28 Small Business Statistics for 2020 + 3 FAQs Answered

Small businesses are considered the backbone of any economy, and rightfully so. They are the spaces created by the people with awesome ideas determined to see them turned into reality. The magic of small businesses is that they bring innovation to the market but also provide employment for those who have been rejected by big corporations. That’s why we’ve prepared our list of must-know small business statistics. These facts and figures will 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 businesses account for 70% of global employment. 
• Digital tools have helped over 40% of all SMBs acquire more customers in 2019.
• A whopping 84% of small business owners predict a bright future for their companies. 
• Cashflow plays a major role in the failure of 82% of small businesses. 
• The COVID-19 crisis has made 31% of US small businesses non-operational.
• The approval rate for male-owned businesses is highest at 71%.

Small businesses are not just the backbone of global economies but they are also the lead job creators and account for over 95% of firms and up to 70% of the global employment rate. These enterprises are vital to ensuring economic growth, innovation, and social integration. Many of them maintain close relations with their employees, business partners, and the local community making them an irreplaceable part of the global supply chains.

(GlobalNaps)

In case you were wondering about the number of small businesses in the US, data from the Small Business Administration suggests they are 30.7 million. In percentage terms, they make up 99.9% of the whole business community. They are further considered key innovators in the US economy. 

(Oberlo)

Moving to the other side of the Atlantic, the most recent EU small business stats indicate that there are a little over 25 million small and medium-sized enterprises, the majority of which are micro-sized with fewer than nine employees. The EU market further boasts 1.47 million small firms with up to 49 employees and nearly 240.000 medium-sized enterprises with up to 249 employees. While the value that SMEs add to the European economy varies per country, the average value stands at around 56%. 

(Statista)

Back home, small business statistics by state point to California as the US state with the highest number of small businesses (99.8%) and a staggering 7,129,204 employees. Texas is ranked second with almost half of California’s number at a total of 2,679,964 employing a solid 4,706,864 of people. Ranked third, Florida fosters an incredible 2,494,279 of small businesses employing 3,397,931 people. Overall, US small businesses employ nearly 60 million people.

(SmallBizTrends)

Small business cybersecurity statistics, along with cybercrime, data breaches, and IT failure stats show that since 2018 when 30% of small enterprise companies were worried about the risks originating from cyber attacks, the number has gone up by 5%. Due to their inability to allocate sufficient funds for cyber protection, small businesses have traditionally been considered easy prey by hackers. 

(Statista)

Worldwide, seven out of ten people are working for a micro or small business. Global small business statistics further reveal that small businesses are building the GDP of more than half of developed countries. 

(Finances Online)

With the majority of US citizens having access to the internet, one cannot blame them for wanting to work from the comfort of their homes. This is the standard practice of many sole proprietorships since they don’t have to worry about finding office space for multiple employees. The percentage of home-operated firms without paid employees, as home-based business statistics indicate, amounts to 60.1%. Then, 23.3% are small employer businesses while 0.3% are large employer businesses. 

(SBA.gov)

About two-thirds of small business owners (66%) take direct responsibility for three of the most significant responsibilities, such as operations, marketing, customer services, product development, sales, and finance. According to Forbes, 23% of employees spend their work time manually inserting data and small business employment statistics confirm it. For a sector that brings innovation to the table, this sounds a bit outdated, right? Small business entrepreneurs can minimize such unproductive methods by incorporating more digital tools or even hiring third-party companies to outsource the tasks. 

(Forbes)

It seems like starting a business stateside doesn’t take 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, while in the UK and Ireland, it takes 13 days. On the other hand, if you are in New Zealand you can get things done in a single day.

(Dynadot)

It’s never too late to follow your dreams and start a new business from scratch. The demographics of small business owners reveal that a staggering 60% of people who start a small business are over 40. A recent survey of more than 2,500 small entrepreneurs in the US showed that small business ventures are not just popular among people up to 60, but 4% of small startups are owned by persons over 70.

(Markingblog)

Small business statistics in an American Express report show that in 2019, the number of women-owned small businesses in the US rose by 21%, resulting in a 9% increase in all businesses. The latest reports on small business owner demographics disclose that women in the US own a little over a third of small enterprises or 9.9 million, as opposed to men who are in charge of 14.8 million ventures. 

(American Express, Finances Online)

Small business owners statistics show that women-owned small companies make $50,000 revenue in their first year, compared to $75,000 for men-owned small ventures. In the second year, the revenues of both increased by $59,000 and $91,000, respectively. Small business revenue reports also show that in the next two years, men increase the percentage of their income by around 30% ($100k and $105k), yet women-owned businesses grow by just a couple of percent ($65k and $68k).

(SmallBizTrends)

Small business owners statistics show that Gen Xers hold the bulk (44%) of the small biz market. This marks a small lead over Baby Boomers who comprise 41% of small business owners. Millennials hold third place with 12%.

(Guidant Financial)

A JPMorgan report points to some fascinating small business owner demographics — 70% of all new ventures are started by men, while women account for only 30%. Additionally, when women start a business, it tends to be smaller in size.

(JPMorgan)

Small and medium businesses experienced a growth of over 40% in their customer base in 2019. Stats show that small businesses that have successfully integrated digital tools in their everyday work are more likely to report increased numbers of customers than their peers. These enterprises further report 5X higher probability of reaching international customers. 

(Deloitte)

And small business growth statistics mention that enterprises that provide business services are among those marking the highest growth at 13% along with the retail industry whose growth also stands at 13%. The construction and contracting industry which employs a lot of freelance workers notes a 12% growth rate while the residential services and food and restaurant industries each note 9% growth.

(Guidant Financial)

This might come as a surprise but small business statistics reveal one-quarter of small businesses start off without any capital. Most owners rely on personal savings, home equity, or loans from loved ones to push their dreams on the road to success. Interestingly, data shows micro-businesses can easily get off the ground with only $3,000 in capital. What this means is that although many factors influence the amount of capital one would need, profitability does not necessarily depend on financing. 

(LendEDU)

JPMorgan’s small business revenue statistics further show that small ventures take the most significant risk — 31% of organic growth and 20% of financed growth companies do not make it past their fourth year. Many small businesses generate their revenue through collaborations with other SBMs which is a perfectly healthy way to grow a business, and recent reports on the success rate of small businesses confirm financing is not the only way to expand a firm. More than 50% of small companies belong to the organic growth type and generate profit mostly from conducting business with other small businesses. 

(JPMorgan)

Discussing the small business failure rate (or success rate for that matter) is tricky. Some businesses, small or big, are born successful while others struggle to find their place in the ecosystem. The good news is 60% of small businesses survive their first two years, and 50% will manage to survive the first five years. About one-third are ultimate survivors and manage to endure up to ten years or more. After all, the rule is that the longer you are in business, the more likely you are to stay in business.

(Fundera)

Small business stats point to a significant change in owners’ outlook on their company’s revenue development between the first and the second quarter of 2020. At the beginning of 2020, 64% of owners believed their small business revenue would grow while only 4% believed they would be experiencing failure. Unfortunately, the situation with the COVID-19 pandemic resulted in an increase in the number of owners (43%) who believe small businesses will be facing a significant revenue decrease. 

(Statista)

Small business failure statistics confirm that a massive 82% of business owners report cash flow as a decisive factor in their operations and in many cases, as the main reason for their ‘death’. Basically many businesses do not just experience problems with money coming in and out but they locate the problem with the invoicing. On many occasions the invoices are paid after the loan payment is due, hence the money flow problem. Seasonal businesses usually suffer the most.

(Fundera)

According to small business bankruptcies statistics, the short answer is that one in 12 enterprises goes 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 increases in the fifth year. 

(BLS.GOV)

The uncertainty caused by the coronavirus crisis was a heavy blow for small businesses in the US and over 70% were forced to shut down in March. According to small business statistics, COVID also caused 60% of SBs to close down following orders from health authorities. The good news is that some managed to adapt to the new situation and started selling their products and services online, with 51% enjoying a rise in online interactions with their clients.

(Oberlo)

CBInsights’ data reveals that the biggest reason for the high percentage of small businesses that fail, which is high at 45%, is the fact that most of them 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. 

(CBInsights)

The number of small businesses in the US that sought external funding in 2018 is relatively moderate and stands at 43%. 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.

(Fed Small Business)

Small business statistics about financing reveal that almost one-third of businesses were unable to receive the funding they needed to develop their business. One in four businesses says that because of the financial issues they couldn’t meet their business or finance goals. And many of these enterprises experienced the worst-case scenario by being forced to lay off employees. 

(Fundera)

Online tenders are growing in popularity among business owners and the demand continues to grow. Small business lending statistics confirm 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, it appears many businesses still turn to them. The high approval rates could be the reason for this, as online tenders have an 82% approval rate compared to the 71% approval rate of small banks.

(Fed Small Business)

According to an October 2019 report, large banks reached 28% of the approval loan rate. Forbes further reports that the whole year was excellent for small businesses that benefited from the positive economic conditions in the US at the time.

(Forbes)

Small business success rate and profitability data indicate four out of ten enterprises are profitable which is a good number given the constant market uncertainty. Stats further show that around 30% are balancing the scales on a daily basis, while another 30% are constantly losing money. Research also shows that two founders succeed better than one because they can get 30% more money and are almost 20% less likely to scale prematurely.

In 2019, a staggering 3.48 million applications were submitted in the US stating intent to start a business and this number is higher by an incredible 41% compared to the number of applications received almost 10 years ago. Given the strong performance of the US economy and the high rating issued by the World Bank (91.6 score for ease of starting a business), the numbers should come as no surprise.

No business idea is common or uncommon, what matters is which one has the highest chances of growth and success. With an 11% growth rate, small businesses offering business services and food ventures (restaurants) are currently the fastest-growing SB. Health, beauty, and fitness also look promising with a 10% growth rate. The best startups meanwhile are seen in accounting, tax preparation, bookkeeping and payroll services, real estate and legal services, and management of companies and enterprises.

There are various factors that can hurt your business during its first five years of operation and even send you under. That said, these small business statistics show that with the right strategy and product or service, along with carefully secured funding, you might just be among the lucky ones that do make it in 2020 and beyond.

Sources: GlobalNaps, Oberlo, Statista, Fundera, SmallBizTrends, Statista, Finances Online, SBA.gov, Forbes, Markingblog, Oberlo, American Express, Finances Online, SmallBizTrends, Guidant Financial, Stanford, JPMorgan, Deloitte, Guidant Financial, StartBlox, LendEDU, JPMorgan, Fundera, Statista, Fundera, CBInsights, BLS.GOV, CNBC, Oberlo, CBInsights, Fed Small Business, Fundera, Fed Small Business, Fundera, Forbes