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Maskot/Getty Images October 10, 2022 Christopher Murray is a personal finance writer for a number of reputable sites including Bankrate. Six years ago, Christopher started as the single staff writer for a budding finance blog, He worked his way all the way up to Senior Editor. Ultimately, the freedom that freelance writing brings was calling and he decided to go back to writing full-time. Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited by the opportunity to help people make good financial decisions. Send your questions to Bankrate logo The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Small business owners likely make up the bulk of the businesses in the U.S. From restaurants and grocery stores to farms, real estate agencies and mechanics, businesses owned by locals with fewer than 100 employees are considered small businesses. These small businesses are operated by a variety of types of people, and no business will look the same. From the number of employees to the revenue each business brings in, small businesses come in all shapes and sizes. Let’s take a closer look at a few facts about small businesses. Lightbulb Key takeaways There are 31.7 million small businesses in the U.S. as of 2020, accounting for 99.9% of all U.S. businesses. () More than half of small business owners are 55 and over. () 9.1% of small business owners are veterans. () One of the most common reasons people start their own business is to be their own boss. Sixty-six percent of those surveyed in Cox Business stated this is why they opened their small business. () 82% of small businesses survive one year; 50% survive to the five-year mark; just 35% survive ten years. () General small business statistics
Whether or not a business qualifies as a small business is typically defined by how much revenue it makes and how many employees it has. The Small Business Administration has outlined . For example, a small business in the logging industry would have less than 500 employees, but a small soft drink manufacturer could have as many as 1,250 employees. As for revenue, this is also a large range depending on the industry, with small businesses generating on average between $1 million (or less) and $41.5 million in annual revenue. Small businesses exist within nearly every industry. Freelance writers can qualify as small business owners, and so can retailers, hairdressers, tax experts, lawyers and even private-practice doctors. There are 33.2 million small businesses in the U.S., composing 99.9 percent of all American businesses, according to the . Even some of the big-name chains you see could be locally operated and qualify as small businesses. surveyed 4,500 current and aspiring business owners and found that 41 of surveyed respondents owned franchise businesses. Small business industries
While small businesses exist in nearly every industry, there are a few that dominate. Below is a chart, based on a survey by Guidant Financial, that shows some of the biggest players in the small business world. Industry Percentage of Small Businesses Source: Food and Restaurants 12% Retail 11% Business Services 11% Health, Beauty and Fitness 9% Residential and Commercial Services 7% Business ownership statistics
The business world is diverse, yet certain groups are more likely to start businesses. Note that the statistics referenced in this section are for all business owners in the U.S. — not just those that qualify as small businesses. However, remember that small businesses compose 99.9 percent of all U.S. businesses. Business ownership by gender
Men currently own more small businesses than women. The Census Bureau’s most recent found that just 1 in 5 employer firms in the U.S. are owned by women. The number of female-owned businesses grew 0.6 percent year over year, however. Business ownership by race
Just like there’s a gender divide in the small business community, there’s a clear racial divide, too. The U.S. Census found that not only are businesses mostly male-owned, but most of them are also run by white men. The chart below breaks down ownership by different groups. Race/Ethnicity Percentage of Small Business Owners Source: White 70.8% Hispanic or Latino 14.4% Asian 6.2% Black or African American 6.0% Unknown 2.1% American Indian and Alaska Native 0.5% Business ownership by age
Small businesses are owned and operated by folks of all ages. Still, it’s not a surprise that individuals from older generations tend to own businesses more than younger adults. Older adults have had more time to build credit, making it easier to secure financing. They also have more experience in the working world and have had more time to save money to invest in their businesses. Generation Percentage of Small Business Owners Source: 40+ years old 30-40 years old 20-30 years old Business ownership by education level
Having a higher education level doesn’t necessarily qualify you to run a business, but it can make the financial component easier. Additionally, attending college can build a network and support system that can provide the capital or contacts needed to get you started in business. As you’ll see in the chart below, those with bachelor’s degrees are the highest percentage (52 percent) of business owners. But bachelor’s degrees aren’t necessary for every industry, and those with associate’s degrees also make up a significant portion of the business world. Education Level Percentage of Small Business Owners Source: High School Associate Bachelor’s Master’s Small business financial statistics
Small businesses have unique financial needs compared to larger corporations. Small businesses’ average revenue looks different, payroll looks different and borrowing needs look different. Business revenue statistics
How much a small business makes largely depends on the industry and where the business is located. Of course, a restaurant in a large city like Los Angeles or New York City is going to make substantially more than the only diner in rural America. The U.S. Census’s (released in 2022) found that the median income for self-employed individuals at their own incorporated businesses was $55,858. And thankfully, the majority (63 percent) of existing businesses . Just as there’s a gap in ownership between men and women, there’s also a substantial gap in revenue. found that businesses run by women have an average annual revenue of $475,707, while male-led businesses earn $675,643 on average in annual revenue. Small business financing statistics
While use solely their own money to launch their businesses, many small businesses will need funding at some point. After all, the amount of outstanding small business loans . This number is so high in part because the . While loans are an option for businesses that need large amounts of financing, are another common method businesses use to pay for expenses. Credit card interest rates tend to be much higher than that of business loans, so they aren’t the best option for long-term financing. However, they are sometimes more accessible and offer rewards and perks that business loans don’t. Small business success statistics
Despite the wealth of entrepreneurship in the U.S, the road of a small business owner isn’t easy. Unfortunately, 18 percent of businesses fail within their first year, 50 percent after five years and 65 percent by year 10, according to the . Geographic location may also play a factor in this failure. that, as of 2019, Washington, Michigan and Kansas are the three states with the highest rates of business failure. On the other hand, have the highest success rates. Another factor in small business success is industry. Unsurprisingly, the healthcare industry has the highest rate of success, with 60 percent of small businesses staying open past their fifth year. Warehousing, transportation and construction, on the other hand, have the worst success rates at 30 percent and 40 percent, respectively, after five years. So why do small companies fail? revealed that the main reason businesses fail is due to running out of money and an inability to secure more. A product becoming obsolete and getting outcompeted are two other common reasons some businesses fail. Time Frame Percentage of Small Businesses That Fail Source: Within 1 year 18% After 5 years 50% After 10 years 65% The bottom line
The statistics in this guide are both encouraging and daunting to aspiring business owners. Starting your own business can feel both high risk and high reward, but you don’t have to invest huge amounts of money and time into your business before you know whether it’ll be profitable. Read our to learn how to formalize your idea and start earning a living from your passion. FAQ section
What is a small business
The definition of a small business is often based on the revenue earned and the number of employees the business has, and it’s relative to the industry. There’s no singular cutoff number for revenue or employee count, but small businesses have a limited number of employees and aren’t owned by a large corporate conglomerate. They’re often operated by locals within a community and employ other community members.
How do I start a small business
There’s no one way to . In general, you’ll need a niche idea or product you’re selling, capital to get a storefront, if necessary, and a variety of licenses depending on your industry. Starting a business is no easy task, though, so make sure you understand the industry you’re working in and both the positives and negatives of being a business owner.
When is Small Business Saturday
Every year, Small Business Saturday celebrates small business owners. It’s held the Saturday after Thanksgiving, almost as a continuation of Black Friday. You’ll often find tons of sales at local businesses, and it’s a great way to support your community.
Why are small businesses important
Small businesses make up so much of the workforce that without them, we’d be without many essential services. From retailers, farmers, restaurant owners, funeral home owners and everything in between, small business owners are a part of every industry. SHARE: Christopher Murray is a personal finance writer for a number of reputable sites including Bankrate. Six years ago, Christopher started as the single staff writer for a budding finance blog, He worked his way all the way up to Senior Editor. Ultimately, the freedom that freelance writing brings was calling and he decided to go back to writing full-time. Mariah Ackary is a personal finance editor who joined the Bankrate team in 2019, excited by the opportunity to help people make good financial decisions. Send your questions to Related Articles