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
1New business applications reached 5.5 million in 2022
Verified24.7 million new business applications in 2023
Verified3Employer business startups increased 8.1% in 2022
Verified419.3% of businesses survive past 5 years
Directional5Business births were 451,689 in 2021
Single source650% of small businesses fail within 5 years
Verified7High-propensity business applications hit 1.1 million in 2023
Verified8Business deaths declined 3.5% in 2022 to 806,521
Verified9Net business formation rate was 2.1% in 2023
Directional1030% survival rate after 10 years for small businesses
Single source11New employer firms opened at record 16.1 per 1,000 in 2021
Verified12Closures fell to 5.1 million nonemployer firms in 2022
Verified1365% of businesses started in 2018 survived to 2023
Verified14Startup rate for employer businesses was 3.9% in 2022
Directional15Pandemic spurred 25% rise in new business formations 2020-2021
Single source1680% of new firms are nonemployer businesses
Verified17Business applications down 6% in early 2023 from peak
Verified18Survival rate for 1-year-old businesses is 78.5%
Verified19High-tech startups increased 20% post-2020
Directional20Firm exit rate was 7.5% in 2022
Single source21New firms with payroll grew 10.2% in 2022
Verified221 in 9 business applications become high-propensity employers
Verified23Survival after 2 years: 65.3% for small businesses
Verified24Record 5.4 million new applications in 2021
Directional25Net entry of 1.2 million businesses in 2022
Single source2620% of startups fail in first year
Verified27Black-owned business formations up 44% 2020-2022
Verified28Latino-owned startups surged 30% in pandemic era
VerifiedBusiness 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
162% of small businesses report inflation as top challenge
Verified233% cite labor quality as biggest issue in 2023
Verified375% of small businesses faced rising costs in 2022
Verified4Access to capital challenges 47% of owners
Directional5Regulatory burden costs small firms $12,000 per employee
Single source682% report tax complexity as issue
Verified7Supply chain disruptions hit 67% of small manufacturers
Verified843% struggle with finding affordable health insurance
Verified9Cyber threats concern 58% of small businesses
Directional1029% cite crime/violence as operating concern
Single source11Energy costs rose for 61% in 2023
Verified1252% face payment delays from customers
Verified13Uncertainty index at 94 for small businesses in 2023
Verified1439% report lower sales due to inflation
Directional15Compliance costs average $34,000 per small firm yearly
Single source1671% worry about recession impact
Verified17Inventory investment down 15% for small retailers
Verified1826% unable to fill job openings
Verified19Rising interest rates affect 55% of borrowers
Directional2048% face increased competition from big firms
Single source21Tech adoption lags in 37% due to cost
Verified2264% concerned about federal regulations
Verified23Capital access index worst since 2013 for small firms
Verified2435% report real sales declines in 2023
Directional25Insurance premiums up 20% for 41% of owners
Single source2657% optimistic despite challenges in Q2 2023
VerifiedChallenges 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
172% of small businesses are home-based
Verified229.8% of small businesses are minority-owned
Verified3Women own 38.1% of employer small businesses
Verified4Veterans own 5.4% of small businesses with employees
Directional514.6 million nonemployer firms are majority Black-owned, wait no: Black-owned businesses: 3.5 million firms
Single source6Hispanic-owned businesses number 4.7 million, 13% of total
Verified7Average age of small business owners is 50 years
Verified828% of small business owners are over 55 years old
Verified9Asian-owned small businesses: 2.1 million, 10% share
Directional1042% of U.S. small businesses are owned by millennials or younger
Single source11Home-based businesses total 27 million
Verified12Women-owned firms employ 12.3 million people
Verified13Black women own 18% of women-owned businesses
Verified1456% of small businesses are sole proprietorships
Directional15Rural small businesses comprise 25% of total
Single source16Gen Z entrepreneurs own 15% of new businesses
Verified17Immigrant-owned firms: 25% of new businesses
Verified186 million veteran-owned small businesses exist
Verified19LGBTQ+ owned businesses: 1.4 million, 7% of total
Directional20Family-owned small businesses: 70% of total
Single source2135% of small business owners have college degrees
Verified22Native American-owned firms: 400,000+
Verified2349% of small businesses owned by people over 50
Verified24Pacific Islander-owned: 150,000 businesses
Directional25Multi-generational ownership in 40% of family firms
Single source2651.1% of employer firms are white male-owned
VerifiedDemographics 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
1Small businesses account for 99.9% of all U.S. businesses as of 2023
Verified2Small businesses represent 44% of U.S. economic activity
Verified3In 2022, small businesses generated $19.1 trillion in sales
Verified4Small firms contribute 43.5% to private sector GDP
Directional5There are 33.2 million small businesses in the U.S.
Single source6Small businesses pay 45.9% of private payroll
Verified7Small businesses export 28.4% of total U.S. goods exports by value
Verified8In the U.S., small businesses make up 99.7% of exporters
Verified9Small businesses account for 64% of net new jobs over the past 25 years
Directional10Small businesses in the U.S. employ 61.7 million Americans
Single source11Small business economic output was $17.9 trillion in 2021
Verified12Small firms comprise 99.8% of firms with employees in the U.S.
Verified13Small businesses contribute 42.9% to U.S. GDP from firms with employees
Verified14In 2022, small businesses added $1.2 trillion to GDP growth
Directional15Small businesses represent 46% of private sector employment
Single source16Small business sales totaled $16 trillion in 2020
Verified17Small firms pay 39.2% of business income taxes
Verified18Small businesses drive 44% of U.S. economic activity by receipts
Verified19In 2023, small businesses accounted for 99.9% of U.S. firms
Directional20Small businesses contribute over $5 trillion in annual payroll
Single source21Small firms make up 97.5% of exporters by number
Verified22Small business GDP share is 43.5% in nonfarm private sector
Verified23Small businesses generated 55% of GDP in services sector
Verified24Small firms' economic activity reached $18.5 trillion in 2022
Directional25Small businesses comprise 99.9% of all employer businesses
Single source26Small business payroll share is 46.4% of private sector
Verified27Small firms contribute 30.2% to manufacturing GDP
Verified28In retail trade, small businesses account for 98.6% of firms
Verified29Small businesses' share of receipts is 41% in construction
Directional30Small firms drive 77.2% of net new jobs since 2005
Single sourceEconomic 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
1Small businesses employ 47.1% of the private workforce in 2022
Verified2Small firms created 12.9 million net new jobs from 2010-2020
Verified3In 2023, small businesses employ 62.6 million workers
Verified4Small businesses account for 46% of U.S. private sector jobs
Directional5Firms with fewer than 20 employees employ 17.3% of workers
Single source6Small businesses hired 1.8 million workers in Q1 2023
Verified789% of small business owners reported hiring challenges in 2023
Verified8Small firms employ 58% of manufacturing workers
Verified9In leisure and hospitality, small businesses employ 62.5% of workers
Directional10Small businesses employ 78.8% of workers in construction
Single source11Net job creation by small firms was 66% from 2000-2019
Verified12Small businesses employ 99.8% of firms with paid employees
Verified1348.7% of small business employees are in firms with 1-19 workers
Verified14Small firms added 2.1 million jobs post-COVID recovery by 2023
Directional15In professional services, small businesses employ 82.3% of workforce
Single source16Small business job growth rate was 2.3% in 2022
Verified17Firms under 500 employees employ 50.7% of private workforce
Verified18Small businesses face 42% labor shortage rate in 2023
Verified19Small firms employ 53.7% in education and health services
Directional20Job openings at small firms rose 15% in 2022
Single source2176% of small businesses plan to increase employment in 2024
Verified22Small businesses employ 84% of retail trade workers
Verified23Average small business employment growth was 1.9% in 2023
Verified24Small firms created 1.5 million jobs in 2023
Directional25In wholesale trade, small businesses employ 68.4%
Single source26Small business unemployment claims dropped 20% in 2023
Verified2755% of small firm jobs are in services
Verified28Small firms employ 40.1% of transportation workers
VerifiedEmployment 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
- Reference 4NFIBnfib.comVisit source
- Reference 5BLSbls.govVisit source
- 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