Small businesses, in their sheer diversity and universality, require no elaborate introduction.
However, their profound significance lies in their role as they form the bedrock of America’s economy.
In 2023, small businesses are facing a number of challenges, including rising inflation, supply chain disruptions, and a labor shortage.
However, they are also resilient and innovative in finding new ways to reach customers and grow their businesses to face these challenges.
As we delve into the recent findings, we’ll see the impact of small businesses on the economy and how they have undeniably contributed to the fabric of the United States.
Top Small Business Stats
As you dig into the nooks and crannies of numbers around small businesses, here are some statistics for you to glance over.
- America boasts over 33.2 million small businesses, making up 99.9% of the total business landscape.
- Small businesses account for over 46% of all private sector employment.
- Over 9.6 million jobs were lost due to the global pandemic. However, employment is expected to grow by 8.3 million, making up 87% of the job losses.
- The average small business has fewer than 5 employees as of 2021.
- Small businesses added over 12.9 million jobs in the last 25 years.
Current Ecosystem of Small Businesses
Knowing the current state of the small business economy is essential for navigating through the business world today, whether you operate an e-commerce site or provide door-to-door services.
Small businesses are the backbone of the economy, and their success is vital to the overall economic health of the nation.
These statistics will better equip you to face the challenge of rising inflation and supply chain disruptions and take the necessary measures to counter the impact of such events on your business.
America boasts over 33.2 million small businesses, making up 99.9% of the total business landscape. (SBA)
There are currently over 33.2 million small businesses in the United States. These small businesses employ over 61.2 million people, which accounts for 46.8% of all private-sector employment.
Despite their importance, small businesses face challenges such as:
- Accessibility to capital required to grow and scale operations.
- Competition from larger businesses both on national and international levels.
- Complex and time-consuming government regulations.
However, these challenges can be overcome by focusing on niche markets, following a customer-first approach, and using technology to streamline your operations.
Small businesses are more likely to be innovative than enterprise companies. (SBA)
According to the U.S.Small Business Association (SBA), patents generated per hundred employees is just 1.7 whereas small firms generate a whopping 26.5 patents per hundred employees.
In other words, while huge corporations may have huge turnovers and better margins, small businesses are more innovative with a wide scope for new innovations.
SME and MSMEs are major enablers of global economic growth. (Salesforce)
Small and medium-sized enterprises (SMEs) are the backbone of the global economy, playing an important role in driving economic growth and creating jobs.
According to SalesForce, SMEs account for over 90% of all businesses worldwide. They also contribute to creating over 50% of new jobs.
This makes them essential for a prosperous and thriving global economy, especially as they are likely to be owned or run by minorities and women, promoting diversity and inclusion in the global economy.
Small businesses support the entire fabric of the U.S. by serving remote and local communities. (Brookings)
Big businesses prefer to set up their establishments in urban and highly populated areas.
However, small businesses are more flexible and are established in various remote and rural areas where no big businesses can be found.
In recent years, SMEs have achieved remarkable progress in creating job opportunities and have emerged as pivotal catalysts for innovation.
Their influence varies across different sectors and nations. This includes playing a substantial role in driving global economic growth by fortifying through fortified employment, nurturing sustainable industrial advancement, and igniting innovation.
50% of small businesses fail after five years. (Bureau of Labour Statistics)
As per data from BLS, the failure rate of small businesses is 18% in the first year, which rises to 50% by the fifth year and 65% by the tenth.
The location of a business can also play a major role in the success of a business. For instance, Michigan, Washington, and Kansas have higher failure rates compared to Massachusetts, Louisiana, and California.
Financial struggles and product competition are two leading reasons why small businesses fail. (CB Insights)
While starting and running a business is not easy, success is definitely a possibility. Here are some tips for you to avoid the pitfalls of failure:
- Develop a solid business plan that outlines your goals, strategies, and financial projections.
- Manage your finances carefully to keep track of your income and expenses.
- Market your business by developing a plan that can help you reach out to your target customers and build your brand image.
- Prepare contingency plans to deal with unforeseen circumstances, such as recessions and natural disasters.
Small businesses account for over 46% of all private-sector employment. (U.S. Chamber of Commerce)
Small businesses in the U.S.account for almost half of employment in the private sector.
This shows the importance of small businesses in the American economy and the well-being of its citizens.
There’s no doubt that SMEs are boosting the economy by reducing the unemployment rate that spiked in millions during the global pandemic.
Small businesses account for over 44% of the country’s GDP (SBA)
Small businesses make up a substantial portion of the American economy, contributing to more than 44% of the GDP.
They play a vital role in creating jobs, generating income, and fostering economic growth.
Recent Trends in U.S. for Small and Medium-sized Enterprises
Knowing the latest trends in small businesses will enable you to plan and prepare your next course of action and make necessary modifications to your operations to align with your goal.
Let’s take a quick look at some of the statistical highlights that influence SMEs.
About 65% of the U.S. population shops online. (Worldometer)
Adapting to the online shopping trend is essential for the survival and growth of small businesses, as the digital landscape continues to evolve and shape consumer behavior.
The current U.S. population is over 340.40 million and about 65% of Americans shop online.
This presents a substantial opportunity for small businesses to reach a large customer base through e-commerce platforms and digital marketing.
However, it also highlights the fierce competition within the online marketplace, where larger corporations often dominate.
The U.S. eCommerce sales in 2023 account for 16.4% of retail sales. (Insider Intelligence)
This clearly shows that digital shopping and e-commerce is slowly becoming the most preferred mode of shopping.
With the annual population growth rate being at 0.5% in 2023, retail e-commerce sales in the U.S. is expected to grow to over 21.2% by 2026.
As of 2019, over 64% of small business owners prefer to use social media for marketing. (The Manifest)
To thrive in this digital era, small businesses need to invest in social media marketing expertise and develop compelling, authentic content to connect with their audience effectively.
Out of 33.2 million small businesses, 87% advertise their business in some form. However, social media also demands a nuanced understanding of the landscape, with evolving algorithms and consumer behaviors, which can be a challenge for some small business owners.
63% of small business owners are confident in the economy. (U.S. Chamber of Commerce)
Despite the challenges they face, small businesses are optimistic about the future. A recent survey found that 63% of small business owners are confident in the economy, and 59% are planning to expand their businesses in the next year.
When small business owners have confidence in the economy, they are more likely to invest in their businesses and take calculated risks, which can contribute to growth and job creation.
61% of small businesses were impacted by supply chain disruptions during the pandemic. (Small Business Index)
The pandemic has highlighted the importance of long-term supply chain planning for small businesses.
Many have recognized the need for greater flexibility, diversification, and risk management in their supply chains.
These alterations could involve finding alternative suppliers, diversifying sources, increasing inventory levels, or implementing more robust supply chain management practices.
This could lead to more robust supply chains in the future.
Small and mid-sized enterprises are the backbone of the U.S. economy. The studies indicate that despite various challenges, small businesses will continue to thrive in the US.
SMEs are more likely to become more globalized by exporting their goods and services to new markets by building partnerships around the world.
With the advent of new technologies propelling their growth, we can expect to see a new age for small businesses.
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