While they might be the quiet neighbor on your street or the modest shop on the corner, small businesses are the roaring engine of the American economy, responsible for nearly half of all private sector jobs and economic activity.
Key Takeaways
- Small businesses account for 99.9% of all U.S. businesses as of 2023
- Small businesses represent 44% of U.S. economic activity
- In 2022, small businesses generated $19.1 trillion in sales
- Small businesses employ 47.1% of the private workforce in 2022
- Small firms created 12.9 million net new jobs from 2010-2020
- In 2023, small businesses employ 62.6 million workers
- New business applications reached 5.5 million in 2022
- 4.7 million new business applications in 2023
- Employer business startups increased 8.1% in 2022
- 72% of small businesses are home-based
- 29.8% of small businesses are minority-owned
- Women own 38.1% of employer small businesses
- 62% of small businesses report inflation as top challenge
- 33% cite labor quality as biggest issue in 2023
- 75% of small businesses faced rising costs in 2022
Small businesses form America's economic backbone, creating most jobs and driving nearly half of all activity.
Business Formation
- New business applications reached 5.5 million in 2022
- 4.7 million new business applications in 2023
- Employer business startups increased 8.1% in 2022
- 19.3% of businesses survive past 5 years
- Business births were 451,689 in 2021
- 50% of small businesses fail within 5 years
- High-propensity business applications hit 1.1 million in 2023
- Business deaths declined 3.5% in 2022 to 806,521
- Net business formation rate was 2.1% in 2023
- 30% survival rate after 10 years for small businesses
- New employer firms opened at record 16.1 per 1,000 in 2021
- Closures fell to 5.1 million nonemployer firms in 2022
- 65% of businesses started in 2018 survived to 2023
- Startup rate for employer businesses was 3.9% in 2022
- Pandemic spurred 25% rise in new business formations 2020-2021
- 80% of new firms are nonemployer businesses
- Business applications down 6% in early 2023 from peak
- Survival rate for 1-year-old businesses is 78.5%
- High-tech startups increased 20% post-2020
- Firm exit rate was 7.5% in 2022
- New firms with payroll grew 10.2% in 2022
- 1 in 9 business applications become high-propensity employers
- Survival after 2 years: 65.3% for small businesses
- Record 5.4 million new applications in 2021
- Net entry of 1.2 million businesses in 2022
- 20% of startups fail in first year
- Black-owned business formations up 44% 2020-2022
- Latino-owned startups surged 30% in pandemic era
Business Formation Interpretation
The entrepreneurial spirit is clearly alive and kicking, with millions answering the siren call of starting up, yet the sobering reality is that for every bustling grand opening, there's a quiet closing just around the corner, proving it's still a brutal, if hopeful, numbers game.
Challenges
- 62% of small businesses report inflation as top challenge
- 33% cite labor quality as biggest issue in 2023
- 75% of small businesses faced rising costs in 2022
- Access to capital challenges 47% of owners
- Regulatory burden costs small firms $12,000 per employee
- 82% report tax complexity as issue
- Supply chain disruptions hit 67% of small manufacturers
- 43% struggle with finding affordable health insurance
- Cyber threats concern 58% of small businesses
- 29% cite crime/violence as operating concern
- Energy costs rose for 61% in 2023
- 52% face payment delays from customers
- Uncertainty index at 94 for small businesses in 2023
- 39% report lower sales due to inflation
- Compliance costs average $34,000 per small firm yearly
- 71% worry about recession impact
- Inventory investment down 15% for small retailers
- 26% unable to fill job openings
- Rising interest rates affect 55% of borrowers
- 48% face increased competition from big firms
- Tech adoption lags in 37% due to cost
- 64% concerned about federal regulations
- Capital access index worst since 2013 for small firms
- 35% report real sales declines in 2023
- Insurance premiums up 20% for 41% of owners
- 57% optimistic despite challenges in Q2 2023
Challenges Interpretation
Running a small business in 2023 feels like juggling chainsaws while being quoted prices in a currency that inflates by the minute, yet against all logic, more than half of you still manage a stubborn, admirable grin.
Demographics
- 72% of small businesses are home-based
- 29.8% of small businesses are minority-owned
- Women own 38.1% of employer small businesses
- Veterans own 5.4% of small businesses with employees
- 14.6 million nonemployer firms are majority Black-owned, wait no: Black-owned businesses: 3.5 million firms
- Hispanic-owned businesses number 4.7 million, 13% of total
- Average age of small business owners is 50 years
- 28% of small business owners are over 55 years old
- Asian-owned small businesses: 2.1 million, 10% share
- 42% of U.S. small businesses are owned by millennials or younger
- Home-based businesses total 27 million
- Women-owned firms employ 12.3 million people
- Black women own 18% of women-owned businesses
- 56% of small businesses are sole proprietorships
- Rural small businesses comprise 25% of total
- Gen Z entrepreneurs own 15% of new businesses
- Immigrant-owned firms: 25% of new businesses
- 6 million veteran-owned small businesses exist
- LGBTQ+ owned businesses: 1.4 million, 7% of total
- Family-owned small businesses: 70% of total
- 35% of small business owners have college degrees
- Native American-owned firms: 400,000+
- 49% of small businesses owned by people over 50
- Pacific Islander-owned: 150,000 businesses
- Multi-generational ownership in 40% of family firms
- 51.1% of employer firms are white male-owned
Demographics Interpretation
America's entrepreneurial spirit is a gloriously chaotic national experiment in self-reliance, currently being run from kitchen tables by a surprisingly young, diverse, and increasingly female-led cohort, though it still has plenty of gray hair and garage-based hustle in the mix.
Economic Impact
- Small businesses account for 99.9% of all U.S. businesses as of 2023
- Small businesses represent 44% of U.S. economic activity
- In 2022, small businesses generated $19.1 trillion in sales
- Small firms contribute 43.5% to private sector GDP
- There are 33.2 million small businesses in the U.S.
- Small businesses pay 45.9% of private payroll
- Small businesses export 28.4% of total U.S. goods exports by value
- In the U.S., small businesses make up 99.7% of exporters
- Small businesses account for 64% of net new jobs over the past 25 years
- Small businesses in the U.S. employ 61.7 million Americans
- Small business economic output was $17.9 trillion in 2021
- Small firms comprise 99.8% of firms with employees in the U.S.
- Small businesses contribute 42.9% to U.S. GDP from firms with employees
- In 2022, small businesses added $1.2 trillion to GDP growth
- Small businesses represent 46% of private sector employment
- Small business sales totaled $16 trillion in 2020
- Small firms pay 39.2% of business income taxes
- Small businesses drive 44% of U.S. economic activity by receipts
- In 2023, small businesses accounted for 99.9% of U.S. firms
- Small businesses contribute over $5 trillion in annual payroll
- Small firms make up 97.5% of exporters by number
- Small business GDP share is 43.5% in nonfarm private sector
- Small businesses generated 55% of GDP in services sector
- Small firms' economic activity reached $18.5 trillion in 2022
- Small businesses comprise 99.9% of all employer businesses
- Small business payroll share is 46.4% of private sector
- Small firms contribute 30.2% to manufacturing GDP
- In retail trade, small businesses account for 98.6% of firms
- Small businesses' share of receipts is 41% in construction
- Small firms drive 77.2% of net new jobs since 2005
Economic Impact Interpretation
The United States economy is basically a giant, world-dominating corporation that's actually just a very, very large collection of scrappy, underdog small businesses who, while constantly worrying about making payroll, somehow also manage to pay nearly half of it.
Employment
- Small businesses employ 47.1% of the private workforce in 2022
- Small firms created 12.9 million net new jobs from 2010-2020
- In 2023, small businesses employ 62.6 million workers
- Small businesses account for 46% of U.S. private sector jobs
- Firms with fewer than 20 employees employ 17.3% of workers
- Small businesses hired 1.8 million workers in Q1 2023
- 89% of small business owners reported hiring challenges in 2023
- Small firms employ 58% of manufacturing workers
- In leisure and hospitality, small businesses employ 62.5% of workers
- Small businesses employ 78.8% of workers in construction
- Net job creation by small firms was 66% from 2000-2019
- Small businesses employ 99.8% of firms with paid employees
- 48.7% of small business employees are in firms with 1-19 workers
- Small firms added 2.1 million jobs post-COVID recovery by 2023
- In professional services, small businesses employ 82.3% of workforce
- Small business job growth rate was 2.3% in 2022
- Firms under 500 employees employ 50.7% of private workforce
- Small businesses face 42% labor shortage rate in 2023
- Small firms employ 53.7% in education and health services
- Job openings at small firms rose 15% in 2022
- 76% of small businesses plan to increase employment in 2024
- Small businesses employ 84% of retail trade workers
- Average small business employment growth was 1.9% in 2023
- Small firms created 1.5 million jobs in 2023
- In wholesale trade, small businesses employ 68.4%
- Small business unemployment claims dropped 20% in 2023
- 55% of small firm jobs are in services
- Small firms employ 40.1% of transportation workers
Employment Interpretation
Despite constantly complaining they can't find help, small businesses are quietly doing the heavy lifting of employing half the country and inventing most of its new jobs.
Sources & References
- Reference 1ADVOCACYadvocacy.sba.govVisit source
- Reference 2SBAsba.govVisit source
- Reference 3CENSUScensus.govVisit source
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- Reference 6NBERnber.orgVisit source
- Reference 7BEFbef.census.govVisit source
- Reference 8KAUFFMANkauffman.orgVisit source
- Reference 9FUNDERAfundera.comVisit source
- Reference 10LGBTCHAMBERlgbtchamber.orgVisit source
- Reference 11FAMILYBUSINESSREVIEWfamilybusinessreview.comVisit source