Small and medium-sized businesses (SMBs) account for a huge percentage of businesses in the U.S. This makes the SMB sector an integral part of the national economy.
We do a lot of business with small businesses who use our digital signage solution to communicate better with their audiences. Because of that, we decided to compile a list of small business statistics and trends for 2020.
What is a small business?
A small business is a privately owned company in the form of a sole proprietorship, partnership, or corporation. Typically, a small business has fewer employees, ranging between 100 and 1500, depending on the industry. In the United States, the small business administration (S.B.A.) provides a set of standards that defines a small business. These include:
- Must be independently owned and operated
- Must be a for-profit business of any other legal business structure
- Must not be nationally dominant in its industry of operation
- Must be physically located and run its operations within U.S territories
However, businesses outside the U.S can also be considered small if their operations in the U.S make a significant contribution to the local economy, either by payment of taxes to the federal and state governments or by using American products and labor.
How many small businesses are started each year?
More American people are venturing into small businesses every year. According to the 2008 small business statistics and trends, an estimated 670,000 new small businesses opened each year. However, the number of startups has since declined.
A report by the Chamber of commerce shows that the number of small businesses started from 2009 to 2016 hovered around 400,000. As of 2019, there was a total of 30.7 million small businesses in the United States.
What percentage of the U.S. economy comprises small businesses?
Small businesses are considered the backbone of the U.S economy, contributing to 44 % of the national economic activity. Although their overall share of G.D.P. has declined over the years, from 48% to 43.5%, they are still an important part and contributor to the U.S financial system.
According to a 2019 SBA profile, there are 30.2 million small businesses in the U.S., which represents 99.9% of all businesses in the nation and 47.3% of all US employees.
How do small businesses impact the U.S. economy?
Small businesses are the epicenter of the U.S economy. They drive tons of income tax dollars as well as consumer spending into the economy.
Small businesses are responsible for about two-thirds of jobs created in the U.S.
Additionally, the small business ecosystem leads the way in terms of adoption of technology, product innovation, and competitiveness.
A 2016 survey by S.B.A. reported that small businesses accounted for about 98% of all firms that exported goods and services from the U.S. Their exports were around one-third of the country’s total exports by value, which further reinforces their contribution to the economy.
Overall, small businesses benefit the economy across all aspects of performance-including growth, innovation, employment, and living standards.
Who owns small businesses?
Small businesses are owned by Americans who run businesses regarded as small in terms of their workforce, organizational structure, and sales volume.
An independent caterer working from home is a small business owner, and so is the owner of a larger catering firm with several franchises.
Some common small business owners include real estate brokers, house cleaners, consultants, shopping mall booth operators, gardeners, financial advisers, law firm owners, and more.
Small Business Statistics and Trends for 2020
Below are 49 small business statistics and trends on growth, failures, ownership, financing, marketing and sales, employment and the workforce.:
Growth and Revenue
- As of 2 years ago, there are 30.2 million small businesses in the U.S.A. (SBA Office of Advocacy)
- Small businesses with 1 to 499 employees add more new jobs to the U.S economy than their counterparts with more than 500 employees (SBA.gov)
- The average salary for a small business owner is between $30,000 and $149,000 a year. (Payscale)
- 31% of small businesses are growing their workforce and revenue generation (Fedsmallbusiness)
- The number of small businesses making between $1 million and $2.5 million in revenue rose by 28% from 2011 to 2016 (U.S. Census Bureau)
- Small companies with revenue below $5 million saw a 7.8% growth in annual sales in 2015 (Forbes)
- Technology and healthcare are the most lucrative industries right now. Healthcare makes up 85% of businesses that survive the first year, making it one of the most stable industries for startups (Fundera)
- Only about 1 in 12 small businesses close every year (Small Business Administration)
Failures and Challenges
- 29% of small businesses fail because of cash flow problems (Lending Tree)
- 14% of small businesses fail because of ignoring their consumer base (Fundera)
- Only 17% of restaurants fail in their first year (Fortunly)
- Almost 3 in every 4 tech startup in the U.S fail because of scaling too fast (Crowdspring)
- 50% of startups fail within their first five years (Venture Beat)
- Around 43 % of cyber-attacks target small businesses which presents a serious challenge, with 60% of small businesses that get compromised closing within the next six months. (Digital, Cyber Security Ventures)
Women-owned Small Businesses
- There are 12.3 million businesses owned by women in the U.S.A. (American Express)
- Women now account for 40% of all small business owners in the U.S., a figure that has steadily grown over the past few decades. (JP Morgan Chase & C.O. Institute)
- As of 2018, women of color own 47% of the small businesses owned by women in the U.S. Of the 47%, Latina women owned 17% while African-American women owned 20% (American Express)
- As of 2017, women-owned firms in America employed nearly 9 million people and generated over $1.8 trillion in sales (National Association of Women Business Owners)
- About 6 in 10 women entrepreneurs (62%) depend on their small business as the primary source of income (PRNewswire)
- Private tech companies and startups led by women entrepreneurs achieve 35% higher R.O.I. than those run by men (Forbes)
- Women-led funding campaigns have a higher success rate (69.5%) as compared to men’s 61.4% success rate in crowdfunding (National Women’s Business Council)
- There are over 8 million minority-owned small businesses in the U.S (SBA.gov)
Financing and Loans
- About 40% and 43% of small businesses applied for funding in the years 2017 and 2018, respectively (Fedsmallbusiness)
- Standard retail outlets and small businesses such as shops and restaurants have a 20% probability of securing an S.B.A. loan. Niche-specific companies such as commercial equipment leasing, breweries, and pharmaceuticals have a higher approval rating (Finder)
- 29% of small businesses in the U.S. fail because they lack capital or funding sources (CBInsights)
- Among all small businesses in the U.S, only 48% indicated their financing needs are satisfied. 23% have a deficit while 29% have unmet financing needs (Fedsmallbusiness)
- 70% of small businesses in the U.S have outstanding debt (Fedsmallbusiness)
- 73% of small businesses use financing. (S.B.A. Office of advocacy)
- According to the Federal Reserve, the average small business loan amount across all U.S. banks is $633,000 (Fundera)
- Among firms approved for credit, only 50% were granted full amounts as requested (Kauffman Foundation)
- Female business owners seek roughly $35,000 less in financing compared to men (Forbes)
Marketing and Sales
- Over 64% of small businesses have a website. 81% of these firms say their business website is mobile-friendly (Clutch)
- However, less than 30% use website analytics or call tracking. 18% of US-based businesses admit to not using tracking at all (Media Post)
- 61% of American-owned small businesses use social media marketing to increase their reach and connect with their target audience. (Clutch)
- 53% of small businesses prioritize inbound content marketing strategies such as blogging (HubSpot)
- Small businesses with a regularly updated blog on their website enjoy 126% quicker lead growth than those without blogs. (HubSpot)
- Around 37% spend less than $10,000 on digital marketing or advertising campaigns. (The Manifest)
- About half (51%) of small business owners are reluctant to leverage new technologies because they take too much time to implement (Business Insider)
- Millennial business owners are more likely to advertise on both digital and traditional mediums (The Manifest)
Employment and the Workforce
- Small businesses created 8.4 million new jobs between 2000 and 2017 in the U.S., accounting for 65.9% of net new job creation (SBA.gov)
- 59.9 million people are employed by small businesses, which makes up 47.3% of all employees in the country (SBA.gov)
- 62% of small businesses have five employees or fewer (Census.gov)
- Almost 90% of small businesses have a medical plan in place for their workforce (Guardian)
- 87% of small business employees say they have more fun and feel happier at work than big business employees (smallbiztrends)
- Tech startups and companies led by Millenials are more optimistic about their future growth prospects (Berkeley.edu)
- About half of small business owners foresee employee growth within the next 5 years (Smallbiztrends)
- 50% of small businesses have a chief financial officer or controller (C.F.O. Journal)
- 71% of small business founders are male (Guidant Financial)
- Since 2016, millennials remain the largest workforce generation and are set to make up three-quarters of the workforce by 2025. (Forbes)
Based on these small business statistics and trends, you can see that SMBs are a thriving sector with a significant contribution to the economy and servicing the community.