Small Business Statistics and Trends in 2020

Small Business Statistics and Trends in 2020

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There are 30.2 million small businesses employing 58.9 million people in the United States. This accounts for 99.9% of all businesses and 47.5% of all employees in the United States. [1]

The number of people filing business applications (or an application for an EIN) in the U.S. this quarter has increased compared to the first quarter of 2019. However, It has seen a decline of 0.9% compared to a year ago. [2]

How often do businesses fail? About 20% of businesses fail in the first year, about 33% fail by the second year and about 50% of businesses remain by the fifth year of operations. [3]

How many businesses are profitable? Only 57% of small businesses are profitable; 20% break even, and 23% are unprofitable.

How do businesses compare to 10 years ago? Income for small-business proprietors is up 75% from 10 years ago. [1]

How do businesses compare to last year? As much as 73% of businesses said input costs increased, and more than half of these firms passed on the costs to their customers. [7]

What is total job creation over the last five years? Small businesses created a net 6.8 million new jobs versus 2.7 million new jobs by large businesses over the last five years [1]

How much do small businesses make? About 82% of small businesses earn more than $100,000 in revenue. [12]

What is the revenue of small businesses in the U.S.?

The overall economy seems to have little effect on business failure rates, as the number of business failures did not increase in times of economic hardship or decrease in times of economic prosperity. [3] Despite the number of business failures remaining stagnant during times of economic hardship, this is not true for all industries. For example, during the height of the financial recession in 2008 and 2009, the construction industry saw more than 33% of small businesses fail in their first year.

The largest reasons why businesses fail, cited by business owners, come from the lack of a market need and running out of money. [4]

Restaurants and businesses in the hospitality industry perform as well as any other business, while the construction industry sees the most business failures. Over the last 20 years, on average, only 17.3% of businesses in the restaurant and hospitality industry fail in their first year, which is below the average business failure rate of about 20%. On the other hand, the construction industry sees the most business failures, with the average first-year failure rate of 23.6% over the last 20 years. [15]

Small-business overview

When determining what counts as a small business, the Small Business Administration considers several factors including industry, degree of competition, average firm size and startup costs. This helps the government determine which businesses qualify for their small-business programs. [5]

Most small businesses can be defined either by revenue or by number of employees. Some businesses, such as financial institutions, may be judged by a different metric such as asset size. The revenue limit range for a small business is $750,000 to $38.5 million. The employee limit range for a small business is 100 to 1,500 people. [5]

Small-business financing

How has small-business financing changed over the last year? Demand for new financing increased to 43% of small businesses in 2018 from 40% of small businesses in 2017. [7]

What is the debt profile of small businesses? The amount of small-business debt originated in 2017 is $245 billion. [8] 70% of small businesses have debt, and half of the businesses with debt have less than $100,000.

More than 40% of firms applied for financing in 2018, but 1 in 5 firms that applied did not receive any financing, and 1 in 3 firms only received some of the financing they applied for. [7]

Banks/Financial institutions

  • Of the large banks that submitted loan applications, 58% were approved versus 71% at small banks.
  • Nearly 60% of applicants at large banks indicated their existing relationship with the bank as the biggest reason they chose a large bank versus 65% of applicants at small banks.

SBA 7(a) loans

  • Of applicants looking for a business loan, 22% chose to apply for SBA loans. [7]
  • 85% of the loans are for businesses in urban areas, up from 84% last year and 82% in 2016.
  • Forty-five percent of business loans are between $350,000 and $2 million.

Online lending platforms

  • Thirty-two percent of applicants turned to online lenders in 2018, which is up from 24% in 2017 and 19% in 2016. [7]
  • Those with higher credit risk were likely to turn to online lenders as opposed to a bank (54% versus 50%). [7]

Personal funding

  • When faced with a financial challenge, 69% of small-business owners used their personal funds. [7]

Small-business credit cards

  • Just more than half (52%) of business owners used credit cards on a regular basis. [7]
  • 28% of business owners seeking credit applied for a business credit card. [7]

Angel investments [9]

  • Angels invested an average of $37,000.
  • 54.8% of angels have entrepreneurial experience themselves and have better portfolios than those without entrepreneurial experience.

Venture capital [10]

  • There has been $66 billion invested through venture capital across 4,868 deals in the first half of 2019.
  • The average amount invested in each deal is increasing, with $50 million+ investments constituting the bulk of money invested.

Business owner characteristics

Whether it's race, age or gender, business owners are becoming increasingly diverse. The share of business owners over 50 continue to increase alongside minority business ownership. [12]

Business owner characteristicFigure% change over last 3 years
Median income$51,419+4.5%
Percent over the age of 5550.1%+4.5%
Gender80% male vs. 20% femaleN/A
Location83% in urban area+0.0%
Race85.4% white vs. 14.6% nonwhiteN/A

How did the business owner come to own the business? 91% of small-business owners have come into their position through founding the company or purchasing it.

What percentage of people inherit a business?

Do business owners have experience with running a business? Current business owners reported that 65.5% haven't owned a business before, while 3.8% reported having owned five or more businesses prior to their current business. Nearly 70% of business owners cited the business as a main source of income, while it was not the main source of income for 31.7%. [12]

Is this business the main source of income for the business owner? Diving deeper, during the first two years of opening, only 59.2% of business owners consider their business as their main source of income. This percentage gradually increases as the age of the business increases. More male business owners consider their business to be their main source of income at 70.2% versus 62.7% female business owners who consider their business to be their main source of income. [12]

How many hours a week does a business owner work? Although 60.1% of business owners reported working 40 or more hours a week on their business, we cannot conclude they consider their business as a main source of income. [12]

How many hours does a small business owner work each week?

How many business owners have a college degree? The educational backgrounds of business owners are diverse. More than half (51.4%) of business owners have at least a bachelor's degree, 56.9% of business owners have at least an associate degree and 71.1% of business owners have at least some college experience. [12]

How much schooling do business owners have?

What did the business owner study in college (if they went to college)? For business owners with a higher education degree, the most common field of study was business or finance (29.9%) and the second most was health, medicine or pharmacy (17.4%). [12]

What did business owners study in college?

Small businesses by industry

Although small businesses employ 47.5% of the workforce, some industries will have a much higher share of small businesses as an employer. For example, 85.1% of employees in the agriculture, forestry, fishing and hunting industry work for small businesses, while only 26.4% of information sciences employees work for small businesses.. [12]

IndustryEmployment numberSmall business share
Health care and social assistance8,867,56845.2%
Accomodation and food services7,997,65460.6%
Retail trade5,514,37835.1%
Professional, scientific and technical services5,075,60157.7%
Administrative, support and waste management3,625,05732.6%
Wholesale trade3,486,80757.4%
Finance and insurance1,920,06631.3%
Educational services1,603,70744.0%
Real estate, rental and leasing1,410,53068.3%
Arts, entertainment and recreation1,370,19461.4%
Mining and oil and gas extraction296,00539.8%
Agriculture, forestry, fishing and hunting136,25485.1%
Other services4,626,82685.7%
Not classified24,155100%

What is the largest industry for small businesses? As social trends develop and technology continues to advance, these numbers will continue to shift. Whether one specific industry continues to grow, or advances affect swaths of industries, it is uncertain which industries will be the largest employers 10 years from now.

Small business employee benefits

Why are benefits important? Benefits are a major component in overall job satisfaction to the vast majority (92%) of employees. More than 70% of firms increased their benefits offerings over the last 12 months to retain employees and attract new talent. In fact, firms that prioritized benefits as a strategic tool for gaining and retaining talent were twice as likely to have satisfied employees versus firms that don't use benefits as a strategic tool. [11] Here are some of the typical benefits you'll find small businesses offer:

Benefits% of firms offer
Health care benefits99%
Wellness benefits75%
Paid leave benefits (vacation)96%
Paid leave benefits (sick)79%
Paid leave benefits (personal)36%
Retirement plans95%
Relocation benefits6%

This table pertains to full-time employees.

Paid personal leave continues to rise, mainly driven by the increase of paid maternity/paternity leave. Paid paternity leave is being offered at more firms and increasing even quicker than paid maternity leave. However, this is because paid maternity leave is already much more widely offered than paid paternity leave. These benefits are usually found at bigger firms.[11]

Challenges companies face with benefits

Challenges% of firms
Increasing health care costs70%
Cost of benefits overall41%
Attracting new talent31%
Employee retention28%


Richard is a research analyst who recently graduated from New York University's Stern School of Business with a B.S. in Finance and Sustainable business. During his time at school, he enjoyed learning how business and society intersects. Since graduating, he has enjoyed traveling, cooking, and learning about retirement accounts.