30 Small Business Statistics to Capitalize On in 2023

Starting a business online is a great way to quit your full-time job and achieve financial independence. However, building successful small businesses requires much effort, time, and money.

To help your company take off faster, it’s crucial to research the most profitable business ideas and understand the market’s current state.

This article will cover the latest small business statistics every aspiring entrepreneur should know in 2023, regardless of their chosen business model. We will provide valuable insights on what works and doesn’t to help you succeed in the business world.

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Top 10 Small Business Stats You Should Know

We’ve curated the top 10 small business facts overviewing the current state of the private sector:

1. There are 33.2 million small businesses in the US.
2. Small businesses created 12.9 million net new jobs over the last 25 years.
3. More than half (54%) of small business owners plan to increase spending on social media.
4. The average small business loan amount in the US was $52,158.
5. Cash was the most popular form of financing in 2021.
6. 60.9% of people started a small business because they were ready to be their own boss.
7. The salary of a small business owner in the US ranges between $29,000-128,000/year.
8. 71% of growing small businesses survived the pandemic through digitization.
9. 42% of small to medium-sized businesses (SMBs) have accelerated technology investments.
10. Most established small businesses fail due to a lack of capital and hiring difficulty, especially during the pandemic.

Keep scrolling to read the full small business trends and statistics.

General Small Business Stats

This section focuses on small business statistics in the US. Therefore, the data should benefit those living in the US or planning to target this particular market.

1. Number of Small Businesses in the US

There are around 33.2 million small businesses in the US.

However, only 18% or around 6 million small companies have paid employees. 82% of them, or approximately 27 million, are nonemployer firms.

The US Small Business Administration (SBA) defines nonemployer businesses as freelancers and independent contractors. Besides having more autonomy and equity, this business type also requires low startup capital.

2. Number of Net Jobs Created by Small Businesses

Small businesses created 12.9 million new jobs over the past 25 years. In comparison, large businesses generated 6.7 million new jobs within the same period.

In addition to the massive variety of products and services offered, small businesses significantly contribute to the US economy’s growth.

3. Number of Family-Owned Small Businesses

Approximately 32.4 million employer businesses are family-owned, which is 59% of the private sector workforce.

The sectors with the highest share of family-owned businesses are consumer and manufacturing, accounting for 37% and 27%, respectively.

Meanwhile, health sciences and wellness have the lowest share at 4%. This is understandable, as the government dominates this particular sector and leaves limited space for independent contractors.

4. Distribution of Small Employer Firm Industries

20% of US-based employer businesses operate within professional services and real estate industries.

Non-manufacturing goods production and associated services industries have the second-highest share of small employer firms at 18%. Business support and customer services come third with 15%.

On the other hand, the manufacturing industry has the lowest share of small enterprises, accounting for 4%.

Since the manufacturing industry has the lowest number of small businesses, it is less competitive than more saturated sectors. In other words, you will have a better chance of succeeding.

5. Different Legal Forms of Small Businesses

52.1% of small employer firms in the US are S corporations.

In the US, an S corporation has a regular corporate structure with a special tax status which includes the business profit in the shareholders’ income tax. It’s designed to avoid C corporations’ double taxation and protect the owner’s assets from business debts.

Type of Business	Nonemployer	Small employer
Sole proprietorship	86.6%	13.7%
Partnership	7.4%	11.9%
S corporation	4.5%	52.1%
C corporation & others	1.5%	22.5%

On the other hand, 86.6% of companies adopt the sole proprietorship legal structure that’s popular among nonemployer firms. Its simple structure makes it easy for anyone to start a business, as only one person owns and runs it.

Small Business Social Media Marketing Stats

With around 4.74 billion people social media users, social media marketing is an integral part of any business strategy. Due to its cost-effectiveness and high conversion rates, small businesses rely on this method.

The following are five small business marketing statistics for higher brand awareness on social platforms.

6. Most Popular Social Networking Platforms

In 2021, 55% of small business owners in the US advertised on social media. 66% of the small businesses surveyed used Facebook, while 42% opted for YouTube.

This isn’t surprising since Facebook and YouTube were the two most popular social networking platforms in 2021. According to DataReportal, Facebook and YouTube have over two billion monthly active users, surpassing Instagram by approximately a billion.

Advertising on platforms with a massive audience base will give small firms a competitive edge in their digital marketing efforts.

7. Social Media Posting Frequency

94% of small businesses post monthly, 79% post weekly, and 52% post daily on social networking sites. Only 6% of small companies post less than once a month.

While there is no fixed standard for posting frequency, 74% of social media users prefer brands to post once or twice daily.

8. Social Media User Demographics

55% of consumers learn about new brands via social media.

Brand discovery on social networking sites is particularly popular among Gen Z, as 78% of users from this demographic use it regularly, followed by 61% of millennials and 56% of Gen X. Only 35% of baby boomers surf social platforms to find new brands.

New businesses that target Gen Z and millennials should accelerate brand awareness by investing in popular social media platforms like Instagram and TikTok.

9. Small Businesses Invest More in Social Media

54% of small businesses plan to increase spending on social media, while 30% aim to spend less on print advertising.

Social media is one of the most cost-effective and profitable digital marketing channels due to its massive user base. However, being active on social networking platforms without practicing SEO may bring substandard results or even losses.

We recommend optimizing your campaigns for search engines while also tapping into other eCommerce marketing strategies.

10. Time Spent on Marketing Campaigns

Nearly half of all small businesses handle their campaigns independently. They also spend less than two hours per week on marketing efforts. Unfortunately, this can result in a lack of proper preparation and optimization.

Consider investing in a professional marketer to improve your marketing campaigns. While costing extra, the traffic and brand awareness you’ll get will help you reach a wider audience and benefit you in the long run.

Small Business Finance Statistics

Knowing how other small firms manage their financial affairs will give you a blueprint to follow. Here are five small business statistics to help new companies make better financial decisions.

11. Amount of Small Business Loans

The average loan amount varies based on the borrower’s business type, bank, lending institution, and loan terms.

In 2021, the average small business loan amount was $52,158. In terms of interest type, the average size of fixed-rated loans was $73,072.

Generally speaking, most small business owners prefer to make long-term, predictable payments to mitigate interest rate fluctuations.

12. Average Small Business Revenue

Statistics show that the average revenue of a self-employed business is $44,000/year. Meanwhile, an employer firm may earn around $4.9 million/year.

During the height of the pandemic in 2020, only 63% of small businesses turned a profit. 23% of small businesses suffered a loss in revenue.

Thankfully, 73% of small companies received financial assistance from the Paycheck Protection Program (PPP). It provided funds for small businesses to pay interest on mortgages, rent, and utilities, helping them maintain healthy cash flows.

13. Small Business Loan Approval Rates

Small business loans have a 57% approval rate. However, each approval will depend on many factors, such as the bank type and the applicant’s location, race, and gender.

For instance, small businesses in rural areas have a higher approval rate (51%) when compared to urban companies (38%). Businesses in big cities tend to favor large banks, which offer lower approval rates than small lenders.

14. Loan Applications to Non-Bank Lenders

Businesses with lower credit scores turn to online lenders and non-bank finance companies much more frequently than those with higher credit scores.

35% of small businesses with lower credit scores seek loans from online lenders, while 23% turn to non-bank finance companies. The latter include mortgage companies, equipment dealers, and insurance companies.

In comparison, only a small percentage of small businesses with higher credit scores submit loan applications to online lenders (11%) and finance companies (11%).

15. Most Popular Form of Business Financing

Cash was the most popular form of financing in 2021 with 39% of business owners utilizing it.

20% of small businesses used Rollovers for Business Startups (ROBS), while 10% sought financial aid from family and friends.

Home Equity Line of Credit (HELOC) and equipment leases were the least popular forms of financing, with only 3% of respondents utilizing them to jumpstart their businesses.

Small Business Owners Statistics

Learning about small business owner demographics will offer more insights into competitors. Plus, this information can help you learn from their mistakes and create a better business and marketing strategy.

16. Percentage of Business Owners By Generation

46.5% of small business owners are Gen X, 45.5% are baby boomers, and 7% are millennials. Gen Z – born between 1997-2021 – only accounts for 0.5% of all small business owners.

This business trend shows a shift in small business owners from baby boomers to Gen X. This gap may increase as many baby boomers enter retirement in 2022, whereas Gen Xers are still in their productive years.

17. Percentage of Women-Owned Firms

Small business growth statistics show that the number of women-owned businesses has increased by 114% over the past 20 years.

Today, women own 22.4% of small businesses or franchises in the US. 68.9% are Gen X, 19.4% are baby boomers, and 10.7% are millennials.

Regarding education, 34% of women business owners hold a Bachelor’s degree, 27% have a Master’s degree, and only 8% own a Doctorate.

18. Motivations for Starting a Business

60.9% of people started a small business because they felt dissatisfied with corporate America.

Meanwhile, 47.6% of entrepreneurs felt ready to be their own boss. And surprisingly, only 31% of the respondents went into business to pursue their passion.

In addition, 21.4% of respondents built a company because there was an opportunity, 23.4% did so after being laid off, and 22.7% weren’t ready to retire.

19. Average Income of Small Business Owners

The average small business owner in the US makes around $67,000/year, with the annual base salary ranging between $30,000-$131,000.

On average, entry-level small business owners with less than one year of experience earn about $34,000/year. Those with 1-4 years of experience generally make around $45,000/year.

Meanwhile, mid and late-career small business owners with 5-19 years of experience are estimated to earn $62,000-$67,000/year. Finally, entrepreneurs with 20 years of experience or more make around $74,000/year on average.

20. Percentage of Business Owners Based on Race

86% of US business owners are Caucasian. Meanwhile, Asian people make up 11% of entrepreneurs, followed by African Americans (2.5%) and American Indians, Alaska Natives, Native Hawaiians, and other Pacific Islanders (<1%) collectively.

While the gap is currently high, the number of small businesses owned by minorities keeps growing.

According to a survey by the Kauffman Foundation in March 2022, there were 580 new immigrant entrepreneurs out of every 100,000 adults, compared to only 320 for native-born individuals.

Immigrant-owned businesses were particularly prominent in accommodation services, food and beverages, and retail trade.

Digital Transformation of Small Business Statistics

As the internet becomes more accessible, many businesses have moved to an online platform to expand their market reach. Small enterprises can also capitalize on this eCommerce trend.

Here are several impactful eCommerce statistics to consider to establish a strong online presence.

21. Online Shopping Will Become the Norm

71% of growing small businesses survive the pandemic through digitization. eCommerce sales in the US and Europe experienced 17.9% and 22.15% annual growth, respectively.

With 27% of the global population turning to online shopping, customers expect small businesses to have an eCommerce presence to support online transactions. This trend will likely continue for years to come.

22. Artificial Intelligence Is Growing in Popularity

The US market value of artificial intelligence (AI) is projected to reach $299.6 billion by 2026.

25% of small firms currently use AI for various purposes, including chatbots, task automation, and predictive analytics.

The number of AI users will keep growing, as most business owners believe that the technology can help them boost employee productivity and lower operating costs.

23. Consumers Read Online Reviews Before Buying

76% of people research a small business online before visiting its physical store.

Additionally, 95% of customers read online reviews before making a purchase. Meanwhile, 58% are willing to spend more on brands with positive social proof.

However, this behavior has shifted during the COVID-19 pandemic, as 34% of digital buyers now read fewer reviews. Still, establishing a positive brand reputation is essential to win over the market.

24. Most Consumers Support Local Stores

70% of customers support local businesses by shopping online or in-store.

Out of the 1,500 US citizens surveyed, 57% shopped small to keep their money local. Meanwhile, 38% wanted to support local communities and creators.

Millennial and Gen X customers are more likely to support local businesses, with 45% shopping online. The majority (56%) of people who decide to shop in-store are over the age of 45.

25. Technology Use Among Small Businesses

42% of small to medium-sized businesses (SMBs) have accelerated their technology investments.

72% of growing SMBs have an eCommerce store, with 13% planning to follow suit. Only 15% said that digital presence is not a priority.

Digital security awareness also increases, as 95% of businesses are taking measures to protect their company and customer data against cyber attacks.

Biggest Challenges for Small Business Owners

The COVID-19 pandemic has affected various sectors worldwide, including the business industry. Keep reading, as we will cover significant factors that impact small business success and failure rates.

26. Negative Effects of COVID-19 on Small Business Firms

Two years into the pandemic, many entrepreneurs are still struggling. A recent study revealed that COVID-19 has negatively impacted 71% of small businesses in the US.

Guidant Financial discovered that the most common effects of COVID-19 were lost revenue (23%), reduced budgets (11%), temporary closures (11%), reduced personal wages (10%), and temporary pivot of models (7%).

According to Statista, 43.9% of small business owners experienced moderately negative effects of the pandemic. 7% claimed that the COVID-19 pandemic had a moderately positive effect on their business, while 1.7% experienced significant positive effects.

27. Small Business Failure Rate

According to the US Bureau of Labor Statistics, 18.4% of new businesses fail within the first year. By the fifth year, the number increases to 49.7%. Only 34.5% of small companies survive for at least 10 years.

The oil and gas industry has the highest failure rate in the first year (25.6%), followed by administrative and waste services (20.9%), information (20.8%), and entertainment (18.9%).

28. Small Businesses are Susceptible to Cyber Attacks

43% of cyber attacks targeted small businesses. Unfortunately, only 14% are ready to defend themselves.

The most common types of attacks include phishing (57%), compromised or stolen devices (33%), and credential theft (30%).

These cyber incidents can lead to financial loss, costing small and medium-sized businesses $212,000 in 2021 alone.

29. Most Small Establishments Face Financial Struggles

While some businesses are recovering from the pandemic’s effects, 48% still experienced a revenue decline.

85% of small businesses faced financial challenges, while 77% pursued financial assistance from the government. The two most sought-after loans were EIDL and Paycheck Protection Program.

30. Factors That Hinder the Growth of Small Businesses

According to 70.73% of respondents, recruitment is the number one non-pandemic-related challenge for small businesses.

The second biggest challenge that stifles small business growth is the lack of capital (31.57%). Other hurdles include supply chain, material costs, and administrative work.

Conclusion

Starting your own business may be challenging, yet many people deem it rewarding enough to pursue. It takes time, hard work, and dedication to achieve success.

Fortunately, any aspiring entrepreneur can grow their small business with a proper skill set, passion, and extensive knowledge of current trends.

We hope the small business statistics in this article will help you launch a company and make money online. If you have any questions, check out our FAQ below.

Small Business Statistics FAQ

Find answers to commonly asked questions about small business statistics.