Get To Know Small Business In America
A small business is more likely to succeed with a strong business plan, realistic financial planning, and knowledgeable partner like Community Business Finance.
Fun Facts & Stats About Small Business
What Defines A Small Business?
By SBA standards, a small business is typically a company with fewer than 500 employees, but SBA also looks at other factors such as sales, net income, and net worth. For example, SBA 504 loans are eligible for companies with a net worth under $15million and 2-year net profit of under $5 million. Most Americans can tell the difference between a large and a small company, but there is some confusion in the general public around franchises and middle-market companies. Many franchisees are small, independent operators, but there are some larger, multi-unit operators that exist that don’t fit the definition of “small”. Middle-market companies are typically private and may start at annual revenue of $10 million and be as high as $1 billion. Lower middle-market companies top off at $100 million with 500 to 1,500 employees.
How Many Small Businesses Are There In the United States?
According to the SBA, there are approximately 33.2 million small businesses in our country; however, 27 million are classified as sole proprietors with no employees that may or may not be full-time operations. 5.4 million have fewer than 20 employees and 650,000 have between20 and 499 employees.
How Many Jobs Are Created by Small Businesses?
Per the SBA, 8.7 million jobs were created by small businesses between March 2020 and March 2021, but those figures are possibly skewed because of COVID. By comparison, small businesses accounted for 1.8 million jobs in 2019.
Reasons Entrepreneurs Start Businesses
In a recent article published by Guidant Financial, the No. 1reason to start up a business is to be the boss (29% of those surveyed), and the No. 2 reason is to exit corporate jobs and professions (17% of those surveyed). At Community Business Finance, we often meet aspiring entrepreneurs who want to leverage their talents, experience, and network of industry contacts into companies that are more innovative, more efficient, and more responsive to the marketplace. They are looking for an opportunity to build wealth, generate greater income, and/or establish a family business that has the benefit of more freedom and flexibility.
The “Side Hustle” Era
According to research performed by Salesforce, Millennials and Gen Z’ers are 188% more likely to have the aim to create a side business compared to Baby Boomers. Interestingly, Gen X is not mentioned. The onset of television shows like Shark Tank, The Profit, and others have inspired a younger generation of inventors and innovators while the older, more conservative generations prefer more conventional careers and companies.
Small Business Longevity
More than 20% of small enterprises fail in the first year and nearly 50% fail within the first five years, according to the Bureau of Labor Statistics in 2021. One of the main reasons cited for the failures is too little financing. Most of these start-ups are not financed with bank or SBA loans. With a strong business plan, realistic financial planning, and knowledgeable partner like Community Business Finance, a small business is much more likely to succeed well past the first five years and into the future.