50 Small Business Statistics to Know in 2021
Starting a small business is a big dream for millions of Americans, and it’s a great way to earn an honest income.
However, not all small businesses are successful, and creating a business that turns into a success isn’t a walk in the park. Knowing the state of small businesses is important to succeed.
We’ll look at some of the most important statistics of small businesses that will help you make an informed decision about your future as an entrepreneur.
1. Approximately 20% of small businesses fail within the first year
Although there are many small businesses popping up in the United States, not all of them are destined for greatness.
The U.S. Bureau of Labor Statistics revealed that 20% of small businesses do not make it past their first year. About half of these businesses fail by their fifth year and the third stay in business for 10 years or more.
The biggest reason for the failure of small businesses is the lack of demand for the business’s products/services, while 29% of small businesses fail because they run out of capital.
2. It can take only four days to start a new small business in the United States
The time it takes to start a business from the ground up varies from country to country, and in America, it can be done in four days.
According to information from The World Bank, it can take two days in Australia, and up to 12 in Iceland.
There are many factors that influence how complex starting a small business can be. Depending on the country you’re in, it can be easy or extremely difficult.
3. Small businesses make up 99.9% of American businesses
Driving the economy falls on the shoulders of small business owners in the United States. Statistics provided by SBA indicate that only 0.01% of US businesses are not small in size.
Additionally, these small businesses employ almost half of the US workforce (47.1%). It is thanks to the smaller businesses that the unemployment rate of the country isn’t much lower.
Although they’re the backbone of the US economy, small businesses are often undervalued and struggle to stay operational.
4. 29% of small businesses close their doors due to lack of capital
While product /service demand is the biggest cause of small business failure, lack of capital is another big problem entrepreneurs face.
Almost a third of small businesses run out of the money they need to keep running. Furthermore, 23% of businesses fail because they just didn’t have the right team, and 19% couldn’t compete with their competition.
Cost issues and pricing result in approximately 18% of failed small businesses with 17% failing thanks to poor product offering.
5. Small businesses in the US has grown by 49% since 1982
The past years have been great for small businesses regardless of the struggles they continue to face. Since 1982, the number of businesses has gone up by almost 50% - a good indication of healthy growth and possibility.
From 1993 to 2008, small businesses were responsible for 64% of the net new jobs that were created.
There is expected to be a lot of growth still for small businesses in the years going forward, especially in the technology sector.
6. Most small business owners have a salary lower than $70,000
Although entrepreneurs start small businesses to earn more money, most earn less than expected.
Over 86% of small business owners have to settle for a yearly salary of only $69,730. In comparison, the average salary of a CEO is roughly $155,000 and this shows the sacrifice that small business owners make to be their own boss.
However, there are still many money makers in the small business world, with some earning up to $160,606 a year.
Salary by Experience Level
7. The US has more than 2 million Black-owned businesses
Black-owned businesses are experiencing great growth in the United States. Despite the many difficulties caused by the Covid-19 pandemic, Black-owned businesses have seen even more progress in 2021.
Statistically, 70% of their owners are happy with being their own boss. New York boasts the most of these businesses in the whole of the US, with Washington, D.C having the highest percentage of Black-owned businesses.
Interestingly, the most popular category for small businesses owned by Black entrepreneurs is health care.
Small Business Owners Demographics
8. The average credit score among small business owners is 721
A research study conducted by Experian indicated that the most common credit score among business owners is an impressive 721.
This means that the average small business owner has a better credit score than most Americans. The score of 721 puts them above the national average of 673 by 48 points.
Unfortunately, despite the good score, business owners have a larger debt load than the average US citizen. This is largely due to the expenses of starting a business.
9. Small businesses have created 8 million new jobs since 1990
Small businesses are often seen as ‘small fry’ when viewed by investors and entrepreneurs. However, these small companies are responsible for many new jobs and are helping to carry the economy.
Big businesses have eliminated four million jobs since 1990. In contrast, small businesses have created double that amount of jobs in the same time frame.
According to the Small Business Administration, small businesses play a big part in keeping the economy going - they create 1.5 million jobs annually.
10. Institutional lenders have the highest lending approval rates: 66%
Getting a new company started isn’t easy and capital is one of the biggest obstacles entrepreneurs face. Loans are often the only way small businesses can be taken from dream to reality - if you get approved.
Institutional lenders such as insurance companies and pension funds tend to have the highest small business lending approval rates. Typically, the rates are hovering at around 66%. This is a lot higher than the approval rates of credit unions, which is only 39.9%.
11. Big banks approve less than 30% of small business loan requests
Getting a loan from a big bank is a very difficult task for aspiring entrepreneurs in the United States. In the third quarter of 2019, only 27% of loan requests were approved, leaving 72,10% disappointed and looking for alternative solutions.
According to Forbes, this rejection rate is in part due to applications that did not provide the required information or are not professional enough. Tax returns, balance sheets, and bank statements are necessary to help secure loans.
Small Business Loans Approval Rates in the United States by Lender Type
12. Eligible US Small Business Owners Can Get Tax Credit
Federal law provides a tax credit to small business employers who offer their employees he1alth care coverage. This is not available to all small businesses, though, since there are requirements that must be first.
Initially, one of the requirements to be eligible for this tax credit was that the average wages must be below $50,000. However, that amount is adjusted each year to take into consideration inflation adjustments.
There are employees who are excluded from this arrangement, though. For example, if the employee is a partner or owner of more than 5% of the business, they are excluded. Family members of such employees are excluded as well.
13. 32% of small business owners turned to online lenders
Since getting a loan from a bank is so difficult, many small business owners have turned to newer options: online lenders. In 2019, approximately 32% of small businesses applied for funding from an online lender.
Over the past three years, the number of entrepreneurs who seek funding online has grown from just 19% to the currently rising 32%. In comparison, 49% of small businesses attempt to get funding from big banks, and 44% turn to small banks for financial help.
14. Texas leads the states in most small business loans received
The states vary greatly in how much support is offered to small businesses, influencing economic growth.
Texas is the state with the most loans awarded to small businesses: 134,737. Second in line is California with 112,967 loans. The other states do not come close to a hundred thousand, with third place going to Florida with 88,997 loans approved.
In the last place is the District of Columbia, where only 3,253 loans were approved in total.
Nevada is roughly in the middle with an abysmal 7.47% and the two worst states are Tennessee (4.64%) and South Carolina (4.63%).
15. The general loan amount for small businesses is $107,000
In an effort to stay afloat, many small businesses opt for loans. At the end of 2020, small businesses received nine million loans. These loans totaled $750 billion.
On average, small businesses that made loans received $107,000 that served as financial assistance during trying times caused by the Coronavirus.
Loans guaranteed through SBA lending programs were more than $28 billion in total. The Paycheck Protection Program also provided 5.2 million loans that are worth over $525 billion.
Top uses of small business loans
16. Female small business ownership rose by 13% in 2021
The number of small businesses owned by women has been increasing in the past few years. 2021 has seen a great rise that exceeded previous growth expectations: 13%.
With that said, the number of total small businesses owned by women is still not where it should be. Currently, 66% of businesses are owned by men, with 31% being owned by women. This recent rise is promising, however, and it is hoped that the growth will continue in the coming years.
Small Business Ownership by Gender
17. Fewer than 40% of startup small businesses are founded by Black women
Black women are responsible for few of the small businesses that were opened in recent years - less than 4%.
Fortunately, between 2016 and 2018, the number of Black women who founded startups has doubled. Half of these new businesses were based in New York and California.
ProjectDiane keeps an eye on Black women in the business world and paints a positive picture. According to their information, startups in their database grew from 334 to 650 in 2020.
18. Black women business owners earn less than other women
Despite the call for equality, Black female entrepreneurs still don’t enjoy the kind of success that other female entrepreneurs do. This is most obvious when comparing business revenues.
Black female business owners earn a lot less than other women. As was found by one study, Black female-owned businesses made $24,000 in net revenue on average.
In comparison, other female-owned businesses earned an average of $142,900. There is clearly a big gap in revenue that needs to be addressed.
19. Businesses owned by women of color increased by 43%
The number of women of color who own businesses in the United States has grown quite exponentially.
Although the number of female-owned businesses saw a rise of 21% between 2104 and 2019, businesses owned by women of color grew by 43%.
The number of businesses owned by Asian American women grew by 37% and Native American female-owned businesses saw an increase of 26%. Overall, the number of female-owned businesses continues to inspire confidence in the future for women in business.
20. Black-owned businesses managed to generate over $150 billion in gross revenue
While Black-owned businesses don’t dominate the business world, they are slowly but surely earning bigger incomes. It is hoped that by 2022, Black-owned businesses are generating more than $300 billion in gross revenue.
Information shared by the Minority Business Development Agency revealed that among the existing two million Black-owned businesses, more than $150.2 billion gross revenue was generated.
This amount is less than 1% of the nationwide gross revenue that was reported, which is over $2 trillion.
Corporate profits in the United States
21. Almost 40% of small and midsize businesses offer higher salaries
Small businesses need to compete with bigger companies on many levels, and that includes the salaries they can offer employees.
But surprisingly, 37% of smaller businesses actually offer potential staff and workers higher salaries than their competition.
The companies also offer their employees additional perks such as vacation policies to ‘sweeten the deal’ and attract more skilled and experienced people to the company. This is making it more appealing to work for a small business than a corporate giant.
22. Retail, marketing, and health service businesses received the most funding
There are many industries that have seen the growth of small businesses over the past few years. Some industries have been given favor as businesses in those sectors receive the most funding as they are seen as more profitable.
Here are the top ten industries in terms of funding received in 2020 in no particular order:
- Retailing Electronics
- Auxiliary Health Services
- Software Development
- Physicians/Doctors Office
- Manufacturing Other Merchandise
- Hotel, Motel, Lodging
- Strategy/General Consulting
23. More than 70% of US small businesses shut down in March 2020
The global Coronavirus pandemic affected millions of lives and continues to cause problems for businesses everywhere. In the United States, over 70% of small businesses were forced to close their doors in March of 2020.
Large parts of America went into lockdowns to deal with the virus and more than 60% of these businesses closed due to health authority or government orders.
Sadly, this affected the companies and many of them did not open their doors again.
24. 66% of small businesses have to constantly face financial difficulties
Many small businesses are struggling to keep afloat, and 66% of them face financial challenges that make it difficult to succeed.
For 43% of these businesses, the biggest problem they face is the payment of operating expenses which are essential in keeping the business open. If the businesses would lose revenue for even just two months, they would need supplement funding.
On that note, 40% of small businesses already have very high debts that reach $100,000 or more.
25. The US small business sector occupies up to 50% of all commercial space
Big companies may dominate the business world, but small businesses truly are the backbone of the American economy, with these companies taking up a huge portion of the country’s commercial space.
The small business sector takes up between 30% and 50% of all commercial space in the United States. That is an estimated 20 to 34 billion square feet.
This estimation does not take into consideration the small businesses that are run from home, of course.
26. Almost half of consumers support small businesses for high-quality items
Small businesses are often praised for the high-quality service and products they offer the public. That’s why 48% of people shop from these businesses when they are looking for good quality.
About 45% of consumers support smaller businesses when they are looking for more personalized services. In general, 77% of consumers will pay more to a small business if they experience great quality service.
Small companies often set an example for (and sometimes put to shame) their bigger counterparts.
27. Self-employment figures showed a decline in income in 2020
Amid the Coronavirus pandemic, small businesses have suffered financially. Although self-employment was relatively steady and consistent, income has declined 13% annualized in 2020’s second quarter.
This quarterly decline is the largest in history since quarterly data recording started in 1947. Fortunately, the recent quarter showed that business owners’ income has started to recover.
Whether this recovery is long-term or only temporary remains to be seen as the economy attempts to rebuild itself. COvid-10 financial assistance can save many small businesses.
28. Women-owned businesses suffered more due to the pandemic
Information shared by the U.S. Chamber of Commerce indicated that the Covid-10 pandemic has hit women-owned small businesses the hardest. At the start of 2020, 60% of female small business owners said the health of their business was either ‘very good’, or ‘somewhat good’.
In the third quarter of the year, this number went down by 13%. Male-owned businesses saw a decline of only 5%.
Male-owned businesses have reported an increase in staff, something female-owned businesses couldn’t do as successfully.
29. Women own 12.3 million small businesses in America
12.3 million of the small businesses in the United States are owned by women, compared to 402,000 in 1972. This means the number of female-owned small businesses rose to roughly 42%.
As a result, more than nine million people work for women-owned small businesses, which is approximately 8% of the total private US workforce. Total employment by female-owned businesses has increased to 8% between 2007 and 2018. This number is expected to continue increasing over the next five years.
30. 4 in 5 small businesses remained open amid the pandemic
Many small businesses were able to keep operations running by either adjusting how they do things or being an essential business. Four in five small businesses kept their doors open this way.
38% of small businesses were essential and 37% were able to make adjustments so they didn’t have to close. 7% recently reopened after being closed and 25% shifted to an online strategy.
37% of small businesses are keeping their doors open by changing their primary revenue stream.
31. Over 3 million small businesses have only 1 to 9 employees
Small businesses aren’t always able to employ many people, and 3.7 million of them only give work to one to nine workers.
This does not mean there isn’t room for growth, but with the pandemic hampering business, it is limiting employment possibilities.
Despite the many difficulties small businesses have to endure, they continue to play an important role in their communities. In fact, for every $100 spent at a small business, $68 stays within the local economy.
32. Sales is one of the most difficult tasks small businesses face
Small businesses and entrepreneurs have five top issues they have to overcome in order to have a successful business.
The most difficult task for most small businesses is good sales, with 76% of entrepreneurs agreeing it’s one of their biggest challenges.
75% of small business owners feel tax accounting and market research are difficult tasks and cash flow is an issue for 74% of entrepreneurs. Setting financial goals, in general, is tricky for 74% of small business owners.
The 5 most difficult tasks entrepreneurs face in general include:
- Sales (76% of entrepreneurs agree)
- Market Research (75% of entrepreneurs agree)
- Tax Accounting (75% of entrepreneurs agree)
- Cash Flow (74% of entrepreneurs agree)
- Setting Financial Goals (73% of entrepreneurs agree)
33. 44 million workers were self-employed at some point in 2019
2019 saw a rise in the number of people who attempted to start their own small businesses. Research indicated that 28.2% of workers (44 million) were at some point during a given week in 2019 working for themselves.
Additionally, 14% of workers stated that their primary job was being an independent contractor.
This was before the Coronavirus affected the economy and caused many small businesses’ ends. Since then, technology has played a big role in the growth of self-employment.
34. Generation X accounts for 46% of small businesses
Generation X makes out the biggest part of the small business sector, claiming 46%. After them, Boomers follow with a 41% portion of the sector. The older generations have more experience and have been ‘in the business’ for longer, so this isn’t a big surprise.
Millennials take the third place with 13% of the small business sector going to them and Generation Z can only boast with 1%.
As the generations grow older, these numbers are expected to shift and adjust.
35. 20% of small businesses are run by the owner
With the economy struggling to recover, it comes as no surprise that many small business owners opt to hire no additional staff.
Up to 20% of small businesses are operated by the owner with no plans of hiring employees to help out. 45% of small business owners have only one to five employees, which is proving to be more affordable.
This number does not favor the hope that employment will increase to help the country get back on its feet.
36. Small businesses are a big target for online attacks
Small businesses are vulnerable when it comes to protecting their data and online privacy. According to the 2019 Verizon Data Breach Investigations Report, small businesses accounted for 43% of all data breaches.
Criminals target these smaller businesses because their online security isn’t as sophisticated as that of the big companies.
Getting hold of the private networks and protected files and data of smaller businesses is therefore much easier. Credit card numbers and insurance details are often the aim of cybercriminals.
37. One-third of small businesses do not have reliable cybersecurity
An alarming amount of small businesses in the United States do not take their online security seriously. They are open to cyberattacks because they do not use good cybersecurity software or countermeasures.
One-third of small businesses that employ 50 people or less are guilty of this lack of security awareness. In fact, 43% of small businesses have absolutely no cybersecurity measurements in place at all.
Also, research shared by BullGuard indicated that one in five companies has no endpoint security.
38. 55% of small businesses are actively advertising on social media
Social media marketing is a hot topic for promotion and the big companies have been doing it for years.
A survey of small businesses in the United States revealed that 55% of them are using this advertising strategy to promote themselves.
42% of these businesses use the video-streaming platform YouTube to advertise and 66% are using Facebook.
Only 15% of small businesses are making use of Snapchat for marketing and 12% use TikTok to advertise or promote their company.
39. Consumers are more likely to support small businesses
Big US companies may have the advantage of being more known, but small businesses have built reliable reputations for themselves. That’s why 46% of consumers in a recent survey said they’d rather shop local and support small businesses.
More than 53% of these consumers are shopping from small businesses because they want to do their part in giving back to their communities.
Being more purposeful with shopping and focused on quality over quantity is positively affecting the growth of smaller businesses.
40. California boasts the most small businesses in the US
Small businesses are scattered all over America, but the bigger states have the most currently doing business.
California has the highest number of small businesses - an impressive 4 million. No other state has so many small entrepreneurs.
The state with the second-most small businesses is Texas with 2.7 million and Florida is close on its heels with 2.5 million. New York is home to 2.1 million small businesses and Illinois takes fifth place at 1.2 million.
41. Small businesses struggle to find qualified workers
While many small businesses are trying to do their part to employ their communities, qualified workers are difficult to find.
In general, 24% of small businesses find it challenging to find workers - it’s more difficult than five years ago. For 35% of small businesses, it’s just as difficult as it was in 2016, showing that this is an ongoing problem that is yet to be addressed.
Small businesses struggle to find workers who have leadership skills because bigger companies snatch them up.
42. 29% of small business owners wanted to be their own boss
One of the biggest motivators for starting a small business is the desire to break away from the ‘daily grind’. 29% of small business owners started their business so they could be their own boss.
17% of small business owners opened their own companies because they were unhappy with corporate America. 16% of these entrepreneurs wanted to follow their passions.
Rather surprisingly, 12% of small business owners only started their business because they were presented with an opportunity.
43. More than 70% of Americans prefer local shopping over special deals
Although getting a good deal is always welcome, most Americans prefer to support local small businesses. Up to 72% of US shoppers would miss out on a better deal in favor of buying from a local business owner.
37% of Americans stated in a 2020 survey they make an effort to support their local businesses as a direct result of the Covid-19 pandemic. 43% of shoppers are willing to spend more on goods to support a small business.
44. Half of all small US businesses are operated from home
Working from home has gone from seeming like an impossible dream to the new norm. Thanks to technology, 50% of small American businesses are now run from homes.
This number includes the small companies that do not have any paid employees. As such, approximately 15 million small businesses are home-based now.
Additionally, 69% of startups are kicking off as home-based companies. Typically, construction and the information industries are more likely to be operated from a home than other industries.
45. 45% of consumers appreciate small businesses for customer service
Small businesses are more likely to appreciate the value of good customer service because they’re more reliant on the trust of consumers. As a result, smaller companies have become more relied upon for exceptional customer service.
45% of consumers would support small businesses because they know they can expect to be treated better than by big corporations.
Other influencers that attract people to small businesses include quality products, contactless payment, the ability to shop online, and alternative pick-up options offered.
46. 84% of small businesses use digital platforms
They may not be as active on social media, but small businesses are not being left behind when it comes to using digital platforms.
84% of them use at least one well-known digital platform to engage with and provide information to their customers.
80% of small businesses use at least one platform to show off their services and products and to actively advertise. 79% of small business owners use various digital tools for easy and smooth communication with suppliers and their customers.
47. 2021 has been a better year for small businesses
Although 2020 was a terrible year for small businesses and companies, 2021 has been much brighter. Although there is still an uphill battle waiting for entrepreneurs, things aren’t as grim as it was last year.
As the economy continues to slowly recover, many things have looked up for small business owners. There have been 66% debt forgiveness and 66% small business government relief programs.
Improved public health confidence of 78% and 79% increased consumer spending has had positive effects already.
48. 64% of small businesses have their own websites
Having a private website has many benefits but there are still small businesses that do not have an online site. Fortunately, many have wised up, and 64% of small businesses do have websites.
Those that do not have websites cite an irrelevance to their industry and the costs associated with websites as reasons for avoiding it. Others feel that being active on social media is more than enough digital and online visibility and that customers will find them without a website.
49. Almost half of small businesses spend $10,000 or less on digital marketing
Small businesses often don’t see the need to dedicate large budgets to digital marketing. That’s why nearly 50% of them spend only $10, 000 or less a year on this form of marketing.
43% of small business owners have a team of in-house employees who are assigned to doing digital marketing. 39% of small businesses use marketing software to do their marketing and the rest of them choose to outsource this work to digital marketing companies.
50. Small businesses are leading the way in green technology
In contrast to bigger companies, small businesses are more progressive in the development of green technologies. Small companies are 16x more productive than large firms in terms of ‘green’ patents per employee.
Small companies are also more than two times more often cited in patent applications, which shows they are more original and influential.
The smaller businesses tend to have more green technology as an important part of the company, with a core focus on being green and environmentally responsible.
51. 31% of small business owners attribute reopening to customer support
Many small businesses had to close their doors indefinitely when Covid-19 forced lockdowns. It spelled the end of most of these companies, but fortunately, loyal customers helped see them through the worst of it.
31% of small business owners say they were able to resume business as usual because of their customers. The support of consumers who would rather buy local has kept many small businesses from going under and will continue to be their lifeline in trying times.