Small business statistics in 2023

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.

Small business insights

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 parameters by industry.

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.

According to the U.S. Chamber of Commerce, there are over 33 small businesses in the United States, equaling 99.9 percent of all American businesses.

Recent years have also seen a rise in new small businesses or sole proprietors entering the business world. In 2021, 5.4 million applications were submitted for new businesses to be formed — a record-breaking number that doesn’t appear to be slowing down. In 2022, nearly as many applications were submitted — 5.1 million to be exact.

Why shop small businesses

Small businesses are at the core of the American economy. These businesses account for 44 percent of U.S. economic activity and 64 percent of jobs created in America, according to the U.S. Small Business Administration.

Economy aside, people enjoy shopping small businesses better than large businesses for many reasons. A recent Bankrate’s survey found that 90 percent of all U.S. adults enjoy the experience of shopping small for at least one reason over shopping with large businesses. Fifty-one percent of U.S. adults feel the unique gift ideas provide a better experience.

Similarly, 50 percent of Americans feel that small businesses’ customer experience is better than large stores, and 41 percent enjoy shopping small to foster a sense of community.

Other top reasons that people enjoy shopping at small businesses include:

• It provides better product quality.
• It’s convenient or saves time.
• Customer service has detailed product knowledge.

Small business industries

According to the U.S. Chamber of Commerce, 50 percent of businesses start at home. And while small businesses are present in most industries, some are more popular than others.

According to Guidant Financial, here are the industries with the most small businesses:

Business ownership statistics

According to U.S. Chamber of Commerce’s small business statistics, a hefty 70 percent of U.S. small companies are owned and operated by individuals of all races, genders and education levels.

But you will see common themes when you’re running through the US business owner demographics, as certain groups are more likely to start businesses. Here, we look at the data but note that these statistics do not determine your business’s success if you fall outside the listed demographics.

Business ownership by gender

The split in business ownership is fairly even, though women take a slight second spot compared to men. About 49 percent of women own businesses, according to Zippia business ownership data, compared to 51.4 percent of men. But, the Zippia data also shows a larger gender pay gap, with male business owners earning an average of $53,813 and women earning $46,257.

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 Bureau 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.

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.

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.

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.

Small 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 2019 Statistics of U.S. Businesses Survey (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 reported that they were profitable in 2020.

Just as there’s a gap in ownership between men and women, there’s also a substantial gap in revenue. A 2021 report from Biz2Credit 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 78 percent of startups use solely their own money to launch their businesses, according to a 2019 SCORE report, many small businesses will need funding at some point. After all, the amount of outstanding small business loans reached $645 billion in 2019, according to the Federal Deposit Insurance Corporation (FDIC). This number is so high in part because the average SBA loan is $479,685.

Small companies may seek small business loans to support their businesses’ current operations, fund an emergency or unexpected expense or expand their business. But the numbers differ widely based on the business’s age and number of employees.

For businesses without employees, 20 percent of startups reached for financing through a lender, as did 31 percent of established nonemployers, according to the 2022 Small Business Credit Survey (SBCS) by the Federal Reserve Banks. For employer-based businesses, 42 percent of startups used business loans, as well as 53 percent of established employers.

While loans are an option for businesses that need large amounts of financing, business credit cards are another common method businesses use to pay for expenses. According to a 2022 Hello Alice business credit survey, 61 percent of business owners use a personal credit card to fund business operations or new purchases. About 20 percent of owners hold a business credit card, but 50 percent of those use their business cards weekly.

Credit card interest rates tend to be much higher than those 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.

The economy’s effect on small businesses

Record inflation may be putting a damper on small businesses’ profitability, causing them to raise prices to keep up with the rising cost of materials. The inflation rate stands at 5.4 percent for the first half of 2023, according to the U.S. Bureau of Labor Statistics. That rate is three times that of inflation in 2013 and over twice the inflation rate in 2021.

To put that into perspective, the Consumer Price Index has risen 3.7 percent across all items indexed, including items like food, energy, vehicles and clothing.

While businesses have good reason to raise prices, if a shopper finds a lower price with a big-box competitor, small businesses could lose customers.

The rise in prices may also keep customers from buying as much this year during the holidays. According to Bankrate’s holiday shopping survey, about 33 percent of shoppers say inflation will influence how they shop for the holidays. While the number of inflation-concerned shoppers is high, it shows a decrease in Americans’ concern from last year. About 40 percent of shoppers said inflation would impact how they shopped in 2022.

Small business success statistics

Small businesses might be the backbone of the U.S. economy, but that doesn’t guarantee the business’s success. A startup’s first few years in business will lay the groundwork for how the business succeeds long term.

Unfortunately, a whopping 50 percent of small businesses fail within five years of opening their doors, according to the Bureau of Labor Statistics. A good 18 percent fail within the first year.

So why do small companies fail? CBinsights’ survey 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.

The industries with the most success (least likely to fail) are healthcare and social assistance, with 85 percent staying open past their first year, according to the U.S. Chamber of Commerce. By choosing an industry with a high chance of success or low startup costs, you’re more likely to pass the uneasy five-year failure period.

Frequently asked questions

• What is a small business

  A small business is defined by the number of employees it has or the amount of revenue it generates. While there’s no one-size-fits-all standard for a small business, the Small Business Administration offers a list of size standards by industry.

• How do I start a small business?

  When starting a small business, you want to research the industry and the target customers that you’ll be creating a product or service for. Once you know that your product has a viable market, you can create a business plan that outlines the goals, strategies and metrics you’ll use to create the business. You should also estimate startup business costs and determine whether you need financing, such as a startup business loan, grant or crowdfunding campaign. After achieving some initial goals, you can make decisions to grow the business.

• When is Small Business Saturday?

  Small Business Saturday falls on the Saturday right after Thanksgiving each year. In 2023, Small Business Saturday is on November 25.