The Latest Statistics on Small Business Economics in the US

By Adriaan Brits | Tuesday, 11 August 2020 | Business

Many people dream of building up a small business — something they can call their own. They try to break free from politics and workplace rules — things that can deter their growth. Starting your own business can sound complicated and overwhelming, but also exciting.

Are you thinking of leaping to start your own entrepreneurial dream? Whether you are starting your own business, or just expanding your business, these statistics will help you make sense of what you should expect.

How Many Small Businesses Are There in the US?

According to the Small Business Administration (SBA) Office of Advocacy, there are currently 30.7 million small businesses in the country. A small business, as defined by the SBA, is a firm with fewer than 500 employees. Statistics show that most businesses in the US have less than 500 employees. Businesses with less than 100 employees are currently at 98% in statistics: and those with fewer than 20 employees account for 89% of all businesses in the US.

It’s no surprise that small businesses generate most jobs in the US. 15 million jobs are annually created by small businesses, according to the SBA. Small businesses offer job opportunities, financial growth, and unique products and services. It’s no wonder they dominate most of the nation’s economy.

Why Become a Small Business Owner?

There are a lot of reasons why a person would want to start his own company. In a 2019 survey done by Guidant Financial, 55% of respondents reported the desire to be their own boss as one of the most common motivations for starting a small business. 39% of these respondents answered that they wanted to pursue their passion. Other reasons include a lack of retirement preparations.

According to Salesforce, a US cloud-based software company providing customer relationship management service, new generations are more likely to start a side business. In fact, statistics show that 188% of millennials and Gen Zers are more than likely to start a side business, compared to Baby Boomers. The reason for them to start a business will be because they had an idea they wanted to bring to the marketplace.

Nobody wants to fail, and many people, according to statistics, would rather see small business success than a corporation. But while some rise, others fail.

How Many Small Businesses Have Failed?

According to ConvergeHub, More than 50% of small businesses fail in the first year, and more than 95% of small businesses fall within the first five years. This statistic should not discourage you from starting your own business — it should do the complete opposite.

By knowing why the majority fail within their first year, you can plan a strategy to overcome potential risks. You won’t be able to eliminate all risks, but it will help you to understand what to do when a problem arises.

The primary reason small businesses fail within their first five years is because of a lack of market demand, according to a 2019 report done by CB Insights. Other potential reasons are because small businesses lack financing; some businesses never find the right team to work with and unfriendly products. More clients mean more money, and more money means a successful business. So how do you get a bigger clientele?

Marketing Is the Best and Only Answer

In the new digital era, more people are online than ever before, so a small business’s best bet will be to advertise the business on social media platforms like Facebook and Instagram.

In a statistic done by The Manifest in 2019, 64% of all small business owners use social media as their primary marketing platform, with print-marketing at only 36% and television at 22%. Facebook is also the dominant social media platform to use, according to many statistics. More people are likely to follow a business on Facebook.

German online statistics portal Statista shows that California was the state with the most new businesses established in 2016 (92,217), followed by Florida (60,066), Texas (57,669), and New York (51,687).

The numbers continue to rise every day. 2020 will, without a doubt, be a challenging year to start a small business, but it does not mean it can’t be done. These statistics will help guide you into making a success out of your dreams and passions. Even though challenges are likely to arise, being aware of these obstacles and handling them will help you overcome even the most difficult ones.

Be aware of who your target market is, familiarize yourself with the latest trends, and never take social media marketing for granted.

About the Author

Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.