There’s no doubt about it: small businesses power the United States.
Small businesses, which the U.S. Small Business Administration (SBA) designates as independent businesses with less than 500 employees, make up 99.9 percent of American firms. (1)
Most are solopreneurships. According to recent statistics from the SBA, 80 percent of small businesses had no employees.
Others drive job growth around the country. Between 2000-2017, small businesses created 65.9 percent of new jobs, or 8.4 million jobs.
Small businesses are vital to American life for so many reasons. They produce innovative products and services. They provide diverse employment. And they contribute to communities.
Let’s take a look at 5 essential small business stats that provide a glimpse into the future of small business growth and lending trends.
1. Around 4 Out of 5 Small Businesses Will Survive a Year or More
The SBA reports 79.8 percent of businesses that opened in 2016 survived until 2017. More promising growth statistics include:
- About half of all small businesses will survive 5 years or longer
- About one-third of small businesses will last 10 years or longer
The survival rate is increasing. Between 2005-2017, 78.6 percent of businesses survived 1 year. An increase in survival rate is promising for up-and-coming entrepreneurs.
What this means for the future: Technology makes sharing business ideas, resources, mistakes and successes easier than ever. Today’s business leaders have more access to information, which helps them make smarter business decisions.
From case studies and online professional networking groups, to tech like blockchain, entrepreneurs can use tools like these to discover insights, flesh out business plans and use strategies driven by peer-tested insights. Better business success rates can also help increase the lending likelihood for those with solid business plans.
2. About 1 in 12 Businesses Closes Every Year – But Not Necessarily Because of Failure
The latest statistics of U.S. businesses from the SBA show that about 1 in 12 closes every year. (2) It’s encouraging that from 1990-2015, the numbers have been trending down.
Not all close because of business reasons. It’s true that low sales is one of the top three reasons for business closures, but it also decreased 13 percent from 37.9 percent in 2007 to 25 percent in 2015.
Other top reasons include:
- The owner or owners are retiring.
- The owner or owners are selling the business.
- The owner or owners are opening another firm.
- The business is closing due to personal reasons, health reasons or “other reasons.”
Survival and closure rates of small businesses must be viewed with a closer lens. In some cases, business closure was the result of something positive, like the ability to sell the business so it becomes part of something bigger.
What this means for the future: A variety of closure reasons should be encouraging to aspiring entrepreneurs or those who want to get back into business ownership. Some business plans will even include a goal of closure, because the objective is to be acquired.
The SBA reports about 6 percent of closures were due to the owners closing to start a new business. Serial entrepreneurship is thriving in the U.S., and lenders recognize this.
3. Around 91 Percent of Small Business Employees Are Optimistic About the Future
It’s not just small business owners who get satisfaction from working at smaller companies. Small business employees enjoy being able to feel like they directly contribute to their company’s success.
Some notable small business statistics revealed in Aflac’s 2018 Small Business Happiness Survey of 1,000 employees include: (3)
- Nearly two-thirds (65 percent) of employees say working at a small business is less stressful than working at a large business.
- Nearly 9 out of 10 (87 percent of) employees think working at a small business is more fun than working at a large business.
- Nearly 9 out of 10 (86 percent of) employees feel like they have opportunities to voice ideas and opinions at work and have them heard and listened to.
The survey found the top 3 benefits of working for a small business, and the percentage of employees who named them as the top benefit, are:
- Flexible work schedule: 25 percent
- Feeling more appreciated: 19 percent
- Feeling like your input matters: 14 percent
As to the best part of working for a small business, the top three stats are as follows:
- Feeling like a family: 32 percent
- Greater ability to make an impact: 14 percent
- More recognition/appreciation for your work: 14 percent
Because of factors like these, 46 percent of respondents said they felt somewhat optimistic about the future of small business, and 45 percent said they felt very optimistic about the future. That’s great news for small business owners!
What this means for the future: Talented employees enjoy working for small businesses. A family feeling, the ability to make a significant impact and the opportunity to get personalized recognition are all attractive features that aren’t always replicated at larger enterprises. Small business owners can attract top talent for reasons like these.
4. There Were 5.7 Million Loans Less Than $100,000 Issued in 2016
The latest stats on small business from the SBA shows U.S. lending institutions issued 5.7 million loans less than $100,000 in 2016, valued at $82.6 billion. (4) SBA statistics show most micro-businesses cost around $3,000 to get up and running, while most home-based franchises require between $2,000-$5,000 to begin. (5)
Entrepreneurs should plan to have at least 6 months’ worth of fixed costs available when they start their businesses, so there’s enough cash on hand to stay afloat. People starting a small business should include realistic forecasts in a business plan to come to a startup funding number that works for them.
The SBA has a handy startup cost calculator. (6) New small business owners should factor in costs like:
- Office space, equipment and supplies
- Communications and utilities
- Licenses, permits and insurance
- Employee salaries and lawyer and accountant costs
- Market research, advertising and marketing costs
Some of these will be one-time costs required at the start of a business. Others will be ongoing. With an accurate view of startup costs, small business owners can seek out the exact funding they need.
What this means for the future: Small business owners aren’t restricted to dealing with big banks for funding. Small business financing options from lending marketplaces like Fast Capital 360 include short-term loans, SBA loans, equipment financing and business lines of credit to help entrepreneurs get up and running. Small business owners can optimize their funding by creating a thorough business plan with a realistic view of what the business will need.
5. More Than 1 Out of 3 Small Businesses Achieve $150,000 or More in Revenue
A 2018 survey of small business owners by BusinessKnowHow.com found encouraging small business revenue statistics. (7) The site has run the survey for statistics on small business for five years since 2007. It found in 2018, full-time small business earned:
- $150,000 to $199,999: 3 percent
- $200,000 to $499,999: 19 percent
- $500,000 to $1 million: 4 percent
- More than $1 million: 9 percent
The latest U.S. Census data shows in 2016, the average annual sales for nonemployers, which can include both part-time and full-time businesses, was $46,978. (8) The median income for individuals who were self-employed at their own incorporated businesses was $50,347 in 2016. (4)
As you can see, small business revenue and income generated from small business ownership can vary widely.
What this means for the future: “Low” revenue numbers could actually indicate small business owners in the making. The “gig economy” in the United States, where employees work as independent contractors, temporary help agency workers or on-call workers, is on the rise.
According to a 2018 report by the Bureau of Labor Statistics, there were 10.6 million people working in the gig economy in the U.S. (9) Some gigs are part-time businesses that lead to bigger full-time ventures. Expect more freelance side gigs to turn into full-blown solopreneurship businesses in 2019 and beyond.
The Future of Statistics for Businesses Looks Bright
The small business growth statistics mentioned here paint an encouraging picture for current and aspiring small business owners. Small businesses are seeing success and growth, small business owners have small business lending options that work for their unique needs and both small business employees and owners are optimistic about what’s to come.
What are you looking forward to about small business in 2019 and beyond? Share on the Fast Capital 360 Facebook page.