27 Small Business Statistics to Guide Your Growth in 2017
On the fence about entrepreneurship? Thinking about starting a company, but not sure where to start?
In celebration of National Small Business Week (marked this year from April 30th to May 6th), we’ve put together a list of 27 interesting statistics that are relevant to current small business owners – and those who want to be. Use them to create your gameplan and compare your progress to other entrepreneurs.
1. Small businesses (defined as businesses with fewer than 500 employees) account for 99.7% of all business in the US. (Fundera)
As a new entrepreneur, you may not be hiring employees right away. But when you’re ready to do so, know that – as an employer – you join a huge legacy of small business job-producers in this country.
2. Small businesses (firms with 1-499 employees) continue to add more net new jobs than large businesses (500+ employees) (SBA.gov)
The trend highlighted above by Fundera isn’t likely to end anytime soon. Further data from the U.S. Government’s Small Business Administration suggests that small businesses will continue their reign as top job-creators over their larger counterparts.
3. America’s 3.7 million micro businesses made up 75.3 percent of all private-sector employers in 2013, and they provided 10.8 percent of the private-sector jobs. (SBA.gov)
The SBA defines a microbusiness as firms with 1-9 employees, effectively incorporating most small businesses upon their launch. These small-sized firms are clearly having an overly-large impact on today’s job market, representing more than three-quarters of all private-sector employers.
4. The majority of small businesses surveyed are S-corporations (42%), followed by LLCs (23%). (NSBA)
While we can’t recommend specific business structures – as every situation is different – you may find it helpful to know that most small businesses are built as either S-corps or LLC. Partnerships, sole proprietorships and C-corps are all other possibilities.
5. On average, sole proprietorships paid the lowest effective tax rate—just 15.1% in 2013, according to the SBA’s Office of Advocacy—while S-corporations paid double that (31.6%). (SBA.gov)
Many business owners choose S-corps because their profits aren’t double-taxed. Evaluate your options carefully, though, as some SBA data suggests that sole proprietors may actually pay lower effective tax rates, once all factors are taken into account.
6. In 2015, businesses with less than $5 million in annual revenue experienced an average of 7.8 percent annual sales growth. That is up almost a full percent from 2014. (Sageworks)
The further away we get from the Great Recession of the late 2000s, the more we see continued growth in annual small business sales. While there’s no way to guarantee 2017 results, there’s clear reason for optimism among small business owners.
7. Net profit margins improved for small businesses to 7.5 percent in 2015, which is up from 6.4 percent in 2014. (Sageworks)
Net profit margins are up in addition to annual sales growth. A 1.1% change may not seem like much, but as most entrepreneurs know, every penny counts!
8. At the beginning of 2016, a Wells Fargo survey of 600 small businesses found that two-thirds of small business owners said their financial situation is good. (Wells Fargo & Co)
Further, data from 2016, gathered by Wells Fargo, suggests that the majority of entrepreneurs feel optimistic about their companies’ financial positions. If you don’t currently fall into this category, don’t panic. There are a tremendous number of resources out there that can help you reach more customers and sell more products.
9. 71 percent of survey participants said they expect their company to be in good financial shape this year. (Wells Fargo & Co)
Another sign of optimism from Wells Fargo’s survey is the indication that more than 70% of business owners surveyed expect to be in good financial standing at the end of the year.
10. About two-thirds of business survive 2 years in business, half of all businesses will survive 5 years, and one-third will survive 10. (Fundera)
Despite what many people are led to believe about the risk of business closure within the first year, most companies actually reach the five-year mark. Roughly 33% will go on to enjoy a decade or more in business.
11. 82% of businesses that fail do so because of cash flow problems. (U.S. Bank)
That said, one of the most common causes of business failure – as you might expect – is cash flow problems. Keep your company on a solid, stable footing by maintaining good profit margins and planning ahead for potential cash flow shortfalls.
12. The top 3 challenges of running a business are economic uncertainty, the cost of health insurance benefits, and a decline in customer spending, with regulatory burdens almost tying for that third place spot. (National Association of Small Businesses)
Fear and insecurity comes with the territory as an entrepreneur. Hopefully, the list of the top three challenges business owners face above will help you feel less alone in your own struggles.
13. 27% of businesses surveyed by the NSBA claimed that they weren’t able to receive the funding they needed. (Fundera)
Funding is a constant challenge for small business owners. Knowing that more than one quarter weren’t successful in scoring needed funds will help you develop a better game plan for securing startup capital resources.
14. $10,000 is the average amount of startup capital required by a small business owner. (SBA.gov)
Though the SBA numbers put average startup capital requirements as just into five-figures, other estimates come up as high as $80,000. Your specific business model and industry will play a big role in setting this figure; a restaurant will need to make more investments into equipment than, say, a digital marketing firm.
15. In March 2016, big banks approved 23% of funding requests, institutional lenders (which include savings banks and life insurance companies) approved 62.8%, small banks approved 48.7%, alternative lenders approved 60.7%, and credit unions approved 42% of loan applications. (Biz2Credit)
If you need startup capital, knowing who’s approving funding requests can help you set a strategy for securing your own resourcse. Based on the numbers above, for example, you may have better luck with institutional lenders, alternative lenders or small banks than you will big banks or credit unions.
16. Entrepreneurs who own a home are 10% more likely to start a business than entrepreneurs who don’t. (SBA.gov)
This is more a point of reference than a requirement; you certainly aren’t obligated to own a home before you start a business. Interestingly, though, the SBA found this trend to persist, even after controlling for other factors that could influence startup ownership rates.
17. 64%, or $2.2 trillion of all retail sales are now made online or as a result of online promotions smartphone, tablet and other mobile devices will drive more than two-thirds of all internet traffic by 2017. (Ballantine)
Is your business online? If you’re starting a new company selling physical products or operating out of a brick-and-mortar store, know that more than two-thirds of all retail sales occur online.
18. 51 percent of Americans prefer to shop online. (BigCommerce)
It’s clear, based on the statistic above, that people want to shop online. Give them the opportunity to do so by adding an ecommerce component to your business’s website.
19. 74 percent of small business websites have no eCommerce. (SmallBizTrends)
Despite clear trends demonstrating consumer preferences for online shopping, nearly three-quarters of small businesses do not offer ecommerce opportunities. If you have a product that can be sold online, consider making it available to your customers in this way.
20. 75% of marketers are increasing investment in content marketing. (Ballantine)
Investing in content marketing – generally, through business blogging – is another great way to support your customers and prove your industry authority with relevant, high-quality content.
21. Almost a quarter of online shoppers (23 percent) are influenced by social media recommendations. (BigCommerce)
Another area that requires the investment of your company is your presence on popular social media channels. Not only do they give you a direct line to your target buyers, you may find that they indirectly impact your bottom line in the form of peer-to-peer referrals.
22. 6 out of 10 small business owners are not able to track the ROI of their social media activities. (eMarketer)
Unfortunately, understanding the impact of your work on these channels can be challenging, as 60% of business owners find it difficult to prove social media’s ROI. Do your best to understand what is and isn’t working for you when it comes to social media, but don’t abandon this tactic, simply because it’s value isn’t immediately apparent in dollars and cents.
23. A total of more than 150 million direct mail promotions were sent out in 2015. (Ballantine)
Of course, our focus on digital media and online marketing doesn’t mean that print is dead. As recently as 2015, small businesses were still sending out more than 150 million pieces of direct mail promotions.
24. 43 percent of cyber attacks target small business. (SmallBizTrends)
Think your small business is immune to the threat of cyber attacks? Think again. Small companies frequently have less invested in cyber security, which makes them an appealing target for hackers.
25. Only 14 percent of small businesses rate their ability to mitigate cyber risks, vulnerabilities and attacks as highly effective. (Keeper Security)
Too many small business owners drop the ball when it comes to cyber security. Take the necessary steps to keep your company and your data safe.
26. 60 percent of small companies go out of business within six months of a cyber attack. (Denver Post)
The impact of failing to secure your company’s digital presence can be severe. Even if you aren’t put out of business entirely, the negative impact to your reputation caused by a data breach can forever tarnish the brand identity you’ve worked to build.
27. 48 percent of data security breaches are caused by acts of malicious intent. Human error or system failure account for the rest. (SecurityIntelligence)
Cyber security isn’t all about dangerous hackers operating from the dark web. Something as simple as misplacing a device with sensitive data in a public place – a very human error – can have disastrous effects for your company.
Surprised by any of these statistics? Will they change the way you plan for your business in 2017? Leave us a note below with your thoughts:
