41 Small Business Statistics: Everything You Need To Know

ByJulija A.
December 16,2022

From eCommerce stores and brick-and-mortar boutiques to finance consulting, art galleries, and craft breweries, small businesses are as varied as they are numerous. With more than 32.5 million small businesses in the US, it’s obvious that the market is highly competitive, and that living out the dream of being your own boss might not be quite as easy as it seems. So, what can you do? 

If you have your own company (or plan to start one soon), then the best way to make a sound business plan is to familiarize yourself with a few small business statistics. Learning the ins-and-outs of the industry and how other similar firms made it work can help your own company grow and thrive. After all, small enterprises are the backbone of the American economy, and every person with an idea and the drive to succeed should be given a proper chance to better themselves professionally. 

If you don’t want to read through a bunch of boring research papers, don’t worry—we’ve got you covered. For those readers who are looking for quick answers, we’ve also prepared a small 

FAQ section at the end of the article. If you’ve been wondering about questions like how long do small businesses last, how many small business jobs are generated each year, and why are small businesses important for our economy, you can find all the answers after the stats. 

So, without any further ado, here’s a detailed list of some of the most useful stats for business owners and future entrepreneurs. 

Practical Small Business Statistics for Your Company

  • There are 32.5 million small businesses in the US.
  • 48.9% of small businesses survive five years or more.
  • 77% of small business owners say they feel optimistic about the future of their companies.
  • 50% of all small businesses are operated from home.
  • 82% of businesses that fail do so because of cash flow problems.
  • Small businesses account for 44% of US economic activity.

General Small Business Stats

The Small Business Administration defines a small business as a firm with fewer than 500 employees.

(SBA.gov)

In Australia, any business that has fewer than 20 employees is considered a small business, according to the Australian Bureau of Statistics.  In the European Union, it’s under 50, and in America it’s under 500. The numbers vary across the world, but the definition is the same—it’s any business with fewer employees and revenue than the average corporation.

There are 30.2 million small businesses in the U.S.A.

(SBA.gov)

According to the US Census Bureau, in 2017, small businesses employed 47.5% of the entire country’s workforce. That number keeps rising by the day. Given that it can take as few as six days to file the paperwork and open up your own company in America, it’s no wonder people are eager to jump at the opportunity. If you’re thinking of starting your own venture, bear in mind that you’ll be facing stiff competition from all sides.

Small businesses account for 99.9% of all firms in the US.

(Fundera)

Small business stats show that the majority of businesses in America have fewer than 500 employees. Firms with fewer than 100 employees account for 98.2%, and those with fewer than 20 employees account for 89%.

Micro businesses account for 75.3% of private-sector employers.

(SBA.gov)

A micro enterprise employs nine people or fewer, and this is the most common kind of private-sector business in the U.S. Small business statistics show that while this might be the most common kind of enterprise, its share of employees is very small, providing only 10.5% of all private-sector jobs.

Analysts predict that half of the workforce will be freelancers by 2020.

(Forbes)

A lot of small businesses hire full-time workers even when they don’t have enough work to make it worthwhile. Freelancers are usually a much better investment, especially for a company that’s just starting out and can’t find the resources to pay full-time employees. Luckily, the number of freelancers is on the rise, which gives small companies a great opportunity to find professionals at an affordable price.

19% of small business owners work over 60 hours a week.

(Fundera)

Small business statistics indicate that most owners work hard to make their company succeed, particularly when they’re just starting out. Indeed, it’s not uncommon for bosses to work 60-hour weeks. Stats show a whopping 89% have a habit of working weekends, while 81% work nights.

50% of all small businesses are operated from home.

(SBA.gov)

Given that 290 million people in the U.S.A. have access to the internet, it’s a lot easier to work from the comfort of your own home. This is especially true for sole proprietorships where owners don’t have to worry about finding space for multiple employees. However, one of the challenges of home-based businesses is running an effective marketing campaign, so owners need to be organized and advertising-savvy if they want to build a good customer base.

Small businesses employ 59 million people in the U.S.A.

(SBA.gov)

US economy statistics show us that small businesses have always been an important part of both our culture and our success. They contribute to the local economy by bringing stability, jobs, and financial growth, and they can offer a more diverse inventory or specialize in unique services. Whether they remain small or grow into large corporations, these kinds of companies also contribute to the government’s budget through taxes.

Small Business Growth Statistics & Small Business Financing

84% of small business owners indicate that they’re feeling optimistic about the future of their companies.

(StartBlox)

Despite the sheer number of other small businesses and the heavy competition they face, most owners actually feel very optimistic about their future. Companies expect growth in the upcoming years, and they aren’t afraid to put in the hard work needed to succeed.

The health care and social assistance industries are projected to grow by 21%.

(Fundera)

According to the Bureau of Labor Statistics small business failure rate, the healthcare and social assistance industries are the most stable for startups.

Technology, health, and energy are the top businesses to start now if you want to be rich in a decade.

(Fundera)

Tech, health, and energy are not the biggest industries out there, but right now they’re the most lucrative ones. If you planned to start your business in one of these sectors, your services are bound to be in high demand.

64% of small business owners begin with only $10,000 in capital.

(Intuit)

Small business stats show that the average amount of capital needed to get a company going is around $10,000. This doesn’t sound like much, but for those managing their business from home it can be more than enough to set everything up, especially if they don’t intend to hire many employees.

Micro businesses can get off the ground with just $3,000 in capital.

(LendEDU)

How much capital you need to start a business depends on a lot of factors, but research shows profitable small businesses can be financed for as little as $3,000.

Approximately a quarter of small businesses begin with no financing whatsoever.

(LendEDU)

It might surprise you to know that a lot of small businesses succeed despite starting off without any money behind them.

The average small business loan is worth $633,000.

(Fundera)

This should give you a rough idea of how much money you might be able to get to start your business. Bear in mind, though, that the actual amount you receive will depend on a range of factors, including your own credit history. Those with less than perfect credit scores need not necessarily despair — there are plenty of lenders willing to assist when starting a business with bad credit.

The average SBA loan was $107,000 in 2017.

(Fundera)

SBA loans are issued by banks but guaranteed by the Small Business Administration. If you meet all the criteria, you might be able to apply for one and get a lump sum to finance your business endeavor.

Interested in a business loan? Fill out this short quiz:

 

Small Business Revenue Statistics

86.3% of small business owners earn an annual salary of less than $100,000.

(Fundera)

As you’d probably expect, small business owners rarely make as much money as CEOs of big corporations. They usually make less than $100,000 a year, but what’s even more surprising is that 30.7% don’t take any salary at all.

Only 40% of small businesses are profitable.

(SmallBizTrends)

While 40% of businesses start to become profitable at one point, 30% start losing money, and 30% break even.

In 2018, 9% of small businesses made more than $1 million.

(Business Know-How)

The most profitable small businesses made over $1 million last year, while the least profitable 16% made less than $10,000. In 2018, 37% of US-based small businesses reported expected annual sales of $50,000, while in 2020, the percentage jumped to 43%. 

Small Business Failure Statistics & the Biggest Small Business Challenges

50% of small businesses survive for at least five years.

(Fundera)

Contrary to popular belief, failure rates are not quite as dire as they appear. Two-thirds of all businesses survive for at least two years, while around 33% survive over ten years. While the competition is certainly stiff, a consistent business plan can help you stay on top of the game and build your company from the ground up.

On average, one in 12 businesses closes every year.

(LendEdu)

How many small businesses fail? Apparently, the average is just below 10% – one in 12, to be precise. This might not seem like an overly encouraging stat, but bear in mind that with the right funding, adaptability, and knowledge, you can avoid the common pitfalls of owning a small business and push past the start-up stage. Establishing your company is by no means easy, but it is absolutely achievable.

82% of businesses fail because of inconsistent or insufficient cash flow.

(Fundera)

What is the primary reason that so many new businesses fail? Cash flow is the culprit here. Companies that run seasonal businesses encounter this problem more frequently than others. For example, a gardening company that gets the majority of its work during the warm months might struggle to scrape by during the off-season. Utilizing the services of invoice factoring and analyzing cash flow statements can help fix this problem.

27% of businesses aren’t able to receive the funding they need.

(NSBA)

No financing often means no sales and not enough money to hire the workers you need. A certain percentage of businesses that fail seem to do so because they can’t fund further business endeavors, which prevents them from growing. Financing should always be a top priority, regardless of what kind of company you’re trying to run.

42% of failed small businesses offer products or services that don’t bring anything new or useful to the market.

(Fundera)

The main purpose of a business is to fulfill its customers’ needs. If no one wants or needs your services, it’s unlikely that your company will manage to hold its ground. There is a great percentage of startups that fail because they don’t provide anything original to consumers in a competitive market. Without a product that stands out, they can’t increase their sales enough to finance their own growth.

19% of small businesses fail because of their competition.

(CBInsights)

Not paying attention to what your competitors are doing is one of the biggest mistakes you can make. Companies that perform effective competition research are more likely to adapt and improve their services to get ahead. By impressing their customers, they give themselves a better chance of succeeding.

23% of small businesses fail because they don’t have the right team running the business.

(Business Insider)

The startup failure rate shows us that good management is essential to surviving your first years in business. If you don’t have the right kind of professionals to help you stay on top of your finances and help you organize other aspects of your daily workflow, you won’t be able to focus on getting new customers. But it’s not just management that you need to focus on—having competent and hard-working employees is also important.

17% of small businesses fail because they lack a business model.

(CBInsights)

It’s surprising how many startups fail because they don’t have a business model. After all, it’s practically impossible to start and maintain a successful company without a well-developed plan. Simply having an idea is not enough—you need to define objectives and predict your income stream if you want to make it. A business plan is especially important for companies that are seeking investors; most people won’t even consider financing you without a clear vision.

14% of small businesses fail because of poor marketing.

(CBInsights)

You might have managed to create a great product that’s better than anything your competitors could ever offer. But if you don’t advertise it effectively, no one will buy it.

Only 35% of businesses in the construction industry survive their fifth year.

(Fundera)

Construction companies are among the toughest businesses to manage, as their extremely high failure rate suggests. While 75% manage to survive their first year, the majority can’t seem to push past the five-year mark.

Business Trends for Women & Minority Populations

There are 12.3 million businesses owned by women in the U.S.A. 

(WBENC)

Since 2007, the number of women-owned businesses in the United States has increased by a whopping 58%. Now, women-owned businesses employ more than 9.2 million people across the country.

Businesses owned by women generate $1.8 trillion in revenue. 

(WBENC)

While this number looks impressive, it actually only represents 4.3% of total private-sector revenue. It’s clear that, despite all the progress women have made, there’s still a long way to go before we achieve gender equality in the workplace.

46% of African American small business owners are the only employee in their own firm. 

(Guidant Financial)

Small business statistics show that nearly half of businesses owned by African American people have one employee only, while 41.2% employ between two and give workers. Only 13% have more than six employees. While the number of African American business owners is on the rise, a lot of firms still struggle to find enough capital to hire employees.

Veterans comprise 9.1% of the small business owners of America. 

(Small Business)

Veterans own more than 2.5 million businesses in the U.S., and 2.08 million of those are entirely self-operated businesses with no employees. Technical services and construction are the most common industries in which veterans own businesses.

Immigrants own 25% of new businesses in the U.S.A. 

(Forbes)

A quarter of all small business owners are immigrants who have arrived in the country in pursuit of the American dream. When you consider how many small businesses in the US there already are, this is a significant number. In certain states, such as California and New York, this number is over 40%. However, in others, like Idaho, it’s less than 5%.

Immigrants have founded 55% of the unicorn startups in the U.S.A. 

(NFAP)

More than half of all billion-dollar companies in America were founded by immigrants, the most notable being Uber, co-founded by a Canadian immigrant called Garrett Camp. SpaceX, Avant, and Palantir Technologies are some other examples of exceptionally successful immigrant-run firms in America.

Marketing & Small Business Firms

47% of businesses emphasize marketing as their top growth strategy. 

(StartBlox)

Small business trends show us that companies are becoming more aware of the importance of advertising. Roughly 47% of them plan to invest in marketing efforts, followed by the 33% whose primary focus is developing strategic alliances with business partners.

Only 64% of small businesses have their own website. 

(Clutch)

We live in a digital world. It’s almost unthinkable that a firm could function without a website these days, and yet more than one-third do. The accessibility of website builders nowadays means there’s even less of an excuse to skip this crucial step. Most companies, regardless of which industry they operate in, can benefit from advertising their business online. Given that a lack of marketing strategy is a major contributing factor to the small business failure rate, creating a website is a necessity.

92% of business owners believe having their own website contributes effectively to their digital marketing strategy. 

(Iron Paper)

Fortunately, while not all owners have a website, most understand that their business needs one. This shows a certain willingness to adapt to modern times and invest more resources into advertising.

31% of small business owners identify driving sales as their top marketing goal. 

(Keap)

The average small business revenue depends largely on sales, so most firms are making this their priority in the near future. This is followed by 24.6% of businesses, which are focusing on boosting customer retention and engagement, and 17.1% that want to build brand awareness. Finding the time and resources to build a good marketing campaign can be tricky for most owners. However, the efforts tend to pay off in the long run.

70-80% of people research a small business before visiting or making a purchase. 

(Blue Corona)

Most successful small businesses understand that customers these days need to research a company before they feel confident about making a purchase. One of the easiest ways for people to look into your business is to check out your website and social media profiles, then read the reviews left by other customers. Investing in reputation management services can help you present your firm in the best possible light and make it easy for consumers to trust you.

61% of small businesses invest in social media marketing. 

(Clutch)

Considering the number of small businesses in the US, social media marketing can be a great way to stand out from the crowd. Most of your customers tend to have accounts on platforms like Instagram, Facebook, and Twitter. If your company doesn’t, you’ll struggle to compete. A solid social media strategy can help you inform your customers about important deals or events, and can also serve as an easy way to get in touch.

FAQ
What is considered a small business?

A small business is a privately held corporation or a sole proprietorship. It has fewer employees and earns less yearly revenue than a large business, but the exact definition varies from industry to industry. For example, the agriculture industry classifies small businesses as those with less than $750,000 in annual receipts on average, while the construction industry’s maximum is $36.5 million in average receipts annually.

It’s important to define exactly what small businesses are in order to protect and promote them. The government usually grants special subsidies and benefits to help the little firms compete against the big market-share holders in their industry. They can also generally get bank loans sooner and more easily.

Why are small businesses important to the U.S. economy?

Small businesses are important to the U.S. economy because they make a significant contribution to the yearly GDP while also creating job opportunities, especially for disadvantaged minority communities. They also spark innovation and bring original ideas and products to the market.

Small businesses also complement the economic activity of larger organizations. Many offer important B2B services like accounting, web design, and legal services. Others offer niche products and services; for example, it’s usually small businesses that build specific car parts for large auto manufacturers. An average car has anywhere between 28,000–30,000 parts if you count each nut, bolt, and screw. Most of these parts are produced by small companies who then sell them to larger firms.

What percentage of the economy is small business?

Small businesses account for 44% of economic activity in the U.S.A. according to the latest available report from 2014. While their overall market-share has decreased over the years, they’re still an important part of our financial system. Small businesses’ share of GDP has fallen from 48% to 43.5% over the years. According to the SBA Office of Advocacy, this decline can be attributed to the fast growth of large businesses and the Great Recession.

Approximately what percentage of the jobs in the United States do small businesses provide?

There are 30.2 million small businesses in the U.S.A., and they make up 47.5% of the private workforce. Small businesses created 1.9 million jobs in 2015, and they keep contributing to local communities by providing employment and financial stability to many.

Small companies tend to hire more often than big ones because they need employees to grow and expand. Unfortunately, small firms also have a lower survival rate, meaning workers sometimes lose their jobs because of business closures.

How many small businesses start each year?

Around 627,000 new businesses start every year according to 2008 statistics, which are the latest available stats on this subject. This includes sole proprietorships, partnerships, and corporate entities.

One of the reasons so many new businesses open each year is the relative ease of getting started. In America, you can get most of the paperwork and licenses you need in as little as six days. The process is particularly easy for at-home sole proprietorships because owners don’t have to worry about hiring employees or finding the right location for their business.

What is the success rate of small businesses?

It’s difficult to calculate how many businesses are successful because it largely depends on the industry. For example, finance, insurance, and real estate seem to be doing particularly well—58% of these companies still operate after four years. Information companies have the highest failure rate—only 37% of them are successful after four years.

In general, 40% of companies are profitable, 30% break even every year, and 30% continue to lose money.

What is the survival rate for new businesses?

According to Fundera, 50% of small businesses survive for at least five years, while 80% survive the first year. The older your company is, the harder it can be to maintain your business. Federal income taxes, strict government regulations, and healthcare-management for employees are some of the biggest challenges small business owners have to face, and dealing with these problems is the top priority for many firms.

Conclusion

The competition is stiff, but most owners have a positive outlook on the future. While you’re likely to face challenges along the way, these small business statistics show that it’s possible to run a company successfully when you know what to expect.

Use this knowledge to create or modify your existing business plan, and start growing your business one step at a time.

Sources

About the author

Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.

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Ability to link Stories to a website has increased their popularity among both marketers and influencers. 90% of Instagram users follow at least one brand on the platform. (Instagram) Another unsurprising fact is that fans will stay fans wherever they go. Instagram is no different. In fact, a vast majority of users end up following brand accounts, so that already creates a loyal fan base to which a company can promote its products. Female influencers produced 84% of sponsored Instagram posts in 2019. (Statista) For years, beauty and fashion have been on the forefront of advertising on Instagram. Since these industries mostly have female consumers, it comes as no surprise that influencers are predominantly female.  The number of sponsored Instagram posts is projected to reach 6.1 million in 2020. (Statista) Looking at the Instagram influencer marketing statistics throughout the past several years, a trend can be seen regarding the number of sponsored posts. It is constantly on the rise, although not at the 100% rate we’ve seen from 2016 to 2017. In 2019, there were 4.95 million sponsored posts on Instagram, and in 2020 this number is expected to rise by more than a million. A study from April 2018 found out that more than half of influencers use Instagram Stories as their preferred outreach method. (eMarketer) Instagram Stories were introduced in August 2016 and gave users a chance to create posts that only last for 24 hours. It is a great customer acquisition method because it allows influencers to reach people who don’t already follow them. 25% of all sponsored posts on Instagram are fashion-related, while food takes second place. (Business Insider) We’ve already mentioned how the influencer marketing industry revolves around beauty tips and lifestyle instructions, so it makes sense that fashion represents a quarter of all Instagram sponsored posts.  Micro-influencers with fewer than 100,000 followers are responsible for the majority of posts on Instagram. (Socialbakers) Nearly a third of all profiles on Instagram belong to so-called micro-influencers, who can have anywhere from 2,000 to 100,000 followers. The interesting thing about influencer culture is the fact that there’s room for everyone. In fact, top Instagram influencers with over a million followers only make up 1% of all accounts on the platform. 97% of marketers plan on using Instagram for their influencer campaigns in 2020. (Linqia) Instagram has finally overtaken Facebook as the most popular influencer platform. Not only are Instagram posts sitting at the top spot, but Stories are also making their way up - 83% of marketers are planning to pour their budgets into promoting their products with Stories produced by influencers. The reason? Vertical video. For 55% of marketers, vertical video will play a key role in 2020 campaigns. YouTube Influencer Stats 10 brands spent $1 million each on sponsoring YouTube videos. (Influencer Marketing Hub) “This video is sponsored by…” You know the drill. Sponsored video segments, basically ads that are embedded into the video, are turning to be quite an investment for certain brands. These famous words were most commonly spoken for SkillShare, Squarespace, Nord VPN, Blue Chew, and DLive. Brands spent more than $90 million on YouTube influencers during Q1 2020. (Influencer Marketing Hub) During the first quarter of 2020, more than 1,300 brands were spending money on sponsored content on YouTube. In total, there were 5,680 videos produced, amassing 704 million views. On average, advertisers spent $16,011 on each sponsored YouTube video. (Influencer Marketing Hub) While sponsorships with top YouTube influencers don’t come cheap, the growth of micro and macro influencers lead to a wide variety of pricing tiers. Looking at the numbers during Q1 2020, we can see what amount of money on average is needed for each influencer campaign on the platform. In the future, analysts predict that YouTubers at or below 100,000 subscribers could be the biggest driving force for marketing campaigns. Epic Games was the biggest spender in the first half of 2020 with a campaign worth $10.6 million. (Influencer Marketing Hub) The gaming powerhouse Epic Games, the owners of Fortnite and Epic Games Store, had a way bigger marketing budget for YouTube than anyone else. Sitting in second place is Bang Energy with $7.7 million, while SkillShare comes in third with $3 million in sponsored content expenses. Gaming is huge on YouTube and, with the world’s most popular game under its belt, Epic knew the value of promoting on this platform. Four in 10 millennial consumers feel that their favorite YouTube influencer understands them better than friends or family. (ThinkWithGoogle) While these statistics might appear worrying, they certainly fit with the whole concept of influencers. Marketing to teens nowadays boils down to promoting normal, down-to-earth, relatable figures who understand what young people are interested in. That’s why millennial influencers are so effective. Because of that, teens, millennials, and other younger demographics feel a strong connection to them. Half of YouTube’s top 10 earning stars are gamers. (Forbes) Industry statistics reveal that some of the most influential YouTubers on the platform are gamers. This reflects the continuous growth of the gaming industry, which is expanding rapidly. In an effort to compete with websites like Twitch, YouTube has also introduced streaming, which has further helped gaming channels gain prominence. 18% of users are influenced by YouTube when it comes to their purchases. (Shane Barker) YouTube is one of the biggest and most popular online platforms for product reviews. There are thousands of channels specializing in unboxing videos and hands-on reviews, all of which give potential customers a better feel for the product than written reviews. Influencers who create reviews often make deals with YouTube influencer marketing, in which they get free products, or even cash, in exchange for their reviews. YouTube has the best engagement rate, ranging from 4% to 6.7%. (CreatorIQ) YouTube is a platform designed to drive engagement. Either by involving viewers in the discussion or by them sharing and liking videos, the drive to engage with content is inherently higher than on any other platform. Data from 2016 to 2019 demonstrates that Twitter has the lowest engagement rate, with 0.17% or lower depending on the audience size. User Statistics You Should Know 49% of users rely on influencer recommendations for purchases. (ION) Online bloggers are so influential that almost half of users on the web rely on their recommendations when deciding to make a purchase. This shows that influencers are at least as important as all those hard-working marketers out there. Influencer marketing statistics show that young people (ages 18-34) are more likely to buy a product endorsed by an influencer than one endorsed by a celebrity. (Marketing Charts) About 10 years ago, the go-to stars for product promotion were actors, musicians, sportspeople, and other celebrities. Nowadays, it’s all about influencers who seem a lot more trustworthy and relatable. Indeed, 22% of young people trust influencers’ choices, compared to just 9% who trust celebrities. 94% of users think authenticity and transparency are essential. (Marketing Charts) Authenticity and transparency are two of the most important traits in celebrity influencers. If they want to keep their followers, these social gurus need to be original, cultivate their own voice, and make sure that their behavior is completely transparent. This is the best way to earn their audience’s trust and respect. 19% of consumers rely on Facebook influencers when they purchase products. (Shane Barker) Statistics show that 19% of users turn to Facebook influencers for advice regarding product purchases. Although the platform is now less popular than its sister network, Instagram, it is still the preferred platform for thousands of influencer marketing companies. What About Twitter? You’ve probably noticed that we’ve mentioned pretty much every major social media platform except for Twitter. So, who are Twitter’s biggest influencers? What are some of the most interesting Twitter followers statistics? Unfortunately, a lot of Twitter statistics revolve around the company’s own reports and estimates. Twitter seems to be desperately looking for a way into the world of real influencer marketing, even though the platform is inherently restricted by its 280-character limit for tweets.
By Dragomir Simovic · May 18,2022
It takes guts, determination, and a healthy dose of wild optimism to attempt building a startup of your own. It also takes years of hard work. Despite all this, 70% won’t live to see their 10th birthday. So, what is the startup failure rate in your industry, your city, your niche? And why do so many people give up on the idea they fought so hard for? Most entrepreneurs are aware that it can be difficult to get repeat funding, build a viable business model, and grab their customers’ attention. But did you know most businesses fail simply because there is no market for their product? If you don’t do your market research properly, all your subsequent efforts to stay afloat will have been in vain. It’s important to learn what percentage of startups fail in the industry you’re targeting. Don’t set yourself back by ignoring economic, financial, social, and cultural data on the current state of affairs in your particular niche. And make sure you have a good grasp on what the competition is doing so you can provide a product or service with a point of difference. We’ve prepared an infographic on the latest and most relevant startup statistics to help your business get off the ground. To do this, we’ve compiled high-quality data from independent studies and reports, as well as government websites and academic papers. Our goal? To find out what prevents startups from failing, how to conduct the best market research, where to get funding, and how long it takes to start making money organically. What are the best cities for startups? What are the most profitable industries for startups? It’s worth asking yourself all these questions before you begin investing time and money into an idea that may not succeed. With a steady focus and the right information, you’ll give yourself the best chance of getting the job done. Top Startup Failure Rate Statistics - Editor’s Choice Access to talent (63%) was the critical issue affecting most startups in 2019. Only 6% of U.S. startups believe organic growth will be their company’s next source of funding. Incompetence, at 46%, is the most common reason why businesses fail, according to a Statistic Brain study. San Francisco and Silicon Valley account for 13.5% of global startup deals. 50% of U.S. startups say they were concerned trade policy between the U.S. and China will hurt their businesses in 2019. Of the startups surveyed, 58% started with less than $25,000 and one-third started with less than $5,000. More than 80% of U.S. startups said they planned to add employees in 2019. Startup Failure Rate Statistics Incompetence, at 46%, is the most common reason why businesses fail, according to a Statistic Brain study. (Statistic Brain) In this case, the term “incompetence” refers to a wide variety of inadequacies. These include emotional pricing, no experience in record-keeping, a lack of planning, no knowledge of finance, failure to pay taxes, and spending too much with limited business revenue. The percentage of startups that fail after four years in the U.S. is over 50%. (Statistics Brain) Businesses in the fields of information (63%), transport, communication and utilities (55%), and retail (53%) are the most likely to fail. Their somewhat more successful counterparts include real estate, finance, and insurance (42% failure rate), along with education and health (44%). 65% of entrepreneurs admit they were not fully confident they had enough money to start their business. (Business Insider) Sadly, 93% calculated a run rate of under 18 months. Of these, 25% calculated a run rate of less than six months, while 36% didn't make any calculations at all. Only 9% of businesses fail due to an utter lack of passion. (CBINSIGHTS) How many new businesses fail just because their owners simply don’t care enough to make an effort? Not too many, as it turns out. Still, this is a ridiculous reason to go down. As stated in the infographic, CBINSIGHTS performed post-mortems on 101 failed startups to learn what drove them to an early grave. Mostly, it was a lack of market need, inadequate funding, or an incompetent team. In 2018, there was a decline of about 2% in cultural support, human capital, competition, internalization, and risk capital. (Global Entrepreneurship Index 2018) Unfortunately, the Global Entrepreneurship and Development Institute has noticed that the overall environment in 2018 is less supportive of startups and entrepreneurship. 56% of companies that raise a follow-up round of funding after their seed are then able to raise a second follow-up round. (CBINSIGHTS) Wondering how to make a startup company successful? Make sure you project a professional, hard-working image to earn subsequent funding. As this research shows, it’s easier to raise a third round of financing than a second one, with only 40% of businesses successfully raising their first post-seed round. After the third round, though, your chances of getting subsequent funding are likely to drop steadily. Access to talent (63%) was the critical issue affecting startups in 2019. (US Startup Outlook 2019) Even the best startup business will face a number of challenges on its way to success. In the 2019 US Startup Outlook survey, nearly 1,400 technology and healthcare startup founders and executives cited the most important public policy issues affecting their business. The most compelling issues other than access to talent were healthcare costs (44%) and cybersecurity (40%). The final three concerns were customer privacy (33%), corporate taxes (22%), and international trade (also 22%). In 2019, 50% of U.S. startups said that their more realistic long-term goal is to be acquired, 7% less than in 2018. (US Startup Outlook 2019) A larger percentage of startups compared to last year say they don’t know what their ultimate goal is, underscoring the difficulty of planning an exit strategy amid increased market volatility. With plenty of capital available, many corporations, private equity funds, and scaling companies have the resources to make acquisitions. Only 6% of U.S. startups believe organic growth will be their company’s next source of funding. (US Startup Outlook 2019) Organic growth is crucial, as startup success statistics show. Other important sources of funding include bank debt, IPOs, mergers, government grants, ICOs, and crowdfunding. 50% of U.S. startups say they are concerned trade policy between the U.S.A. and China would hurt their business in 2019. (Exploring the Factors of Startup Success and Growth) Of those, 33% are somewhat worried, while 17% are very concerned. This might be due to China’s “Made in China 2025” plan. This is a strategic project issued by Chinese Premier Li Keqiang and his cabinet in May 2015. In short, China plans to move past being the world’s “factory” and start producing higher-value products and services. The small business survival rate – which currently sits at 30% past the 10-year milestone – might not drop because of this economic shift. There is another issue, though. According to a Churnbase study, China has more unicorn companies than the U.S.A., in spite of America being the primary source of venture capital. Startup Trends You Can Focus On To Succeed Of the startups surveyed, 58% started with less than $25,000 and one-third started with less than $5,000. (Business Insider) Kabbage recently polled 600 thriving U.S. small business owners to better understand their cash flow issues. Admittedly, these small business owners indicated they had at least some knowledge of how to build a startup. In many cases, this knowledge included experience in financing and bookkeeping (35%), legal and compliance (29%), and marketing and advertising (28%) when starting their business. Maybe the motto that “it takes money to make money” doesn’t apply all the time. Globally, product innovation scores have increased by 22% since 2017, while startup skill scores have risen by 11%. (Global Entrepreneurship Index 2018) The Global Entrepreneurship and Development Institute came up with these figures. It is one of the top research centers focused on understanding and improving the relationship between entrepreneurship, innovation, and prosperity. Based on the organization’s findings, people are getting better at understanding and identifying successful startup business ideas and turning them into useful products. 60% of U.S. startups expected business conditions for their company to improve in 2019, 1% less than in 2018. (US Startup Outlook 2019) Entrepreneurs’ hopes and dreams are slightly grimmer than in 2017. On the other hand, 31% of respondents believe that business conditions will stay the same. As many as 9% think conditions are likely to get worse, a 4% increase since 2018. On average 15% of micro-enterprises are traders, while the share is 60% for small enterprises. (OECD) The success startups expect to achieve seems to revolve mostly around trade. A 2018 OECD report on entrepreneurship classified micro-enterprises as having between zero and nine employees (zero meaning the owner is the only one working). According to this measure, a small enterprise employs between 10 and 49 people. Organizations’ capacity to channel innovations to the economy is more potent in innovation-driven economies (1.55%) than in efficiency-driven (1.17%) or factor-driven economies (-0.59%). (Global Entrepreneurship Index 2018) Successful startup businesses identify and understand how developed their country’s economy is before they decide what startup idea to pursue. Factor-driven economies rely mainly on unskilled labor and natural resources, while efficiency-driven economies are characterized by more efficient production processes and higher quality. Finally, innovation-driven economies depend on skilled, educated, and knowledge-based labor, with a more developed service sector. Scores on the Global Entrepreneurship Index have improved by 3% on average since last year. (Global Entrepreneurship Index 2018) The GEI analyzes startups’ health based on 12 main factors. These startup success factors include product innovation, process innovation, human capital, cultural support, and the perception of opportunities.  71% of surveyed U.S. startups have successfully raised capital in 2018. (US Startup Outlook 2019) A quarter of these businesses don’t consider the fundraising environment to be challenging. That may be because there is currently a trend of venture capitalists and private equity firms investing larger sums into a smaller deals. These startup trends only apply to high-performing young businesses, however. Struggling startups are finding it increasingly more difficult to raise funds.  More than 80% of U.S. startups said that they planned to add employees in 2019. (US Startup Outlook 2019) The success startups hope to achieve often relies on paying a bunch of new employees to do the heavy lifting, so to speak. As many as 29% of entrepreneurs recognize that it’s extremely challenging to find talent with the necessary skills to grow their businesses. Another 62% say it is somewhat challenging. Startups are most in need of filling product development, sales, and technical positions. Startup Guide: Ageism, Racial Bias, and Venture Capital In 2019, the percentage of startups with at least one woman on the board of directors increased to 37%. (US Startup Outlook 2019) That’s the highest result since SVB started doing research in 2015. Additionally, 53% of startups now feature at least one woman in an executive position, a 10% increase compared to last year. 37% of founders believe startup investors show some kind of age bias against them. (State of Startups) In 2018, the State of Startups annual survey interviewed hundreds of venture-backed founders, who talked about what it’s like running a tech startup today. On average, founders think ageist attitudes begin once they turn 46. In 2018, 26% of surveyed tech startup founders believe a race bias is exists. (State of Startups) Small business stats and startup stats don’t usually cover these issues, but discrimination remains a huge problem. In the State of Startups annual survey of 529 founders, almost 30% agreed people in the American startup scene need to do more to fight racial bias. In 2019, 52% of U.S. startups expected their company’s next source of funding to be venture capital. (US Startup Outlook 2019) That’s down 2% from 2018. Due to limited revenue or high costs, most of startups’ small-scale operations aren’t sustainable in the long run without additional funding. That’s why, after receiving their initial investment, most young startups will either fail or need subsequent investments. As for subsequent investments, 17% of the U.S. startup budget comes from angel investors, micro VCs, or an individual investor. Only a small number of companies become profitable solely thanks to their first investment. As many as 8% hope for private equity, while 7% rely on private investors. On average, a typical angel investor in the U.K. holds their investment for six years. (The UK Business Angel Market) A study of the U.K. Angel Business Market came up with this figure. Startup statistics in the UK show hugely positive signs of continued growth in the angel market. In fact, 41% of angel investors increased their investments during the 2016-17 tax year. Growth has been impressive, with 69% of investee businesses surpassing their expectations. San Francisco and Silicon Valley account for 13.5% of global startup deals. (StartupsUSA) San Francisco tops the list, playing host to nearly 10% of global venture capital deals. In other startup news, New York is the runner up, with 6.5%. London is next, with 5% of global venture capital deals, half of what San Francisco provides. Finally, the heart of Silicon Valley, San Jose, accounts for almost 4% on its own. Boston and L.A. each account for more than 4% of all startup deals on a global scale. Bangkok takes first place for global growth of venture capital deals, with an increase of more than 600% between 2010 and 2017. (StartupsUSA) Thailand's successful startup industry expected to see double-digit growth in 2018, driven by local funding and foreign venture capital. Local startups are being encouraged by government support, and Thailand is promising as overall costs for startups are low relative to Singapore. Globally, the majority of enterprises (between 70% and 95%) are micro-businesses, meaning they have fewer than 10 employees. (OECD) Startup statistics show that in most OECD economies, small and medium-sized enterprises account for over half of all employment and value added within the business sector. These are either single-person businesses, where a freelancer opens a firm and is self-employed, or a partnership of some sort. Small businesses such as these are easier to manage. Since poor time and resource management are some of the most common causes of the high startup failure rate, this reluctance to start big is probably a good idea. In most OECD countries, venture capital constitutes less than 0.05% of GDP. (OECD) This is according to the OECD, an intergovernmental organization consisting of 36 member countries. The two major exceptions to the small GDP percentage of venture capital are Israel and the United States, where the venture capital industry is more mature and represents more than 0.35% of GDP. Tech Startup Statistics The fastest-growing tech startups are in advanced manufacturing and robotics, which is growing at a rate of 189.4%. (Global Startups Ecosystem Report) According to a 2018 report, advanced manufacturing and robotics has the best five-year growth rate of any tech subcategory. This stat specifically measured early-stage deals from 2012-17. Agtech and new food is the second-fastest-growing sector for startups, with a growth rate of 171.4%. (Global Startups Ecosystem Report) The 2018 Global Startup Ecosystem Report found agtech businesses to be among the most profitable startups. The agriculture industry employs a huge number of people and adds $3.2 trillion annually to the global economy. Now, digitization is transforming this vital industry, especially in the fields of automation and quality control. Blockchain is the third-fastest-growing tech startup category, with a 162.6% growth rate. (Global Startups Ecosystem Report) Blockchain is still in the emerging phase of the startup lifecycle. This peer-to-peer value exchange eliminates the need for third-party mediators. The technology has applications across myriad industries, particularly within the financial services sector. When you look at tech startup trends, nothing’s hotter right now than blockchain. AI, big data, and analytics are the fourth-fastest-growing tech startups, at 77.5% growth rate. (Global Startups Ecosystem Report) This sub-sector is growing strongly and is much closer than many other sub-sectors to the mature phase, encompassing 5% of all global startups. Worldwide GDP could grow up to 14% by 2030 as a result of AI, which would mean an additional $15.7 trillion for the global economy. Why Some Startups Succeed (and Why Most Fail) Market research: You’ve fulfilled your lifelong dream by starting a real estate agency. But the area you should be covering is already packed with realtors, and your service is surplus to the market’s needs. You fail. Business plan: Identifying market demand is just the beginning. You need to split your business plan into small, achievable goals, and predict potential problems and solutions. Funding: Whether you’re backed by a venture capitalist, an individual contributor, or the government, your business will probably need repeat investments. The best startup advice you can get is to not stretch for cash during your first year, or you might never get off the ground. Location and marketing: An integrated, multi-channel online presence is a must for any business to survive in the 21st century. If you open a coffee shop with no website or social media presence in a neighborhood that couldn’t care less, you’re going to have a bad time. Knowledge: The truth is that some entrepreneurs take up this challenge with little to no previous knowledge of finance, accounting, or their niche. Make sure you enroll in courses to learn the skills you need before you try to break into the market.   Conclusion If you want to succeed, a positive attitude and hard work alone aren’t going to cut it. You need to know, not hope that your business will be a success. The startup success rate becomes less favorable with every year your business keeps operating, and as time goes by, survivors are increasingly rare. You won’t get too many shots at building a profitable company, so time and quality information are of the essence. Don’t be fooled: the myth of the personality cult, maverick tech entrepreneur who makes millions winging it is a sham. If you’re born into considerable wealth, you might be able to pull that off. The chances are, though, that you’ll only succeed if you work harder and smarter than your competition. Over-prepare, read up on all the you can get your hands on, then prepare yourself for the ultimate leap of faith so you don’t become just another number in the startup failure rate.
By Andrea · May 18,2022

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3 comments
les Armstrong
1 year ago
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by the way i stopped reading when you brought in the race ticket...goodness we are all just americans please!!

Harish Doshi
10 months ago
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Where do I find business relevant data for Small Business Manufacturing Operations exclusively. Any assistance will be greatly appreciated. I am looking for following historical data..... 1) EBITDA: 3-5MM; 5-10MM; 01-15MM; 51-25 MM; 25-40MM; 40-60MM (again exclusively for manufacturing operations) 2) In general, xx% of companies are profitable, xx% break even every year, and xx% continue to lose money. Thanking you, Harish Doshi

Kish Sharma
9 months ago
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Can you please help me understand how many small / micro business owners still don't use an advanced CRM management tool?