Minority-Owned Businesses | Total Annual Revenue | Employees | Estimated Annual Payroll |
|---|---|---|---|
| Veteran | $926.7 billion | 3.6 million | $176.6 billion |
| Hispanic | $472.3 billion | 2.9 million | $105.6 billion |
| Asian | $841.1 billion | – | – |
| Black/African-American | $141.1 billion | 1.3 million | $42.2 billion |
| American Indian & Native Alaskan | $39.7 billion | 244,000 | $9.6 billion |
| Native Hawaiian & Pacific Island | $8.8 billion | 60,100 | $2.3 billion |
Veteran-owned businesses generated the most revenue at $926.7 billion.
They also employed the most people with 3.6 million employees and a hefty $176.6 billion in annual payroll.
Interestingly the number of Hispanic-owned businesses grew approximately 8.2% from 346,836 to 375,256.
They also made up about 6.5% of all businesses, with an estimated $472.3 billion in annual revenue.
Hispanic-owned businesses are extremely important to the sector, with an estimated 2.9 million employees nationwide.
It’s estimated that minority-owned businesses are responsible for employing over 9 million people every year in the US.
The largest minority-owned sector is social assistance and health, making up 37% of all minority-owned businesses.
When comparing minority-owned businesses vs white-owned businesses – minority owned only receive about half of the number of investments that white-owned businesses receive.
While this looks highly unequal, there are more white-owned businesses in the US, so more investments are made into these businesses.
One of the biggest roles of small businesses (from a government perspective) is to create jobs.
And small businesses in the United States are very good at it.
About 1.5 million jobs are created in the US every year by small businesses alone. This means that 64% of all job creation comes from small businesses.
The truth is that without small businesses, the US job market would be in a very bad condition.
How many employees does the average small businesses have?
About 41% of small business enterprises have between two and five employees.
37% of small businesses choose to outsource mainly to improve the efficiency of how their businesses are run.
Small businesses with less than 100 employees make up the most significant share of businesses. While the media likes to focus on the big billion-dollar companies, small businesses tend to drive job creation in the United States.
COVID-19 hit the small business sector hard.
27% of the entire small business workforce had to be laid off or furloughed in 2020 due to the COVID-19 pandemic.
Only 29% of small businesses were able to keep all their employees.
83.5% of food services and accommodation businesses said they felt a significant negative effect on their business due to the COVID-19 pandemic.
How long did COVID impact small businesses?
56% of small business owners think it took about six months to 1 year for the business climate and economy to recover from the pandemic.
There is no doubt that small businesses felt the enormous effects of government policy around COVID-19.
Thinking of launching your own business?
These are the small business statistics you need to know first!
Your chances of being successful increase significantly if your small business has two founders.
The ideal is:
As a small business founder, you are far more likely to succeed if you have previously failed in business.
I guess it’s true for most people – failure is the best teacher!
Should you run a service or product-based business?
In terms of success, your business is likely to succeed if you offer services.
Product-based businesses are difficult to run and come with a huge range of challenges that the service sector doesn’t have to deal with.
Businesses that prioritize investments in technology are also more likely to succeed overall.
That doesn’t mean you have to develop the latest technology, it just means you should be innovating in different areas of your business to grow it over time.
Before you jump into a new business, you should know the risks you are taking on!
Here’s what you need to know about failure and business:
82% of businesses that fail do so due to poor financial management. This is the biggest killer of businesses overall.
What’s the second biggest reason?
The second most common reason a small business fails is because there is no market for the product or services they offer.
Here’s the simple truth…
Just by making sure you have enough money to get your business off the ground and ensuring there’s a market for your products/service – your chances of success improve significantly.
Do your research and create a realistic financial plan. That’s it!
In the United States, about 543,000 new businesses are started every month. About 20% of those businesses will fail within the first year alone.
Entrepreneurial statistics show that the failure rate increased to about 33% within 2 years and up to 50% after 5 years.
The big takeaway here is that 50% of all small businesses fail within the first 5 years of business.
If you can get past the 5-year mark, you are likely to make it long-term.
Small business statistics show that the small business sector is essential to the US economy!
It provides millions of jobs per year and contributes trillions in annual revenue.
But being a small business owner comes with:
The COVID-19 pandemic showed how difficult the business environment could be (without real notice).
Even without the pandemic, 50% of small businesses won’t make it past the 5-year mark. But the reward can be worth the risk!
Millions of people in the United States run their own businesses successfully every day! Just make sure you have a solid financial plan, and there is actually a market for your product.
Want more statistics posts? Take a look at these blogs:
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