Small Business Guy

Small Business Guy

Supporting U.S. Small Business The Way It Once Was.

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Fund your business

It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business.

Determine how much funding you'll need

Every business has different needs, and no financial solution is one-size-fits-all. Your personal financial situation and vision for your business will shape the financial future of your business.

Once you know how much startup funding you’ll need, it’s time to figure out how you’ll get it.

Piggy bank


Man in shirt and tie


Bank and money


Fund your business yourself with self-funding

Otherwise known as bootstrapping, self-funding lets you leverage your own financial resources to support your business. Self-funding can come in the form of turning to family and friends for capital, using your savings accounts, or even tapping into your 401(k).

With self-funding, you retain complete control over the business, but you also take on all the risk yourself. Be careful not to spend more than you can afford, and be especially careful if you choose to tap into retirement accounts early. You might face expensive fees or penalties, or damage your ability to retire on time — so you should check with your plan’s administrator and a personal financial advisor first.

Get venture capital from investors

Investors can give you funding to start your business in the form of venture capital investments. Venture capital is normally offered in exchange for an ownership share and active role in the company.

Venture capital differs from traditional financing in a number of important ways. Venture capital typically:

  • Focuses high-growth companies
  • Invests capital in return for equity, rather than debt (it’s not a loan)
  • Takes higher risks in exchange for potential higher returns
  • Has a longer investment horizon than traditional financing

Almost all venture capitalists will, at a minimum, want a seat on the board of directors. So be prepared to give up some portion of both control and ownership of your company in exchange for funding.

How to get venture capital funding

There’s no guaranteed way to get venture capital, but the process generally follows a standard order of basic steps.

  1. Find an investor 
    Look for individual investors — sometimes called “angel investors” — or venture capital firms. Be sure to do enough background research to know if the investor is reputable and has experience working with startup companies.
  2. Share your business plan 
    The investor will review your business plan to make sure it meets their investing criteria. Most investment funds concentrate on an industry, geographic area, or stage of business development.
  3. Go through due diligence review 
    The investors will look at your company’s management team, market, products and services, corporate governance documents, and financial statements.
  4. Work out the terms 
    If they want to invest, the next step is to agree on a term sheet that describes the terms and conditions for the fund to make an investment.
  5. Investment
    Once you agree on a term sheet, you can get the investment! Once a venture fund has invested, it becomes actively involved in the company. Venture funds normally come in “rounds.” As the company meets milestones, further rounds of financing are made available, with adjustments in price as the company executes its plan.

No treasure map necessary

When John and Kelly didn’t have enough money to open their auto repair shop, they got an SBA-backed loan to help start their business.

Read more  

Use crowdfunding to fund your business

Crowdfunding raises funds for a business from a large number of people, called crowdfunders. Crowdfunders aren’t technically investors, because they don’t receive a share of ownership in the business and don’t expect a financial return on their money.

Instead, crowdfunders expect to get a “gift” from your company as thanks for their contribution. Often, that gift is the product you plan to sell or other special perks, like meeting the business owner or getting their name in the credits. This makes crowdfunding a popular option for people who want to produce creative works (like a documentary), or a physical product (like a high-tech cooler).

Crowdfunding is also popular because it’s very low risk for business owners. Not only do you get to retain full control of your company, but if your plan fails, you’re typically under no obligation to repay your crowdfunders. Every crowdfunding platform is different, so make sure to read the fine print and understand your full financial and legal obligations.

Get a small business loan

If you want to retain complete control of your business, but don’t have enough funds to start, consider a small business loan.

To increase your chances of securing a loan, you should have a business planexpense sheet, and financial projections for the next five years. These tools will give you an idea of how much you'll need to ask for, and will help the bank know they’re making a smart choice by giving you a loan.

Once you have your materials ready, contact banks and credit unions to request a loan. You’ll want to compare offers to get the best possible terms for your loan.

Use Lender Match to find lenders who offer SBA-guaranteed loans 

If you have trouble getting a traditional business loan, you should look into SBA-guaranteed loans. When a bank thinks your business is too risky to lend money to, the U.S. Small Business Administration (SBA) can agree to guarantee your loan. That way, the bank has less risk and is more willing to give your business a loan.

Use Lender Match to find lenders who offer SBA-guaranteed loans.

SBA investment programs

Small Business Investment Company (SBIC)

SBICs are privately owned and managed investment funds licensed and regulated by SBA. They use their own capital, plus funds borrowed with an SBA guarantee, to make equity and debt investments in qualifying small businesses. Learn more about SBICs to see if your business might qualify.

Small Business Innovation Research (SBIR) program

This program encourages small businesses to engage in federal research and development that has the potential for commercialization. Find out if the SBIR’s competitive awards-based program makes sense for you.


Small Business Technology Transfer (STTR) program

This program offers funding opportunities in the federal innovation research and development arena. Small businesses who qualify for this program work with nonprofit research institutions in the early and intermediate stages of starting up. Find out if the STTR program makes sense for your business.




Drawing on a survey of more than 5,800 small businesses, this paper provides insight into the economic impact of coronavirus 2019 (COVID-19) on small businesses. The results shed light on both the financial fragility of many small businesses, and the significant impact COVID-19 had on these businesses in the weeks after the COVID-19–related disruptions began. The results also provide evidence on businesses’ expectations about the longer-term impact of COVID-19, as well as their perceptions of relief programs offered by the government.


To explore the impact of coronavirus disease 2019 (COVID-19) on small businesses, we conducted a survey of more than 5,800 small businesses between March 28 and April 4, 2020. Several themes emerged. First, mass layoffs and closures had already occurred—just a few weeks into the crisis. Second, the risk of closure was negatively associated with the expected length of the crisis. Moreover, businesses had widely varying beliefs about the likely duration of COVID-related disruptions. Third, many small businesses are financially fragile: The median business with more than $10,000 in monthly expenses had only about 2 wk of cash on hand at the time of the survey. Fourth, the majority of businesses planned to seek funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. However, many anticipated problems with accessing the program, such as bureaucratic hassles and difficulties establishing eligibility. Using experimental variation, we also assess take-up rates and business resilience effects for loans relative to grants-based programs.
In addition to its impact on public health, coronavirus disease 2019 (COVID-19) has caused a major economic shock. In this paper, we explore the impact of COVID-19 on the small business landscape in the United States, focusing on three questions. First, how did small businesses adjust to the economic disruptions resulting from COVID-19? Second, how long did businesses expect the crisis to last, and how do expectations affect their decisions? Third, how might alternative policy proposals impact business and employment resilience?
To explore, we surveyed more than 5,800 small businesses that are members of Alignable, a network of 4.6 million small businesses. The survey was conducted between March 28 and April 4, 2020. The timing of the survey allows us to understand expectations of business owners at a critical point in time when both the progression of COVID-19 and the government’s response were quite uncertain.
The results suggest that the pandemic had already caused massive dislocation among small businesses just several weeks after its onset and prior to the availability of government aid through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Across the full sample, 43% of businesses had temporarily closed, and nearly all of these closures were due to COVID-19. Respondents that had temporarily closed largely pointed to reductions in demand and employee health concerns as the reasons for closure, with disruptions in the supply chain being less of a factor. On average, the businesses reported having reduced their active employment by 39% since January. The decline was particularly sharp in the Mid-Atlantic region (which includes New York City), where 54% of firms were closed and employment was down by 47%. Impacts also varied across industries, with retail, arts and entertainment, personal services, food services, and hospitality businesses all reporting employment declines exceeding 50%; in contrast, finance, professional services, and real estate-related businesses experienced less disruption, as these industries were better able to move to remote production.
Our results also highlight the financial fragility of many businesses. The median firm with monthly expenses over $10,000 had only enough cash on hand to last roughly 2 wk. Three-quarters of respondents only had enough cash on hand to last 2 mo or less.* Not surprisingly, firms with more cash on hand were more optimistic that they would remain open by the end of the year.
Our survey also elicited businesses’ beliefs about the evolution of the crisis, allowing us to study the role of beliefs and expectations in decisions. The median business owner expected the dislocation to last well into midsummer, as 50% of respondents believed that the crisis would last at least until the middle of June. However, beliefs about the likely duration of the crisis varied widely. This raises the possibility that some firms were making mistakes in their forecasts of how long the crisis will last.
The crisis duration plays a central role in the total potential impact. For a crisis lasting 4 mo instead of 1 mo, only 47% of businesses expected to be open in December compared to 72% under the shorter duration. There is also considerable heterogeneity in how sensitive businesses are to the crisis. In-person industries like personal services or retail reported worse prospects for riding out the pandemic than professional services or other sectors with minimal need for face-to-face contact.
Lastly, our analysis explores variants of stimulus packages that were being discussed at the time of the survey. The results show that over 70% of respondents anticipated taking advantage of aid when asked about a program that resembles the Paycheck Protection Program (PPP) that is part of the CARES Act. Moreover, they expected this funding to influence other business decisions—including layoff decisions and staying in business altogether. At the same time, many businesses were reluctant to apply for funding through the CARES Act because of concerns about administrative complexity and eligibility. A large number of respondents also anticipated problems with accessing the aid, citing potential issues such as bureaucratic hassles and difficulties establishing eligibility.
Our survey was constructed to allow for a counterfactual evaluation of a straight loan policy, which is a stylized representation of traditional Small Business Administration disaster relief programs. While the more generous PPP program does improve take-up and business outcomes, traditional loans with speedy delivery and sufficient liquidity are also found to meaningfully shift business owners’ expectations about survival. When compared to a straight loan without forgiveness provisions, the CARES Act had modestly greater take-up, but at much higher cost to the government. Because the majority of business owners would have taken up aid in the form of less generous loans, our results suggest that liquidity provision was paramount for these owners.
Overall, our paper contributes to our understanding of the economic impact of COVID-19 on the small business ecosystem. The fate of the 48% of American workers who work in small businesses is closely tied to the resilience of the small business ecosystem to the massive economic disruption caused by the pandemic. Our survey was conducted during a period of substantial policy uncertainty and before any federal response had been enacted. Our results provide a unique snapshot into business decisions and expectations at that time, while offering insight for policy designed to aid the recovery. Our results highlight the role the length of the crisis will play in determining its ultimate impact, which policy makers should consider as they contemplate the scale of the required interventions. We estimate that closures alone might lead to 32.7 million job losses if the crisis lasts for 4 mo and 35.1 million job losses if the crisis lasts for 6 mo. While some of these workers will surely find new jobs, these projections suggest that the scale of job dislocation could be larger than anything America has experienced since the Great Depression and larger than the impact of the 1918 influenza epidemic (68). Another important take-away of our work is that, during liquidity crunches with significant cash flow disruptions, the form of cash injection (e.g., grant vs. loan) may be less important than making sure that funding is rapidly available with little administrative complexity.
The rest of the paper proceeds as follows. Survey Design and Details discusses the survey design. Firm Characteristics and Representativeness discusses the characteristics of the firms that responded to the survey and their representativeness. In Responses to the COVID-19 Pandemic and Lockdown, we explore the current and expected impacts of COVID-19 on these businesses. In Anticipated Response to CARES Act Programs, we present results from a module of the survey that experimentally varies policy proposals, allowing us to explore responses to policies such as the recently passed CARES Act as well as alternative policies. Industry Differences in Response to Crisis Duration considers survival rate differences across industries, and how survival depends on the duration of the crisis. We conclude in Conclusion.

Survey Design and Details

Our survey was sent out in partnership with Alignable, a network-based platform focused on the small business ecosystem. Alignable enables businesses to share knowledge and interact with one another, and currently has a network of 4.6 million small businesses across North America. Much of the network growth has been organic, with little outside marketing.
Alignable also regularly sends out polls (which they call “pulse surveys”) to users. At the end of a regular pulse poll, participants who took that poll received an email inviting them to participate in a more comprehensive survey being conducted by researchers at Harvard Business School. Participants were shown a disclosure statement and consent protocol. No payments were offered; participation was completely voluntary. The survey was approved by the Harvard University Institutional Review Board.
We received 7,511 responses between March 27 and April 4; 5,843 of these can be traced back to US-based businesses, which is the relevant sample for understanding policy. While the 7,511 responses represent a small fraction (0.017%) of Alignable’s total membership, they represent a much larger share of Alignable’s membership that has engaged with their weekly pulse surveys on COVID-19. Alignable estimates that 50,000 to 70,000 members are taking these pulse surveys weekly, which suggests a 10 to 15% conversion rate of these more active respondents.
Our sample, therefore, is selected in three ways: 1) They are firms that have chosen to join Alignable, 2) they are Alignable firms that have chosen to stay actively engaged taking surveys, and 3) they are the set of firms that are active within Alignable that chose to answer our survey. Consequently, there are many reasons to be cautious when extrapolating to the entire universe of America’s small businesses. We will discuss their representativeness based on observable attributes in the next section of this report.
The survey included a total of 43 questions, with basic information about firm characteristics (including firm size and industry), questions about the current response to the COVID-19 crisis, and beliefs about the future course of the crisis. Some questions were only displayed based on skip logic, so most participants responded to fewer questions. The survey also includes an experimental module that randomized scenarios between respondents to understand how different federal policies might impact these firms’ behavior and survival as the crisis unfolds. Specifically, we experimentally varied some of the descriptions of potential policies across the sample to shed light on the potential impact of policy initiatives that, at the time, were very uncertain. We will discuss that module more thoroughly in Anticipated Response to CARES Act Programs. A further experimental module included between-respondent randomization which explored decisions under different hypothetical durations of the crisis.

Firm Characteristics and Representativeness

The survey contains three baseline questions which enable us to assess the representativeness of the sample along observable dimensions: number of employees, typical expenses (as of January 31, 2020), and share of expenses that go toward payroll. We are also able to get rough information about geolocation to assess representativeness by state.
We compare our data with data on businesses from the 2017 Census of US Businesses, using the publicly available statistics published by the US Census Bureau. The underlying data are drawn from the County Business Patterns sampling frame and cover establishments with paid employees, including sole proprietorships if the owner receives a W2. The Census data capture large and small businesses alike, but, for our comparisons, we will look only at businesses with fewer than 500 employees.
The Alignable network allows users to share customer leads, which could potentially skew our sample toward retail and service businesses that interact directly with consumers. Since retail businesses are particularly vulnerable to COVID-19 disruptions, our sample could overstate the aggregate dislocation created by the crisis. Naturally, industries dominated by large firms, such as manufacturing, are underrepresented. However, as we discuss later, our data on the industry mix of responses suggest that the sample represents a wide swath of America’s smaller businesses.
Fig. 1 shows the size distribution of our sample and the size distribution of businesses with fewer than 500 employees in the Economic Census. The match of employment sizes is reassuring. About 64% of the businesses in our sample have fewer than five employees, while about 60% of the firms in the Economic Census are that small. About 18% of businesses in both samples have between five and nine employees. The survey becomes less precisely matched to the Census among the larger employment groupings, and we believe that our survey will capture the experience of larger employers with less accuracy.
Fig. 1.
Firm size in the survey and Census. This figure plots the share of firms in each employment category for the 2017 Census of US Businesses and the survey respondents. The sample size for the survey is 4,873 responses, omitting 959 responses with missing employment data.
While our survey does not allow for a direct comparison of payroll expenses with Census data, we constructed a rough comparison by approximating payroll expenses for the Alignable firms from categorical questions about monthly expenses and the share of these expenses going toward payroll. The Census provides annual payroll expenses for W2 employees. To get a sense of the match, we compared our estimated monthly payroll expenses in our sample with one-twelfth of annual expenses in the US Census. To facilitate comparison, we divide by an estimate of total employment.§ Fig. 2 shows the size distribution of monthly estimated payroll expenses in our sample and a comparable breakdown for the Census using a per capita adjustment. The match is imperfect, especially for larger firms. The discrepancy might reflect the underrepresentation of manufacturing or professional services firms in our sample, which are among the highest paying of all two-digit North American Industry Classification System sectors in the Census data. SI Appendix, Table S1 provides further detail on the industry match to the Census.
Fig. 2.
Average per capita payroll ($1,000s) in the survey and Census. This figure plots per-employee payroll in thousands of dollars by firm size for the 2017 Census of US Businesses aggregates and the survey respondents. The Census data only report annual payroll for W2 workers and the number of firms in an employment size category. To calculate payroll for the survey firms, we take the midpoint of categorical answers for monthly expenses, multiply by the fraction of expenses going toward payroll, and divide by total employees (we cannot distinguish between W2 employees and contractors).
Fig. 3 shows the geographic scope of our sample. The Alignable sample draws particularly from California, the New York region, Florida, and Texas. The sample is sparse in America’s western heartland, which matches the location distribution of smaller businesses in the Economic Census.


What Is the Small Business Failure Rate?

20% of small businesses fail in their first year, 30% of small business fail in their second year, and 50% of small businesses fail after five years in business. Finally, 70% of small business owners fail in their 10th year in business.

As a new entrepreneur gearing up to start a business, or a business owner who’s recently opened your doors, there’s a lot of uncertainty ahead of you. Everyone whom you’ve told about your idea has probably (rather unhelpfully) mentioned what percentage of small businesses fail. 

Whether they’ve given you stats that are right or wrong, you’re reasonable to feel nervous. After all, opening a small business is a huge risk—you can’t be sure how your product will evolve, whether you’ll qualify for a small business loan, or if you’ll even make it through the many challenges of owning a small business. 

It’s helpful to actually know what percentage of small businesses fail—because many do succeed. And you don’t want anyone scaring you out of your dream. The best thing you can do is have facts.

Let’s go through this fact, and other small business statistics you need to know.

What Percentage of Small Businesses Fail?

The fast answer for what percentage of small businesses fail, according to data from the Bureau of Labor Statistics: about 20% fail in their first year, and about 50% of small businesses fail in their fifth year. But it’s also helpful to see this statistic in terms of how many American small businesses survive. According to the Bureau of Labor Statistics’ Business Employment Dynamics, here’s what the survival rate looks like:[1]

  • About 80% of businesses with employees will survive their first year in business. (The most recent data shows that, of the small businesses that opened in March 2016, 79.8% made it to March 2017.)
  • About 70% of businesses with employees will survive their second year in business. (The recent data shows that of the small businesses that opened in March of 2015, 69.2% made it to March of 2017.)
  • About 50% of businesses with employees will survive their fifth year in business. (Data shows that of the small businesses that opened in March of 2012, 50.2% made it to March of 2017.)
  • About 30% of businesses will survive their 10th year in business. (The most recent data shows that of the small businesses that opened in March of 2007, 33% made it to March of 2017.)

But, again, the quotable stat you need is that about 20% of small businesses fail in their first year, and 50% of small businesses fail in their fifth year. 

And these rates are consistent over time. This suggests, surprisingly, that year-over-year economic factors don’t have much of an impacton how many U.S. small businesses survive.[2] The takeaway here is that you can pretty much bet on a 80%, 70%, 50%, and 30% survival rate across one, two, five, and 10 years in business—no matter the year. 

It’s important to note that this reflects all businesses in the private sector. While the overall survival rates for small businesses don’t vary much, the facts look a little different when you look at business failure industry by industry. 

Small Business Survival Rates by Industry

Ok, we’ve covered the overall small business survival rate, now let’s get a bit more granular. What do small business survival rates look like by industry?

Which Small Business Industry Has the Highest Survival Rate?

If you’re planning on opening a business in the health care or social assistance industry, you’re in luck!

Health care and social assistance businesses tend to have the highest survival rates. Also, the Bureau of Labor Statistics data shows that the health care and social assistance industry is projected to grow by 21%, which is the fastest job growth rate of any other industry surveyed.[3]

About 85% of small businesses in this industry survive their first year, around 75% survive their second year, and about 60% make it through their fifth year. 

Which Small Business Industry Has the Lowest Survival Rate?

Although historical data looks good for health care and social assistance businesses, it doesn’t look so great for the construction or transportation and warehousing industry. 

For the construction industry, about 75% of businesses survive their first year, 65% make it through their second year, and about 35%make it through their fifth year. 

The transportation and warehousing industry doesn’t look much better: A little more than 75% of businesses survive the first year, a little more than 65% survive the second year, and about 40% make it through the fifth year in business. 

Debunking Restaurant Failure Myths

Have you ever been told how risky starting a restaurant is? Were your culinary dreams crushed when you heard that most restaurants fail in their first year?[4] Rest assured: These are myths.

Here’s how business survival rates for restaurants stack up:

  • About 85% of food service businesses survive their first year in business.
  • About 70% of food service businesses survive their second year in business.
  • About 50% of food service businesses survive their fifth year in business.
  • About 35% of food service businesses survive their tenth year in business.

As it turns out, survival rates for food services are really pretty similar to other industries. But the most interesting part of this myth is that the reason why restaurants do end up failing is because they lack access to startup capital—but banks often refuse to lend to restaurants because their business is too risky.

In that case, restaurant owners—or small business owners in any other industry deemed “risky”—might look toward alternative sources of financing. Term loans or business lines of credit from online lenders, or business credit cards, are all great financing sources, and they’re generally easier to qualify for than traditional loans from banks.

→Bottom Line: Businesses in the health care and social assistance industries tend to have the highest survival rates, while the construction and transportation and warehousing industries tend to have the lowest survival rates. Contrary to popular belief, restaurants are not more likely to fail than any other industry.

Why Do Small Businesses Fail?

According to Investopedia, the four most common reasons why small businesses fail are a lack of sufficient capital; poor management; inadequate business planning; and overblowing their marketing budgets.[5] cash flow problems. But there are many more than four reasons why early-stage businesses in this country don’t survive. 

A CBInsights analysis of 101 startups polls the reasons why those businesses failed, according to their founders.[6] Here were the top results:

  • 42% of small businesses fail because there’s no market need for their services or products.
  • 29% failed because they ran out of cash.
  • 23% failed because they didn’t have the right team running the business.
  • 19% were outcompeted.
  • 18% failed because of pricing and cost issues.
  • 17% failed because of a poor product offering.
  • 17% failed because they lacked a business model.
  • 14% failed because of poor marketing.
  • 14% failed because they ignored their customers.

Clearly, there are a many reasons why small businesses fail, but a few keep coming to the top: capital access, cash flow, lack of demand, and poor management. 

A Closer Look at Accessing Capital for Small Businesses

Because access to capital and cash flow issues play such a large role in business failures, let’s run through a few statistics that you need to know about small business funding. 

  • As of 2015, 73% of small business owners report being able to access enough capital for their business… meaning that 27% of business owners were not able to access enough capital to operate their business.[7]
  • Of the 27% of business owners who could not access capital…
    • 57% said the lack of capital had no effect on their business.
    • 33% said this left them unable to grow their business and expand.
    • 18% reported that a lack of capital forced them to reduce employee size.
    • 15% reported that they were unable to finance increased sales.
    • 12% said they had to reduce employee benefits.
    • 10% said they weren’t able to increase inventory to meet demand.
  • In 2015, 40% of surveyed business owners used a bank loan to finance their businesses.
  • But 77% of small business owners who apply for a bank loan from a big bank get rejected.[8]
  • About 52% of small business owners who apply for a bank loan from a small bank get rejected.
  • The best approval rate comes from alternative lending, with alternative lenders approving about 60% of business loan applications in 2016.

→Bottom Line: Small businesses fail for several reasons, but the most common reasons include a lack of demand, poor management, and cash flow issues. Generally, entrepreneurs seeking small business financing found the most success with alternative lenders, rather than traditional banks.

Small Business Statistics: The Good News

If you’re looking at the percentage of small businesses that fail, it might seem like the US small business sector is completely doom-and-gloom. But many more statistics show that small business in the United States is alive and well. So, if you’re feeling down on the prospects of starting a small business, keep these five statistics in mind. 

1. Women-owned small businesses are growing and surviving.

Results from an American Express study show that female entrepreneurship grew by 114% between 1997 and 2017.[9] We have a long way to go before there’s gender equality in the entrepreneurial space, but the fact that women-owned businessesconsistently outlast male-owned businesses demonstrates female entrepreneurs’ strength and perseverance. 

In more good news, women own than 11.6 million firms in the U.S.[10]These firms employ nearly 9 million people and, as of 2017, generated $1.7 trillion. Things are looking up for female small business owners. 

2. Minority-owned small businesses are on the rise.

There’s uplifting news for minority-owned small businesses, too. According to a study by the Minority Business Development Agency, the number of minority-owned firms in the US increased by 38% between 2007 and 2016.[11]

Additionally, the U.S. saw a 34% increase in the number of African-American owned firms between 2007 and 2012. Also during those years, the number of Hispanic-owned businesses in the U.S. grew by 46%.

Again, there is lots of room for these numbers to grow, but it’s encouraging to see increased diversity among small business owners in the United States.

3. Small businesses make up a lot of the economy 

As a small business owner, you can be proud that you and your fellow entrepreneurs make up most of the economy. There are so many statistics demonstrating the importance of small businesses in the United States.[12]

In the United States, small businesses comprise:

  • 99.9% of all the country’s firms.
  • 99.7% of all firms with paid employees.
  • 97.7% of all exporting firms.
  • 48% of private sector employees.
  • 41.2% of private sector payroll.
  • 33.6% of known export value.

Small business is a big deal in the United States’s economy. Remember these statistics any time you’re feeling down on your business. 

4. Small businesses account for much of the U.S.’s job growth.

If you own a business and manage employees, then you’re in part responsible for these amazing job creation statistics:[13]

  • Small businesses employed 56.8 million people, or the equivalent of 48% of the private workplace in 2013.
  • In the first three fiscal quarters of 2014, small businesses added 1.4 million new jobs—39% of which were from very small businesses (with fewer than 50 employees).[14]
  • Small business accounts for 63% of net new jobs in the United States.

5. More small businesses are opening than closing.

Finally, a few small business statistics shows a bright spot in the small business market: For the first time since the recession, small businesses are opening at a faster rate than they’re closing.

That’s spells even more good news for job creation in the U.S., too. Recent data shows that, of 16,000 small firms polled, one-third of small businesses increased their workforce in 2016, and a full 60% of all firms expected an increase in revenue that year.

→Bottom Line: Small businesses make up the vast majority of the U.S.’s firms. Overall, more and more small businesses are opening their doors. In particular, the rates of women- and minority-owned small businesses have recently increased.

The Big Picture on Small Business Survival Rates

When you take a step back from these small business statistics and look at the big picture, the main takeaway is this: Running a small business is hard work—and the percentage of small businesses that fail just demonstrates that. There are many reasons why small businesses fail, but in general, keep an eye on your capital sources and cash flow—those tend to be the tipping point for business failure. 

But keep your head up, small business owner. Optimism for small businesses owners is growing, and the strength of small businesses in the U.S. economy is validated with amazing statistics year after year.



Why do some businesses succeed when others fail? While it may seem to be a matter of luck, in reality there are common mistakes that kill many small businesses before they ever get off the ground. Give your startup a fighting chance by avoiding these 10 top startup missteps.

  1. Growing too fast: While growth is desirable, overexpansion is a serious error. Wanting to be the first to market with a new product, taking on added overhead, or trying to prove to anxious investors that you’re growing can all spur you to overextend your business financially. Set realistic goals and expand only as needs dictate.
  2. Failing to track your finances: Look at businesses that fail and you’ll find that many of them took on too much debt. Learn to pay strict attention to your finances, and keep careful records of all money coming in and going out.
  3. Overspending: Many new entrepreneurs burn through their startup capital before their cash flow is positive. This often happens because of misconceptions about how business operates. If you’re just starting out, seek out seasoned veterans you can turn to for advice before making big expenditures.
  4. Lack of reserve capital: Be prepared for unexpected increases in the costs of things like utilities, materials, and labor. Make sure you keep enough reserve cash to carry you through tough times and seasonal slowdowns.
  5. Poor choice of location: Don’t let a cheap lease tempt you into choosing the wrong location. Consider competition (how many similar businesses are located nearby?) and accessibility (is the area well served by freeways, public transportation, and foot traffic?).
  6. Poor execution: Poor customer service and overall employee incompetence will quickly sink your business. Make sure your employees place a premium on customer service. Develop systems and processes for how tasks should be accomplished, and create internal controls to monitor them.
  7. An inadequate business plan: A well thought-out business plan forces you to think about the future and the challenges you’ll face. It also forces you to consider your financial needs, your marketing and management plans, your competition, and your overall strategy.
  8. Failing to change with the times: The ability to recognize opportunities and be flexible enough to adapt is crucial to surviving and thriving. Learn how to wear multiple hats, respond nimbly, and develop new areas of expertise.
  9. Ineffective marketing: Customers can’t do business with you if they don’t know you’re there. It doesn’t cost a lot to advertise and promote your business through online marketing, social media, email, local search, and more.
  10. Underestimating the competition: Customer loyalty doesn’t just happen — you have to earn it. Watch your competition and stay one step ahead of them. If you don’t take care of your customers, your competition will.


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