From California storefronts to Texas tech startups, America's economic story is overwhelmingly written by its 33.2 million small businesses, which make up a staggering 99.9% of all U.S. firms and serve as the diverse and dynamic backbone of our national economy.
Key Takeaways
- In 2023, there were 33.2 million small businesses in the United States, accounting for 99.9 percent of all U.S. businesses.
- Small businesses made up 99.9 percent of U.S. exporting firms in 2022, with 97.3 percent being very small with fewer than 20 employees.
- Of the 6.4 million employer firms in the U.S. in 2021, 99.7 percent were small businesses with fewer than 500 employees.
- Small businesses employed 61.7 million people in 2023, representing 46.4 percent of the private workforce.
- Small businesses created 12.9 million net new jobs from March 2021 to March 2023.
- Firms with 20-499 employees accounted for 48.5 percent of small business employment in 2021.
- Small businesses generated 44.0 percent of U.S. private-sector GDP in 2022.
- Small businesses paid 45.9 percent of U.S. private-sector payroll in 2022.
- Nonemployer small businesses generated $1.6 trillion in receipts in 2021.
- 50 percent of small businesses that fail do so within the first five years, per 2023 data.
- About 20 percent of small businesses fail within the first year, according to BLS data through 2023.
- 65 percent of small businesses survive past 10 years, based on 2023 cohort analysis.
- SBA approved 66,000 7(a) loans totaling $27.5 billion in FY 2023.
- 340 Program provided 8,500 loans worth $1.1 billion to underserved communities in FY 2023.
- Microloans from SBA totaled 2,200 loans averaging $14,000 in FY 2023.
Small businesses are the dominant and diverse backbone of the American economy.
Challenges
- 50 percent of small businesses that fail do so within the first five years, per 2023 data.
- About 20 percent of small businesses fail within the first year, according to BLS data through 2023.
- 65 percent of small businesses survive past 10 years, based on 2023 cohort analysis.
- Inflation was the top concern for 13 percent of small business owners in June 2024.
- Labor quality was cited by 34 percent of owners as their top operating problem in June 2024.
- 24 percent of small firms reported tax complexity as a top issue in 2024.
- 42 percent of small businesses faced supply chain issues in 2023.
- 37 percent of small businesses reported increased costs as primary challenge in 2023.
- 26 percent of small firms experienced payment delays from customers in 2023.
- 44 percent of small businesses not seeking financing cited sufficient funding as reason in 2023.
- Deteriorated financial condition reported by 14 percent of small firms in early 2024.
- 19 percent of small businesses closed temporarily during peak pandemic in 2020.
- Cyberattack risks affected 43 percent of small businesses in 2023 surveys.
- Regulatory burden cited by 23 percent of small owners as biggest obstacle in 2024.
- 31 percent of small firms planned price hikes due to costs in June 2024.
- Access to credit was a challenge for 22 percent of small businesses in 2023.
- 35 percent of small businesses worried about recession in early 2024.
- Employee retention issues impacted 28 percent of small firms in 2023.
- 51 percent of small business failures attributed to management issues per 2023 studies.
- Underfinancing caused 29 percent of small business closures in recent data.
Challenges Interpretation
While half of small businesses succumb within five years, often due to internal missteps, the resilient majority that survives contends with an endless gauntlet of inflation, labor woes, and supply chain chaos, proving that entrepreneurship is less a sprint to success and more a grueling marathon of constant adaptation.
Demographics
- In 2023, there were 33.2 million small businesses in the United States, accounting for 99.9 percent of all U.S. businesses.
- Small businesses made up 99.9 percent of U.S. exporting firms in 2022, with 97.3 percent being very small with fewer than 20 employees.
- Of the 6.4 million employer firms in the U.S. in 2021, 99.7 percent were small businesses with fewer than 500 employees.
- In 2023, 28.5 million small businesses were nonemployer firms, comprising 82.7 percent of all small businesses.
- Women-owned small businesses numbered 11.3 million in 2023, representing 34.7 percent of all small businesses.
- Minority-owned small businesses totaled 15.2 million in 2023, accounting for 46.6 percent of all small businesses.
- Veteran-owned small businesses stood at 5.3 million in 2023, making up 16.3 percent of all small businesses.
- In 2022, California had the highest number of small businesses at 4.1 million, followed by Texas with 3.2 million.
- The construction industry had 2.9 million small employer firms in 2021, the largest sector by number of small businesses.
- Professional, scientific, and technical services sector had 2.4 million small employer firms in 2021.
- Administrative and support services had 1.1 million small employer firms in 2021.
- 81.2 percent of small employer firms had fewer than 10 employees in 2021.
- Firms with 10-19 employees comprised 10.3 percent of small employer firms in 2021.
- 6.8 percent of small employer firms had 20-99 employees in 2021.
- Only 1.7 percent of small employer firms had 100-499 employees in 2021.
- In 2022, 8.0 million new business applications were filed, a record high compared to pre-pandemic levels.
- The share of employer business applications reached 21.6 percent in 2022, up from historical averages.
- High-propensity business applications, likely to hire, numbered 1.3 million in 2022.
- 46 percent of small businesses were owned by people of color in 2020.
- 28 percent of small businesses were majority-owned by women in 2020.
- 12 percent of small businesses were owned by veterans in 2020.
- Urban areas hosted 78 percent of small businesses in 2021.
- Rural small businesses made up 22 percent of the total in 2021.
- 89 percent of rural small employer firms had fewer than 20 employees in 2019.
- Healthcare and social assistance had 712,000 small employer firms in 2021.
- Retail trade sector had 1.2 million small employer firms in 2021.
- Accommodation and food services had 661,000 small employer firms in 2021.
- Manufacturing had 295,000 small employer firms in 2021.
- Transportation and warehousing had 780,000 small employer firms in 2021.
- Real estate and rental and leasing had 1.3 million small employer firms in 2021.
Demographics Interpretation
The American economy is a vast and diverse quilt, but if you look closely, you'll see it's almost entirely stitched together by an army of very small, very determined businesses, from solo entrepreneurs to tiny teams, who collectively form the overwhelming and surprisingly inclusive backbone of the nation.
Employment
- Small businesses employed 61.7 million people in 2023, representing 46.4 percent of the private workforce.
- Small businesses created 12.9 million net new jobs from March 2021 to March 2023.
- Firms with 20-499 employees accounted for 48.5 percent of small business employment in 2021.
- Firms with fewer than 20 employees provided 16.4 percent of small business employment in 2021.
- In 2023, small businesses employed 54.3 percent of the workforce in goods-producing industries.
- Small businesses accounted for 51.5 percent of employment in service-providing industries in 2023.
- Construction sector small businesses employed 2.0 million people in 2021, 80.9 percent of sector employment.
- Professional services small businesses employed 12.1 million, 82.3 percent of sector jobs in 2021.
- Healthcare small businesses employed 5.7 million, 68.1 percent of sector employment in 2021.
- Retail trade small businesses employed 5.8 million, 77.6 percent of sector jobs in 2021.
- Hospitality small businesses employed 5.3 million, 62.7 percent of sector employment in 2021.
- Manufacturing small businesses employed 2.2 million, 47.7 percent of sector jobs in 2021.
- Wholesale trade small businesses employed 2.5 million, 62.3 percent of sector employment in 2021.
- Transportation small businesses employed 2.8 million, 79.4 percent of sector jobs in 2021.
- 77.4 percent of small firms reported hiring or trying to hire in 2023.
- 34 percent of small business owners reported few or no qualified workers available in June 2024.
- Job openings at small firms averaged 6.4 percent of employment in Q1 2024.
- Compensation rose 0.5 percent at small firms in June 2024, seasonally adjusted.
- 48 percent of small firms reported capital expenditures in Q1 2024.
- Small business employment grew by 2.1 percent year-over-year in 2023.
- Firms with 1-4 employees employed 5.2 million in 2022.
- Firms with 5-9 employees employed 4.1 million in 2022.
- Firms with 10-19 employees employed 5.8 million in 2022.
- Agriculture, forestry, fishing small businesses employed 0.9 million, 85.2 percent of sector in 2021.
Employment Interpretation
Small businesses are the nation's surprisingly muscular backbone, shouldering nearly half of all private jobs while constantly grumbling that they can't find enough qualified shoulders to help carry the load.
Financial Performance
- Small businesses generated 44.0 percent of U.S. private-sector GDP in 2022.
- Small businesses paid 45.9 percent of U.S. private-sector payroll in 2022.
- Nonemployer small businesses generated $1.6 trillion in receipts in 2021.
- Small employer businesses had total receipts of $17.0 trillion in 2021.
- Average receipts per small employer firm were $2.7 million in 2021.
- Average receipts per nonemployer firm were $55,000 in 2021.
- Construction small businesses had $1.8 trillion in receipts, 80.1 percent of sector total in 2021.
- Professional services small businesses receipts totaled $3.2 trillion, 82.1 percent of sector in 2021.
- Healthcare small business receipts were $1.9 trillion, 66.9 percent of sector in 2021.
- Retail small businesses receipts $3.1 trillion, 76.5 percent of sector total in 2021.
- Hospitality small business receipts $0.8 trillion, 61.2 percent of sector in 2021.
- Manufacturing small business receipts $1.5 trillion, 46.3 percent of sector in 2021.
- 56 percent of small businesses reported higher profit margins in 2023 compared to 2022.
- 45 percent of small firms increased inventories in Q1 2024.
- Average small business loan size was $413,000 in 2023 from SBA programs.
- 62 percent of small businesses sought financing in 2023, with 47 percent applying for loans.
- Approval rates for bank loans to small businesses were 52 percent in 2023.
- Online lenders approved 44 percent of small business loan applications in 2023.
- Small businesses with revenues under $1 million had median revenue growth of 5 percent in 2023.
- 40 percent of small businesses reported revenue increases in the last quarter of 2023.
- Wholesale small business receipts $3.0 trillion, 61.8 percent of sector in 2021.
- Transportation small business receipts $1.2 trillion, 78.9 percent of sector in 2021.
Financial Performance Interpretation
Despite the romantic notion of the scrappy entrepreneur, the numbers don't lie: small businesses are not just the heart of the American economy, they're its robust and profit-growing backbone, generating nearly half of all private-sector activity while constantly hustling for the loans to keep the whole show running.
Support and Growth
- SBA approved 66,000 7(a) loans totaling $27.5 billion in FY 2023.
- 340 Program provided 8,500 loans worth $1.1 billion to underserved communities in FY 2023.
- Microloans from SBA totaled 2,200 loans averaging $14,000 in FY 2023.
- Small businesses received 25 percent of federal contracting dollars, $178 billion in FY 2023.
- Women-owned small businesses got 5 percent of federal contracts, $33 billion in FY 2023.
- 28 percent of small businesses planned expansion in 2024.
- Optimism index for small businesses was 98.8 in June 2024, above historical average.
- 12 percent of small firms viewed the economy as good in June 2024.
- Exporting small businesses numbered 1.2 million in 2022, 97.3 percent very small.
- Small businesses accounted for 17.6 percent of known export value in 2022.
- 21 percent of small businesses innovated products/services in 2023.
- Adoption of AI tools by 25 percent of small businesses in 2024 surveys.
- E-commerce sales by small businesses reached $1.1 trillion in 2023.
- 71 percent of small businesses increased digital presence post-pandemic.
- Rural small businesses received $1.2 billion in SBA loans in FY 2023.
- Veteran-owned small businesses awarded $25 billion in federal contracts FY 2023.
- HUBZone small businesses got $13 billion in contracts in FY 2023.
- 15 percent annual growth in small business patents from 2018-2022.
Support and Growth Interpretation
The numbers paint a portrait of a small business sector running on stubborn optimism, fueled by government loans and digital commerce, while constantly peeking around the corner for the next opportunity, even as it side-eyes the current economy with well-earned skepticism.
Sources & References
- Reference 1ADVOCACYadvocacy.sba.govVisit source
- Reference 2SBAsba.govVisit source
- Reference 3CENSUScensus.govVisit source
- Reference 4FEDERALRESERVEfederalreserve.govVisit source
- Reference 5NFIBnfib.comVisit source
- Reference 6BLSbls.govVisit source
- Reference 7USCHAMBERuschamber.comVisit source
- Reference 8USPTOuspto.govVisit source