The Current State of Small Businesses in America
Small businesses are the backbone and heart of the American economy, constituting 99.9% of all firms in the United States, as reported in the June 2024 USA Today article “Small Business Statistics in 2024.” According to the U.S. Small Business Administration, a small business is defined as a firm with revenue ranging from $1 million to over $40 million and an employee workforce of fewer than 500. With approximately 33.3 million small businesses across the country, these enterprises are not only a vital source of innovation and employment but also a significant driver of the nation’s financial growth. They are responsible for almost two-thirds of newly created jobs in the U.S. between 1995 and 2021, contributing 43.5% of the country’s total gross domestic product (GDP). Small businesses also comprise 99.7% of firms with paid employees and 97.3% of exporters, underscoring their critical role in both the domestic and global economy.
The resilience and adaptability of small businesses are evident, yet they face significant challenges in survival and growth. Around 18% of small businesses fail within a year of opening, half fail after five years, and approximately 65% fail after operating for up to 10 years. Access to funding remains a crucial issue, with nearly four-fifths of small business owners relying on self-financing when launching their ventures. Only 16% obtain bank loans, while loans from family and friends make up the remaining 2% to 6%. This financial landscape highlights the difficulties small businesses face in securing the capital necessary for growth and sustainability.
Demographically, small business ownership in the U.S. reveals interesting trends. Women own around 26% of all small businesses, while just under half are owned by Generation X. Only 14% of small business owners are Black, Hispanic, or Asian, indicating a need for greater diversity in entrepreneurship. Texas is home to one-tenth of all small businesses in the U.S., followed by California and Florida, each accounting for 9%, and Georgia at 6%. Industry-wise, the professional, scientific, and technical services sectors dominate, with over 4.5 million small businesses in these fields.
Home-based businesses are a significant component of the small business ecosystem, with around half of all businesses starting at home and 60% of those without employees being home-based. This means approximately 19 million businesses in the country are operated from home, demonstrating the flexibility and innovation of small business owners in adapting to changing economic conditions. The rise of online micro-businesses further underscores this adaptability, with nearly half of these businesses transitioning from supplemental income sources to primary income sources by August 2023.
The current state of small businesses in America reflects both their critical importance to the economy and the challenges they face. With their significant contributions to job creation, GDP, and innovation, small businesses are indispensable to the nation’s economic health. However, their success is contingent upon continued support through favorable policies, access to financial resources, and the promotion of entrepreneurial diversity. As we move through 2024, the ongoing resilience and evolution of small businesses will be crucial to maintaining the vibrancy and dynamism of the U.S. economy.
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About the Author
With over 40 years of extensive experience in small business, restaurant, and franchise development, management, and marketing, Paul Segreto is a recognized authority in the entrepreneurial world. As an executive, consultant, coach, and entrepreneur, Paul has dedicated his career to empowering both current and aspiring business owners. His mission is to pave the way to success by connecting entrepreneurs with the right people, brands, and opportunities.
If you’re a current or aspiring entrepreneur that needs assistance, guidance, or just someone to talk to, please send an email to Paul Segreto at paul@acceler8success.com.
