Small Business Statistics 2022
Why Are Small Business Statistics Important?
Small business statistics are important because they provide insight into the health of the economy, the decisions/motivations of small businesses in the past year, and the impacts of those decisions.
Well, if you didn’t know I was a nerd, this blog post will convince you. I consider myself a “word nerd” but stories without numbers are just fairy tales. You don’t have to like data to appreciate the stories that it can tell you and the decisions that it can help you make.
Small businesses have less than 500 employee and make up more than 99% of all businesses in the US.
Let’s start with some of my favorite numbers from the SBA :
32.5M - Total small businesses in the US in 2022
11.69M - Women-Owned small businesses in 2022
9.2M - Minority-Owned small businesses in 2022
908K - Small Businesses closed in 2021
1.04M - Small Businesses opened in 2021
Gen X owns the majority of small businesses.
As a Millennial, and someone who wants to see more of my generation succeed, I always check on the age demographic of small businesses. Interestingly, the Millennial generation dropped from 12% (in 2021) to 7% of business owners in 2022. It is not clear if this is because the pandemic affected Millennial-owned businesses more, or if there were other motivations for Millennials leaving the small business ownership scene.
Gen X continues to make up the majority of small business owners at 46.5%. Followed by 45.5% for Baby Boomers. These generations are often more financially stable because of the season of life they are in or are transitioning in their career as they become more qualified to be independent in their industries. This doesn’t mean Millennial are not qualified, but Fortune reports that Baby Boomers held 22% of the nation’s wealth when they were between the ages of 25-40 compared to Millennials who hold 7% currently.
More people are trying to get out of corporate jobs.
Historically, the biggest motivator for starting a small business is the desire to be your own boss (47.6% stated it as a motivating factor). In 2022, however, this motivation was surpassed by dissatisfaction with Corporate America at 60.9%. This may be reflective of asking people to go back to the office, or perhaps increased confidence in their ability to step away from a corporate job now that so many are working remotely.
This is a fascinating statistic because this jumped from 19% in 2021! Even in 2020, it was at 25%. So this motivator has had a significant shift in 2022!
More than half of small businesses are less than 5-years-old.
51.6% of small businesses are in years 0-5. The average startup remains in business for 2-5 years. Lack of cash flow is the top reason businesses fail at 38%. While it can take 2-3 years before a business becomes profitable. This continues to emphasize that the second year in business is often the hardest. 35% of startups fail because of a lack of market need.
The retail industry is growing fastest in 2022
The top industry for small businesses in 2022 is Retail, making up 15.1% in 2022. Up from 11% and 2nd place in 2021. It passed the Food/Restaurant industry which was at 12% in 2021 and has also seen an increase to 13.7% in 2022. Other booming industries include Business Services (10.1%) and Health/Beauty/Fitness (9.7%).
The impact of the pandemic on small business
85.4% of small businesses believe they will survive the pandemic. At the same time, 54.6% feel that the pandemic will continue to impact their business. The way that most businesses plan to survive is to increase technology and online presence. 71% of small businesses have online transactions or 63% have an e-commerce presence with nearly half of those (31% of all businesses) having added e-commerce in the past year.
The Great Resignation in 2022
70% of small businesses report that it is very difficult or somewhat difficult to hire new employees. The most common reason for difficulty hiring new employees is a lack of applicants or interest. The skills most lacking in the employees that are hired are communication skills and critical thinking skills. At the same time that hiring has been difficult, small businesses account for 62% of net new jobs in the US. Additionally, 81% of small businesses have no employees. (SBA)
The cost of starting a small business
According to Fundera, the average funds needed to start a small business in 2022 is $10,000. However, there are some surveys that suggest that number is closer to $80,000. The startup funds vary greatly depending on the type, size, and industry of the business. It is possible to start a small business with less than $10,000 in investment, however, this will most likely have to start as a “side-hustle” without more funds.
What Do Statistics Tell Us?
These are only a few of the interesting numbers that are telling the story of small businesses in today’s economy as we transition from panic over the pandemic and adjust our business practices accordingly.
When you are thinking about starting a business, you do not have to follow the current trends. They are only a reflection of years passed and not a prediction of the years to come.
I like to look at the data and see where there are opportunities. I see that women and minorities have room to grow. I see that the millennial generation has a lot of untapped potential. I see that micro-businesses (with no employees) might actually be less headache because the Great Resignation is still in full swing. These things help me set realistic expectations and measure success in different ways. These things make me excited about working with new entrepreneurs and helping them hit their goals!
Understanding statistics and trends is important. Let’s set up a time to discuss how these numbers affect your business and what we can do to keep your business successful!
References
Daniel, W. (2022, March 22). Millennials' wealth has more than doubled since the pandemic began. Fortune. Retrieved June 8, 2022, from https://fortune.com/2022/03/22/millennial-wealth-doubles-during-pandemic-9-trillion-boomers/
Guidant Financial. (2022). Guidant Financial Small Business Trend 2022. Guidant Financial | 401(k)/IRA Business Financing, SBA & Portfolio Loans. Retrieved June 8, 2022, from https://www.guidantfinancial.com/small-business-trends/
Kolmar, C. (2022, February 1). Average Time to Reach Profitability At A Startup [2022]: Startup Statistics You Need To Know – Zippia. Zippia. Retrieved June 8, 2022, from https://www.zippia.com/advice/start-up-profitability-statistics/
Salesforce. (2021). 5th Edition- Small and Medium Business Trends Report. Salesforce. Retrieved June 8, 2022, from https://www.salesforce.com/content/dam/web/en_us/www/documents/reports/smb/fifth-edition-small-medium-business-trends-report-2021.pdf
Small Business Leader Statistics From 2,300 Global SMBs. (2022, March 2). Salesforce. Retrieved June 8, 2022, from https://www.salesforce.com/blog/small-business-statistics/
Small Business Statistics: 19 Essential Numbers to Know in 2022. (2021, December 21). Fundera. Retrieved June 8, 2022, from https://www.fundera.com/blog/small-business-statistics#sources
The Top 12 Reason Startups Fail. (2021, August 3). CBInsights Research Brief. Retrieved June 8, 2022, from https://www.cbinsights.com/research/startup-failure-reasons-top/
2021 Small Business Trends - Guidant. (2021). Guidant Financial. Retrieved June 8, 2022, from https://www.guidantfinancial.com/2021-small-business-trends/
What's New With Small Business, 2021. (2021, November). Small Business Administration. Retrieved June 8, 2022, from https://cdn.advocacy.sba.gov/wp-content/uploads/2021/11/03093326/Whats-New-With-Small-Business-2021.pdf
