Starting a business can often be overwhelming and complex, and it often requires a big leap of faith. However, understanding what’s happening in the business environment will help you make better decisions, avoid risks, and know which opportunities are more profitable.
One of the easiest ways to do this is through researching small business statistics like these. Doing so will help you keep up with disruptive trends and the ever-changing environment. With that in mind, here are some stats and facts you should know about small businesses today.
Top Ten Small Business Statistics and Facts:
- The covid-19 crisis struck small businesses hard.
- The most common reason for individuals to open a small company is to be their own boss.
- Millennials and Gen Z-ers are more likely to run a side business.
- Social media is the most popular advertising channel for small businesses.
- 70-80% of consumers research a company online before they buy from it.
- You need, on average, about $10,000 to start a small business.
- 10% of small companies make over $1 million in profits.
- Small companies with two co-founders raise 30% in initial investments.
- In 2016, freelancers were expected to represent 50% of the workforce by the end of 2020.
- Half of all small companies are home-based.
Small Business Facts About Opening a Business
Why do people opt to leave their jobs and start a small business? Who are these people? Here are some answers.
1. The most common reason for starting a small company is to be one’s own boss.
While there are a number of reasons people choose to start their own business, the most common one (for 55% of them) is the readiness to be in charge of their own professional life.
According to small business statistics, the next most favored reason for opening a company (for 39% of respondents) is a wish to pursue their passion. Some of the other, more popular reasons are dissatisfaction with the corporate scene, getting the opportunity to start a business, and not being ready for retirement.
2. The younger generations are more open to starting a side business.
Small business statistics for 2019 indicate that the younger generations are more likely to have a side business. As a matter of fact, both Generation Z-ers and millennials are 188% more likely to create a side-hustle when we compare them to baby boomers and older generations.
Moreover, when we compare them to older generations, Generation Z and millennial generations are 48% more likely to say that they opened a company because they wanted to bring their business idea to life and present it to the market.
3. The hardest challenge for small companies is finding a qualified workforce.
During the first couple of years, there’s usually a slew of different challenges that threatens small business growth. However, the biggest challenge small companies face is finding qualified labor. In the CNBC and SurveyMonkey 2019 survey, 52% of the respondents said this was their crucial problem.
Small Business Facts About Marketing
Marketing is crucial for the success of a business. You may think marketing is for large corporations, but you’d be wrong about that. No matter how small your business is, here is why you should work your way towards a detailed marketing strategy.
4. 70% to 80% of individuals research a small company before deciding to buy or visit it.
Today more than ever, it’s crucial to have a website. Regardless of the industry, size, and niche, every business should have a website. Established online presence comes with a number of benefits — improved visibility, credibility, and customer satisfaction. Since most consumers go online and research a company before buying from it, no business can neglect the need for a quality website.
5. Small business marketing budget statistics show that most small companies aren’t investing in content marketing.
According to Clutch. co’s research, content marketing is the most underrated digital marketing avenue. Over 80% of small companies don’t invest or utilize content marketing. In other words, four out of five small businesses miss an opportunity to exploit the most cost-efficient channel for creating brand awareness and customer retention.
6. The most popular digital marketing channel for small businesses is social media.
According to the Manifest’s small business stats, social media marketing is the most favored channel for small company owners. As a matter of fact, 64% of them use social media as a part of their marketing strategy. The same survey showed that almost every small company advertises their services.
In most situations, the ads come through digital marketing channels — after social media, the next most favored channel of advertising is online (49%), then print advertising (36%), and television (22%).
7. Small business advertising statistics show that companies are switching marketing channels.
At the time of the research, almost one-fifth of small companies planned to enhance their SEO efforts in 2020. In fact, only 5% of small companies said that SEO was their most profitable marketing channel during the previous year, which may be the reason why they choose not to focus so much on it this year.
On the other hand, over two-thirds (70%) of small companies have planned to raise their social media advertising financing in 2020 to reach more customers, even though social media platforms have a low conversion rate.
Small Business Revenue Statistics and Other Financial Data
Running a business is a complex thing, and there are many things you have to learn to do it properly. It all takes time and experience, which is why we gathered these extra numbers about small businesses to give you a head start.
8. The median income of those who are self-employed is around $51,419.
Median incomes are earnings from all sources. People who are employed at their own incorporated small companies had a median income of $51,419 in 2017. For those employed at their own unincorporated companies, this number was $25,240.
9. You need between $1,000 and $5,000 to start a home-based franchise.
Around 30% of small businesses were started with about $5,000 in startup investment. However, this applies only to home-based franchises.
10. According to the most recent small business loan statistics, $10,000 is the amount an average business owner spends on a startup.
According to the Wells Fargo Small Business Index study, you only need about $10,000 in startup investments to open a business, on average. On the other hand, a Kauffman Firm Survey, which mostly deals with high-tech startups, discovered that the average startup capital was $80,000.
There’s also an interesting fact that 33% of non-employer and 12% of employer businesses are opened without any initial investments.
11. In 2018, around 9% of full-time small companies had over $1 million in revenue.
Yes, the most profitable small companies turned in over $1 million in profits, but the least profitable ventures (16%) turned in less than $10,000. The survey also found that the average profit for a small business in the USA is just under $100,000 annually.
12. Based on small business lending statistics, small startups that have two co-founders raise 30% more capital on average.
Small businesses that have two co-founders are more likely to succeed and in more than one way. When it comes to finding capital for starting a business, this increased success rate equals 30% more investments for such startups.
Although it appears at first that having two co-founders means internal fighting, for investors, it is actually an indication of harmony and a comprehensive approach to business. This is why venture capitalists like to invest in small companies with two co-founders instead of lone-wolf entrepreneurs.
Small Business Statistics for 2021 and Beyond
Last but not least important — let’s see how the pandemic influenced small businesses all over the US. We all know supporting your local, small businesses is crucial, and this is why.
13. Small business statistics for the COVID-19 time period show that 31% of small firms in the USA aren’t working.
There was never a more uncertain time than during the current COVID-19 pandemic. This uncertainty was reflected in small business growth statistics. Based on the latest State of Small Business Report, almost one-third (31%) of small companies in the United States aren’t operational.
Moreover, above 70% of US-based small companies were completely closed as the United States became the new coronavirus hotspot. This was mostly because a big part of the country went under lockdown in order to stop the spread of the infection.
14. Micro companies represented about 75.3% of private-sector employers in 2013.
A micro company is a company that has fewer than nine employees and is, in fact, the most common type of privately-owned company in the United States. According to SBA’s small business data, although this is the most usual type of business, it is still a minor part of the country’s workforce, representing only around 10.8% of all private-sector jobs in 2013.
15. US small business facts point that, in 2016, freelancers were expected to represent 50% of the workforce by the end of 2020.
The majority of small companies hire full-time employees, even though they may not have enough tasks to make it profitable. This is why freelancers are becoming a more profitable investment, particularly if a business is in its initial growth phase and doesn’t have the capital needed for full-time workers.
Fortunately, more and more individuals become freelancers every year, which provides small businesses with an opportunity to find quality talent at fair prices.
16. Half of all small companies are home-based.
Since almost everyone has access to the Internet, it’s no wonder that so many decide to work from their home. This is particularly true for sole business owners; since this way, they don’t require commercial leasing for multiple workers.
How many small businesses are in the U.S. in 2020?
According to Oberlo, the number of small companies in the United States rose to 31.7 million. In fact, today, small businesses make up almost all (99.9%) of USA companies.
In detail, companies with fewer than 100 workers represent 98.2%, while those with fewer than 20 workers represent 89% of all companies in the US.
This number also goes in line with sustainable growth, as it points to a 3.15% rise from 2019 and a growth of 7.09% in the last three years (2017-2020).
(Oberlo) (SBE Council)
Why do small businesses fail, according to statistics?
More than half of small companies fail in their first year of existence, while over 95% of small enterprises fail during their first five years, according to Convergehub’s small business failure statistics.
Moreover, based on CBInsights research, 42% of small companies failed due to there not being any market need for their product or service, 29% failed because they ran out of cash, and 23% failed because there wasn’t a right team behind the company.
Other reasons include — competition (19%), pricing and cost problems (18%), the unfriendliness of the product and the lack of business models (17%), and inefficient marketing, and ignoring the consumers(14%).
Why are small businesses important?
If you’ve ever wondered why small businesses are important, according to the Small Business Administration, small businesses in the US employ 58.9 million individuals or over 47% of the private workforce. In fact, small companies built 1.9 million job openings in 2015.
Moreover, companies with fewer than 20 workers had the biggest gains, adding 1.1 million job openings. Such statistics only show why small businesses are crucial to the US economy — they aid the local economy by creating jobs, stability, and financial growth.
What is the success rate of small businesses?
According to research done by the Small Business Administration (SBA) Office of Advocacy, around 80% of small companies with workers will succeed in their first year in business. However, only half of those will reach five years in business. Lastly, only 30% of companies will survive ten years in business.
What is considered a small company?
The Small Business Act of 1953 states that a small business is a company created for profit, with a place of business in the US. Moreover, the definition includes that the business must operate within the US or make a notable contribution to the US economy.
In addition, the company needs to be owned and operated independently, either as a sole proprietorship, corporation, partnership, or any other legal business type.
What defines a small business depends on the country. For example, the Small Business Administration states that a small business is an independent company with fewer than 500 workers.
The advent of the Internet brought changes in the workforce — half now work as freelancers, as interesting small business facts show. This represents a profitable opportunity both for employers and employees. In addition, the ever-present access to the Internet facilitated the expansion of home-based businesses, as well as the increased investments in digital marketing, especially in social media.
Fortunately, the current economic situation still allows you to open a business with around $10,000 in capital investments. Although, for the high-tech sector, this number is increased ten-fold. Hopefully, small business statistics like these will help you in your future plans and entrepreneurial endeavors.