30.2 million small businesses keep the economy going strong. Small business owners face unique challenges, and long-term success is somewhat unpredictable.
As of 2019, small business trends show that business growth is steady. Thorough planning and knowledge of small business trends can help owners boost their chances of success.
If you’re an aspiring small business owner, you should stay up-to-date on these trends. The compilation of 13 statistics below gives an insight into small business finances, success, failures, and more.
1. Small businesses account for nearly ½ of private-sector employment.
For several years, small businesses have employed about ½ of the U.S. workforce. Reports from the Small Business Administration show that:
- In 2017, small businesses accounted for 47.5% of private-sector employees.
- In 2012, small businesses accounted for 49.2% of private-sector employment.
- In 2014, small businesses employed 48.3% of private-sector employees.
There have been minor fluctuations in this trend based on this data. Despite the small decline, small businesses accounted for the employment of 58.9 million people in 2017.
(Source: U.S. Small Business Administration)
2. 64% of small businesses are started with $10,000 or less.
Many small business owners start their companies with limited funds. A vast majority of owners don’t use business loans during the startup process. A 2019 Intuit report shows that:
- 64% of small businesses are started with less than $10,000.
- 75% of small business owners use their personal savings to cover startup costs.
The report goes on to state that non-business loans can be more beneficial for entrepreneurs. A $10,000 is significantly smaller than the standard business loan. Intuit suggests the use of micro-loans and personal loans as two options for covering startup costs.
(Source: Intuit Quickbooks)
3. More small businesses open each year compared to small business closings.
The latest 2019 quarterly economic bulletin published by the Small Business Administration highlights a positive small business trend. For several years, the number of small business openings is higher than the small business closings.
- Since 2011, the rate of small business openings has stayed higher than the rate of small business location closures.
- In 2013, there were about 406,000 startups and 401,000 firm closures. This data defines startups are small businesses less than a year old.
The success of small businesses varies based on industry. A report from the Bureau Of Labor Statistics that healthcare and social assistance industries have the highest survival rates. The same data shows that the construction industry has the lowest survival rate.
4. 99.9% of female-owned businesses are small businesses.
Out of all female-owned businesses, a whopping 99.9% are small businesses with employees. The SBA reports that the leading industries for women-owned business are:
- Health care and social assistance.
- Accommodation and food services.
- Administrative support.
- Professional, scientific, and technical services.
- Retail trade.
Small businesses owned by women continue to expand over time. Since 2007, the number of female-owned companies has increased by 58%. From 2007 to 2018, employment by these establishments increased by 21%.
5. The annual salary for small business owners is 30% above the average annual salary.
As of November 2019, the reported median salary for a small business owner is $59,000. This salary is about 30% higher than the median employee salary of $47,060.
However, small business owners work an average of 52 hours per week. Traditional employees work an average of 35 hours per week. When converted to hourly wages, a small business owner’s salary is 20% higher.
6. 73% of small businesses invest in social media marketing.
Internet marketing is crucial to the success of any business. According to a 2019 survey, 73% of small businesses invest in social media marketing.
A report from 2018 showed that 61% of small businesses invested in social media marketing. The social media marketing trend steadily rises each year. It’s easy to understand why the trend keeps growing.
Platforms like Facebook, Twitter, and Instagram let owners interact with and engage potential customers. This practice is particularly helpful for new businesses. Social media marketing puts a ‘face’ to a name and builds trust for brands.
7. 40% of small business owners accept paper checks as a form of payment.
Paying by check is relatively uncommon in the digital era. Between 2000 and 2015, the number of payments made with paper checks decreased from 42.6% to 17.9%.
Despite their declining use, 40% of small business owners accept payment by check. This payment option doesn’t produce instant cash, but it does offer one major benefit.
Business owners accept checks to avoid credit card processing fees. The average fees range from 1.5% to 2.9% per transaction. Depending on daily sales, these card processing fees add up quickly.
8. 51% of small business owners are age 50 or older.
It’s easy to picture the average small business owner as a young entrepreneur. Based on a 2016 demographic survey, this is not the case.
- 51% of small business owners are 50 or older.
- 33% of small business owners are 35 to 49 years old.
- 16% of small business owners are under the age of 35.
This survey consisted of only 1,800 respondents, but additional data shows similar statistics. A more extensive study also reported that the average small business owner is 50.3 years old.
9. Around ½ of small businesses survive at least five years.
The survival rate of new businesses is fairly promising based on Small Business Administration reports. The data shows that:
- 79.9% of small businesses survive for one year.
- 45.4% to 51.4% of small businesses survive for five years.
- About ⅓ of small businesses survive for ten years or more.
However, it’s important to note that survival rates vary by industry. Healthcare and social assistance are the most successful industry category, and construction is the least successful industry.
10. 43% of small business owners spend a few hours per week on social media marketing.
It’s fairly common for small business owners to take on the responsibility of digital marketing. One report states that 43% of small business owners spend six hours per week on social media marketing.
Social media marketing is particularly beneficial because it gives small businesses insight into customers. For example, a Facebook Business page provides user statistics such as gender, age, and location. Small business owners can use this information to refine their marketing tactics.
11. Small businesses make up 99.9% of all U.S. businesses.
The SBA and Census Bureau states that 99.9% of all U.S businesses are small businesses. Another report shows that small firms outnumber corporations 1,162 to one.
The high percentage is primarily due to the broad definition of small business. The SBA Office of Advocacy categorizes firms with fewer than 500 employees as small businesses. However, the vast majority of small businesses have fewer than 100 employees.
(Source: U.S. Small Business Administration)
12. 33% of small business owners say that a lack of cash flow is their main challenge.
LendingClub’s yearly State of Small Business survey asked small business owners what their top challenges are. The 2019 survey results show that these are the main issues:
- 33% cited lack of capital or cash flow.
- 15% cited marketing and advertising.
- 13% cited time management.
- 13% cited recruiting and retaining employees.
- 13% cite administrative work like bookkeeping and payroll.
- 6% cited report managing and providing benefits.
This year’s results are consistent with previous years. Cash flow, marketing, and time management are consistently the top three small business owner challenges.
(Source: Lending Club)
13. 62% of small businesses use their websites as their primary digital marketing channels.
There are plenty of digital marketing methods available for small business owners. A 2018 survey showed that 62% prefer to market through their websites. Additionally:
- 61% use social media marketing.
- 39% use email marketing.
- 25% use search engine optimization (SEO).
- 20% use content marketing.
- 10% use augmented/virtual reality marketing.
The same survey reported that in-house employees are responsible for 43% of small business marketing. Only 23% reported using the services of digital marketing agencies.
Reading these statistics gives a great perspective into the small business world. The number of small businesses continues to climb, so it’s essential to stand out from the crowd. When mapping out your business, keep the figures above in mind to stay ahead of the competition and maximize your success.