Small businesses play an important role in the American economy. Most self-employed workers have faced numerous challenges in recent years due to the Coronavirus pandemic and economic inflation. But despite the issues they've encountered, many small businesses continue to grow and appeal to new customers.

To provide insight into the structure and operation of a successful small business today, we've gathered statistics to help small businesses stay strong in 2023. This information also provides clarity about what the future of small-business ownership may look like for any entrepreneur who's thinking about starting a new venture.

General Small Business Statistics

Many new business owners test the market each year, but not every aspiring entrepreneur will stay in business for the long haul. Here are the key statistics regarding how long small businesses last and what percentage of them fail.

The characterization of an organization as a small business varies by industry, but depends on the firm's revenue and the number of employees.

To qualify for Small Business Administration (SBA) benefits and various similar federal programs, a business must not exceed the specified revenue or number of employees based on its industry.

While it varies by industry the maximum standard number of employees ranges from 100 to 1,500, and $2.25 million to $47 million in annual receipts. The specific guidelines for qualifying as a small business can be found through the NAICS code or the industry description.

12% of businesses in the U.S. are less than 1 year old.

Despite the uncertain economic landscape, many entrepreneurs continue to bring new businesses to market, with 12% of all businesses in the U.S. being less than a year old.

16% of businesses in the U.S. are 30 years old or older.

Another 1,419,527 small businesses have experienced long-term success, maintaining operations at least since 1993.

1 in 5 businesses last less than 1 year.

Nearly 214,279 of the American businesses formed in 2022 will likely close their doors after less than one year of operation.

51% of businesses last 5 years.

One in two businesses will be able to survive the first year and maintain operations for more than five years after forming.

35% of businesses last 10 years.

Among businesses that make it past the five-year milestone, about 70% will remain operational for more than ten years.

Only 1 in 4 businesses last 15 years.

The survival rate increases significantly once a business lasts more than 10 years. A few more companies drop off between years 10 and 15, and the remaining business owners represent 25% of individuals who open small businesses.

21% of businesses last 20 years.

Eighty-four percent of business owners who have lasted more than fifteen years will celebrate the 20th anniversary of their business's opening.

1,071,395 businesses were started in the last year.

Over one million new businesses opened in 2022, and 43% of American adults plan to form their own businesses in 2023. Last year, one-third of startups were created by aspiring entrepreneurs doing so for the first time, suggesting we may see some first-timers this year as well.

There are 33.2 million small businesses in the U.S.

The largest percentage of U.S. small businesses (nearly 14%) fit into the professional, scientific, and technical services industries. Another 11% are in various other uncategorized business industries, and 10% are in construction.

99.9% of U.S. businesses are small businesses.

Only 1 in 10 businesses in the U.S. qualify as a large corporation. The rest meet the SBA's standards for a small business.

Small businesses generate 44% of U.S. economic activity.

Although gross domestic product (GDP) for large businesses is growing faster annually, small businesses continue to report positive GDP increases year after year, generating 44% of economic activity in the U.S.

65% of small businesses are currently profitable.

In 2022, more than 65% of small businesses reported being profitable. Most of them (85%) also expect their business to survive despite the current economy.

66% of small businesses have donated to local charities in the past year.

Two in three small businesses have made charitable contributions, and 90% of business owners believe it's important for businesses to give back to their communities.

64% of small businesses report that their business is in good health.

This number is nearly the same as it was in Q3 2022 (65%) and Q2 2022 (66%). But only 27% said the same about the U.S. economy, indicating possible concerns about future economic growth.

63% of small businesses have e-commerce.

Most small-business owners (70%) believe customers expect the ability to complete online transactions.

Updating applications regularly is the top way small businesses protect their customers' data.

Nearly half of growing small businesses consistently update or improve their applications. Many also back up data in the cloud and/or use two-factor authentication to protect customers' data.

Small businesses have created two-thirds of new jobs in the past 25 years.

Many jobs were lost after the onset of the COVID-19 pandemic by the second quarter of 2020. But small business job creation is recovering well and has since increased.

64% of small-business owners expect their revenue to increase in the next 12 months.

2022 saw the highest percentage of this sentiment on record since 2016. Nearly half of small-business owners (48%) reported a revenue increase in 2021, and another 29% noted that their revenue stayed the same.

Market knowledge is the top characteristic of a successful small-business owner.

Problem-solving skills ranked second, while flexibility, an innovative mindset, and leadership skills rounded out the top five attributes of successful entrepreneurs.

57% of small-business owners say cybersecurity will be the most important emerging technology of the next decade.

Other technologies they expect to become more important include 5G, automation, and AI.

Small Business Failure Rate (by State)

Small businesses fail more commonly in some states than others. This may be due to certain laws and tax regulations, or it could be related to a business's market in that particular state. Keep reading to learn about the best (and worst) states for startups.

California is the state with the lowest small business failure rate.

Based on the rates of small business failure in 2019, 82% of small-business owners in California can likely expect some degree of success. Entrepreneurs in Louisiana, Idaho, and Massachusetts are also likely to have high success rates.

Washington has the highest small business failure rate.

Over one-third of Washington's small companies may struggle to get off the ground. Michigan is a distant second on the list, with 28% of new small businesses having failed in 2019.

Global Small Business Statistics

Small businesses make up a significant portion of the global economy, so it's important to understand how small enterprises grow and develop worldwide. These statistics shed light on the current international landscape of small businesses.

90% of global businesses are small or medium enterprises.

Small and medium enterprises (SMEs) play a vital role in the global economy, especially in developing countries. Small, medium, and micro businesses may contribute as much as 40% of the national GDP in these economies.

SMEs account for more than 50% of employment worldwide.

That number climbs even higher if you include informal SMEs. By 2030, another 600 million jobs will be needed to keep up with population increases.

SMEs generate 7 in 10 jobs.

Although most jobs come from SMEs, many of these businesses need help acquiring proper funding and must rely on internal cash reserves or personal loans.

Small businesses are less likely than large firms to receive funding, and 65 million businesses have unmet financial needs every year.

According to the International Finance Corporation, 65 million firms in developing countries have a combined total of $5.2 trillion in unmet business financing needs.

Small-Business Owner Statistics

Small-business owners come from a variety of backgrounds, demographics, and interests. While studies may identify some common characteristics, no two small-business owners are exactly alike.

Veterans own 6.4% of businesses in the U.S.

More than 1.7 million veterans are small-business owners, and veterans make up 5% of the American workforce.

39% of small-business owners are very happy.

Over 70% of small-business owners report feeling some degree of happiness. Only 5% reported feeling very unhappy, and less than 15% of small-business owners expressed some degree of unhappiness.

The majority of small business owners are over age 50.

Among current and aspiring small business owners, only 7% are millennials. The majority are GenX (45.5%) and Baby Boomers (46.5%).

Small-business owners make an average of $68,863.

Pay can increase steadily as small-business owners spend more time in the industry. New small-business owners make an average of $35,000 annually, and most can expect to top $60,000 after 5-9 years of operation.

53% of small-business owners say inflation is their top challenge.

This number represents a record high, as many small-business owners continue to express uncertainty about the future state of the U.S. economy. The percentage has jumped 30% in the last year.

The average business owner's salary is 3% above the national mean wage.

Although average salaries are similar, high and low numbers can vary drastically. Some small-business owners make less than $30,000 annually, but the highest earners may bring home close to $130,000 each year.

There are currently 743,842 business owners in the United States.

While the average age to start a business is 35, the average small-business owner is 44 years old.

10% of all business owners are LGBTQ.

Around 74,000 small-business owners are members of the LGBTQ community.

14% of business owners are Hispanic or Latino.

Over 100,000 small-business owners are Hispanic or Latino. Another 50,000 are African-American owned, and Asian Americans own a similar number of small businesses.

52% of business owners' highest level of education is a Bachelor's degree.

Some small-business owners (around 20%) have an associate degree as their highest level of education, and even fewer (10%) have only a high school diploma.

Business owners are twice as likely to have a Bachelor's degree than the average American.

23.5% of Americans have a Bachelor's degree, while more than half of American business owners also have a four-year degree.

Business owners have an average of 11.5 years of experience in their industry.

Most new business owners spend about 11-12 years working in their industry before venturing out on their own.

Female-owned Small Business Statistics

A large number of small businesses are also female-owned businesses. Below, you'll learn about several small business trends among them.

40% of small-business owners are women.

Nearly 70% of female small-business owners are Gen Xers. Another 19% are baby boomers, and 11% are millennials.

59% of female-owned small businesses are currently profitable.

If that figure seems lower than expected, understand that nearly half of female-owned businesses (49%) are five years or younger, and businesses tend to become more profitable over time.

Readiness to be their own boss is the primary reason women become business owners.

A desire to be their own boss is the most common reason why women start their own business. Another 38% felt frustration with corporate America, and 30% decided it was time to pursue their passion.

40% of female small-business owners are very happy.

Most female small-business owners (around 70%) feel some level of happiness in their business, while less than 18% express some level of unhappiness.

Small Business Funding Statistics

Most small businesses require some level of outside funding in their early days. Many different options exist for businesses looking for funding, and the statistics below will reveal how most businesses pursue their initial startup capital.

Small businesses received $43 billion in funding and loans from the government in the past year.

This amount represents more than 62,000 traditional small-business loans and another 1,200 investments via Small Business Investment Companies (SBICs).

1 in 5 businesses sought loans for $100,001-$250,000 in 2020.

Another 19% of small-business owners sought loans between $250,001 and $1,000,000, and only 9% asked for loans greater than $1 million.

The average 7(a) loan amount is $704,581.

This 2021 number increased drastically from the year prior, when the average loan amount was only $533,076.

The average 504 loan amount is $849,329.

This average has increased every year since 2014, with the largest hike happening between 2020 and 2021.

42% of entrepreneurs start with less than $5,000 in cash reserves.

However, 49% of entrepreneurs start with more than $10,000 in cash reserves leaving only a small percentage in the middle starting with between $5,000 and $10,000 worth of cash reserves.

First-year revenue for small businesses ranges from $30 to $4,500 per customer.

Over a quarter of small-business owners have between one and five paying customers after the end of their first year. Slightly fewer (less than 18%) have at least 100 customers.

66% of small-business owners funded the start of their businesses using personal funds.

More than one-quarter of small-business owners who used personal funds for their startups had less than $5,000 in the bank. Only slightly more than 10% had more than $50,000.

30% of business owners had to pay for their business operations out of personal funds for over 6 months.

Many mentors recommend that entrepreneurs have enough cash in the bank to live for six months after starting their business, since bringing in paying customers can take some time.

22% of small-business owners seek outside funding.

Some new business owners (8%) pursue bank loans, and 5% seek funding from friends and family. Another 9% use cash advances from credit cards.

Small Business Employment Statistics

Many Americans work as employees for small businesses. The jobs these businesses create are essential for the continued prosperity of the national economy. The stats below review how many Americans work for small businesses and how many small businesses hire additional employees beyond the owner.

Small businesses employ 61.7 million people in the U.S.

Professional, scientific, and technical service small businesses employ the greatest number of individuals.

46% of U.S. employees are employed by a small business.

Although only 20% of small businesses have employees, over 29 million Americans work for a small business. In 2022, small businesses employed almost 62 million people.

Half of U.S. businesses have fewer than 5 employees.

The next most common range was 5-9 employees (18%), followed by 10-19 (13%).

39% of small-business owners say that hiring over the past year has been very difficult.

Over half of small-business owners consider the hiring process to be at least somewhat challenging, and only 7% view the process as easy.

Family businesses employ 62% of the U.S. workforce.

Over 24 million family-owned businesses exist in the United States, making up 64% of the total GDP.

The top way small businesses have earned employees' trust is by communicating transparently.

More than half of small businesses practice transparent communication to gain employees' trust. Another 42% look for ways to respond to personal needs, and 40% ask employees for feedback.

Flexible schedules are the top expectation employees have of small businesses.

Nearly 40% of small businesses offer flexible working arrangements to their employees. Of the small businesses that reported growth, half have implemented this change.

Small Business Marketing Statistics

To have a successful small business, business owners must determine how to let potential customers know about their products and the value they can provide. Each small business owner has a marketing strategy, and you'll learn more about different tools and tactics in the sections below.

Facebook is the most popular social media platform for small-business advertising.

Over half of small-business owners use social media marketing for advertising their goods and services, and two in three post about them on Facebook.

70% of small businesses invest in social media as part of their advertising plan.

Many businesses have observed social media's rise in popularity in recent years, and one in four small-business owners invested at least 10% of their marketing budget into social media advertising.

72% of small businesses have increased their online presence over the past year.

Nearly half of small-business owners report a slight increase in online presence over the past year, and another 27% consider their increase in digital marketing significant.

Word of mouth is the most effective marketing tool for small businesses.

Although 74% of business owners believe word of mouth is the best way to market their services, the number is less than it was in 2012 (87%). Since then, the number of business owners who believe in social media as an effective marketing tool has risen significantly from 32% to 53%.

Small Business Invoicing Statistics

Small businesses can receive customer payments in many different ways, and invoicing volume and methods vary just as much.

60% of Small- and Medium-sized Businesses (SMBs) send out less than 100 invoices each month.

Around half of small-business owners send out less than 50 invoices each month, and roughly one in three send between 1-25.

49% of small businesses find it difficult to follow up on late invoice payments.

In addition, 46% of small-business owners struggle with receiving payment on time.

50% of SMBs pay for invoicing solutions.

These SMB owners know that when it comes to invoicing, you get what you pay for. Some (12%) even spend as much as $100 per month on solutions like invoicing software and apps.

Small Business Challenges

Many small-business owners face unique struggles, but some challenges are shared across industries. Learning about the specific issues small-business owners face can help current and future small-business owners anticipate obstacles and take steps to prevent problems.

The top challenge for small businesses is acquiring new customers.

Getting new customers was the biggest challenge for 44% of small-business owners. Another 40% struggled to increase sales revenue, and nearly one-third needed help retaining customers.

68% of small-business owners are raising their prices in response to inflation.

In addition, 34% of small-business owners are taking a closer look at their spending and cash flow. Nearly as many (31%) are losing sales because of inflation.

49% of small-business owners are having trouble sourcing products and supplies because of supply chain issues.

Supply chain issues have also forced 58% of them to increase their prices.

41% of small-business owners are experiencing a labor shortage.

The majority of small-business owners (83%) are increasing their efforts to retain and attract employees as a result.