The Big World of Small Business: 4 Statistics Every Small-Business Owner Should Know
News headlines are often dominated by some of the world's largest businesses—from FAANG stocks soaring to new heights to Space X planning to send rockets to Mars. But the makeup of American companies includes more than just the biggest businesses. Indeed, more than 99.9% of companies in the U.S.—32.5 million—are small businesses with fewer than 500 employees.1 These small businesses employ hundreds of millions of people and form the backbone of the U.S. economy. Here are four key statistics that small-business owners may find surprising.
Small Businesses Create Jobs
The Small Business Administration (SBA) estimates that small businesses with fewer than 500 employees create 1.5 million jobs each year.1 This employment accounts for about two in every three new jobs created in the U.S. Even if your business never grows beyond a few employees, it still plays a valuable and often under-recognized role in the U.S. economy.
Small-Business Owners Crave Something More
The answers were illuminating in a 2021 survey of small-business owners about why they decided to open their businesses.2
29% of respondents said that they wanted to be their own boss.
17% of respondents indicated they were dissatisfied with corporate U.S.
16% of respondents said they wanted to pursue their passion.
12% of respondents said they started a business when an opportunity presented itself.
Other answers included "feeling inspired" and not being ready to retire.
Small Businesses Were Hit Hardest by COVID
In March 2020, more than 70% of small businesses in the U.S. shut down due to COVID, and not all reopened. However, small businesses are flexible and may pivot more easily than some larger corporations, and this became evident as the pandemic raged on. Many small businesses began making more online sales, and some have continued this even as pandemic restrictions loosened.
Small Businesses May Fail—But Not as Often as You Might Think
Small-business owners may feel intimidated by discouraging falsehoods such as "half of all small businesses fail within the first year." This often-quoted myth is not true, and it also does not account for what causes a small business to fail.
Generally, only 20% of small businesses fail within their first year, while about 50% of new companies fail within the first five years. But knowing that 42% of businesses fail because of lack of market demand, while 29% fail because they lack adequate financing helps put these figures into context.
By ensuring that there is adequate demand for what you plan to offer and that you have enough funds to keep your business afloat for several years, you might be able to position your business better to beat the odds.
1 https://www.oberlo.com/blog/small-business-statistics
2 https://www.guidantfinancial.com/small-business-trends/
The opinions voiced in this material are for general information only.
FANG or FAANG is the acronym used for five technology stocks: Facebook, Apple, Amazon, Netflix, and Google (now Alphabet, Inc.).
LPL Tracking #1-05255895