Small businesses are considered the backbone of any economy, and rightfully so. They not only bring innovation to the market but also provide employment for those who have been rejected by big corporations.
That’s why we prepared these essential small business statistics for 2020 to help entrepreneurs gain a better understanding of the market and how to place their product or service for the best possible results. So, read on for insights into how the world of small business works.
Small Business Statistics (Editor’s Choice)
- There are 30+ million small businesses in the US
- You need six days to start a business in the US
- 42% of small business fail because they offer a product that consumers don’t need
- 1 of every 12 businesses closes each year
- 50% of companies generate their profit through collaborations with other SB
- This year ecommerce will account for 15.5% of all retail sales globally and will continue to grow in the future
- 43% of small businesses applied for a loan in 2019
General Small Business Stats
1. A small business in the US has between 250 and 1,500 employees and makes $750,000 or less per year.
According to Small Business America’s definition, small business companies employ between 250 and 1,500 employees and have annual revenue no bigger than $750,000. Keep in mind, however, that each country has its own definition of a small business.
2. There are more than 30 million small and medium businesses in the US.
Deloitte data suggests there are over 30 million SMBs stateside. US small business statistics further reveal that they make 99.9% of the whole business community.
3. 66% of small business owners take the bulk of responsibilities.
About two-thirds of small business owners take direct responsibility for three of the most significant responsibilities, such as operations, marketing, customer services, product development, sales, and finance.
4. SMB employees spend 23% of their working days on manual tasks.
US small businesses statistics suggest that 23% of the work time small businesses spend on manually inserting data. Small business entrepreneurs can minimize such unproductive methods by incorporating more digital tools or even hiring third-party companies to outsource the tasks.
5. You need just 6 days to start a business in the US.
It seems like starting a business stateside doesn’t much time. Compared to China’s 38 days needed to start a business, the US business climate is fantastic. In India, you need a month to start a new business, while in the UK and Ireland, you need 13 days.
Small Business Owner Demographics Stats
6. The number of women-owned businesses in the US rose by 21% for 2019.
This compares to a 9% increase in all businesses. Employment by women-owned ventures meanwhile grew by 8%, and the total revenue of their business is at the same level as every other business in America.
(Source: American Express)
7. Black women-owned businesses are 21% of all women-owned ventures.
AE’s small business stats about diversity reveal that black women account for 21% of all women-owned companies. Their annual growth rate meanwhile rose to 12% in 2019, compared to 8% in the prior-year period.
(Source: American Express)
8. 47% of Latino-owned businesses are more likely to use personal guarantees as collateral to secure debt.
A Stanford Business analysis reveals that 47% of small Latino-owned companies use personal guarantees as the collateral to ensure debt. 37% of Latino-owned companies meanwhile use business assets to secure financing.
9. Men start two times more new businesses than women in the US.
JPMorgan’s new businesses statistics reveal that 70% of all new ventures are started by men, while women started only 30%. Additionally, when women start a business, it tends to be smaller in size than the ones founded by men.
10. US women-operated businesses in their first year generate $25,000 less than men.
Women-owned small companies make $50,000 revenue in their first year, while men make $75,000. In the second year, both revenues increase with $59,000 and $91,000, respectively. Small business owner statistics further show that In the next two years, men increase the percentage of their income by around 30% revenue ($100k and $105k), yet women-owned businesses grow with just a couple of percent ($65k and $68k).
Small Business Growth Statistics
11. 40% of all SMBs acquired more customers in 2019.
Small and medium businesses experienced a 40% growth in customers in 2019. Growth was further shown to have come from the increased use of digital tools among companies.
12. Six out of 10 small businesses are organic or financed growth firms.
JPMorgan’s small business revenue statistics reveal that six out of ten firms are organic or financed growth firms. The stats further show that small businesses take the most significant risk — 31% of organic growth and 20% of financed growth companies do not make it past their fourth year.
13. Half of the small businesses generate their revenue through collaborations with other SMBs.
JPMorgan’s business statistics show that financing is not the only way to expand a firm. More than 50% of small companies belong to the organic growth type and mostly generate profit from conducting business with other small businesses.
Small Business Failure Statistics
14. Nonemployer small businesses are 5x likely to exit than to hire employees.
JPMorgan tracked the employer status of 138,000 small businesses from 2013 to 2019, where only 5% of them were employer firms. In year four, more than 11,200 companies exited while 1,800 companies become employer firms. They deducted that non-employer companies are five times more likely to exit than to hire employees.
15. Unnecessary products and services are the biggest reason why SB startups fail.
CBinsights’s startup statistics reveal that at 42%, the biggest reason why startup small businesses fail because they offer a product or service that is currently not needed on the market. If you want to succeed in the competitive market, you must make something that people want, not what you think they need. If your mindset is like that, in most situations, you will fail.
16. 29% of companies fail because they go bankrupt.
Statistics on small businesses further reveal that 29% of companies fail because they spend all their money. It is a fact that small companies have limited budgets, and when they start unplanned spending spree, they run out of cash.
More and more startups make the same mistake — they think their product or service will immediately attract the attention of customers. They fail because they overestimate their innovation and believe that investors will pour in. Generally, investors are hesitant to give more funding to a company that promised to deliver, yet failed to do so.
17. One in 12 businesses closes each year.
And how often do small businesses fail? The short answer is that one in 12 enterprises goes down under each year. The long answer is that 20% of all new small businesses don’t make it past the first year of working while the number goes to 50% in the fifth year. This means that only half of all new businesses survive after five years.
Small Business Loan Statistics
18. 43% of small businesses applied for a loan in 2018.
43% of the small business sector sought external funding in 2018. Small businesses usually take loans so they can pay the operational costs until they reach a point where they can generate enough revenue to cover those expenses.
19. Nearly 50% of the applicants got the full amount of funding.
That was 47% of applicants that got the full funding they sought, equalling 21.5% of all SMBs. The result was similar to that seen in the previous year’s survey.
20. Online Tenders are increased popularity among business owners.
Small business statistics further show that the demand for online tenders continued to grow. Approximately 32% of companies applied for an online loan in 2018, marking an 8% year-on-year rise. Even though online lenders have the lowest satisfaction levels, businesses still turn to them.
21. Online tenders have the highest loan approval rates.
Maybe this is the reason why business owners turn to this type of loan. Online tenders have an 82% approval rate compared to the 71% approval rate of small banks and 58% of large banks for companies of all sizes, according to small business lending statistics.
22. The approval of SB loans in large banks is 28%.
In October 2019, large banks reached 28% of the approval loan rate. Forbes further reports that 2019 was an excellent year for small businesses that benefited from the current positive economic conditions in the US.
Ecommerce Statistics for Small Businesses
23. By 2021 there will be more than 2.1 billion online shoppers.
Statista’s numbers reveal that there will be more than 2.1 billion online shoppers by 2021. That’s a big market. Online shopping has become more accessible over the last decade because only in 2016, that number was just 1.66 billion.
24. In 2020, ecommerce will account for 15.5% of all retail sales globally.
Not only that, but this growth is only set to accelerate further, possibly at the expense of brick-and-mortar stores. While there are plenty of reasons behind this trend, small businesses should consider investing in an ecommerce website or risk being left behind.
What percentage of jobs do small businesses create?
Small businesses created 1.9 million net new jobs in 2019 according to the official SBA report. They make 47.3% of all jobs in the US. SBA Acting Chief Counsel Major L. Clark said that small businesses are the main driver of the economy. He added that they are vital to any state’s ability to grow its economic output, entrepreneurship, and private sector employment.
What is the survival rate for new businesses?
Data from the US Bureau of Labor Statistics shows that only 80% of small businesses with employees survive their first year. In the second year, another 10% of them don’t make it. By year five, only 50% of small companies survive. Lastly, the report reveals that only 30% of all businesses survive past their 10th year of operation.
What percentage of the economy is small business?
About 99.7% of all companies in the US are small businesses. 88% of all companies employ less than 20 workers, and 40% don’t generate more than $100,000 per year.
There are various factors that can hurt your business during its first five years of operation and send you under in that period. That said, these small business statistics show that with the right strategy and product or service, and carefully secured funding, you might just be among the lucky ones that do make it in 2020 and beyond.