You may already know that small businesses make up a large percentage of the companies in the US, but you may not know just how much. According to recent statistics, over 99% of all businesses are classified as small, meaning that they employ less than the average number of people for a business in their industry. Just how small IS small? Though it can vary depending on industry, a small business typically employs less than 100 people. Every small business has unique challenges but understanding the larger statistics that affect a majority of comparable business allows business owners to take better advantage of growth opportunities and understand when pain points are typical or unusual.
Some general stats to know when you are starting out
What inspired you to start your own small business?If it was the prospect of being your own boss, join the club. Most entrepreneurs quote the idea of no longer having to answer to higher-ups to be their reason behind creating their business. And did you work yourself up from almost nothing? If you wonder where your initial cash flow compares to other small businesses, you might be pleased to learn that most of the almost 31 million small businesses in the US start with less than ten thousand dollars to bankroll their operation.
Are you still going after a few years? Most business owners say that the first year is the toughest, but the good news is, if your small business has had success for over a few years you are already ahead of the curve. About half of all small businesses fail in the first five years and an additional 15% fail in ten years.
Are you still working out of your garage? Here’s more good news, about half of all small businesses are home-based, and with the proliferation of remote work, there are many chances to grow your business without ever having to own any office real estate. That means you can put profits into growth rather than overhead like rent, HVAC, or cleaning services.
Looking for the perfect place to start your business? Though many businesses are remote, the question of where you are located is still important because of local stimulus options. Some places are just more favorable for entrepreneurship than others.
What stage of life are you? Think you might be too old or too young to quit your corporate job and strike out on your own. Statistics show that most small business owners have been around the block and the majority are in their 50s with enough experience to move forward. And you can tell students not to waste those four years in academia, nearly 70% of business owners have a college degree.
Some of the largest pain points related to small business
Identifying where many small businesses struggle can allow you to anticipate difficulties and come up with strategies to overcome them before they threaten your livelihood.
Are you feeling pinched when it comes to your cash flow? About 8 in 10 businesses quote cash flow as their most important issue. In general, small businesses do not have the ability that large corporations have to make it through a troublesome issue or economic downturn. A large percentage of small business owners quote a lack of investment capital and lack of significant reserves to be what makes them most concerned moving forward. Less than 20% of all small business owners have said that they feel comfortable with their financials looking toward growth. However, numerous strategies have allowed businesses to scale in a healthy way including learning how to stick to budgets and understanding the credit of those you work with, not just your own.
Did you dip into your pocket to cover a cash flow issue?Feel like you are creating a non-sustainable model when you use your own money to take care of a problem? Don’t be too hard on yourself. When facing a financial crisis nearly 70% of owners say they used their personal funds to handle it.
Is your business in some significant debt? That’s not unusual either, seven out of ten small businesses are faced with some kind of debt, usually through loans, lines of credit, or on credit cards. And if you are concerned about your level of debt, it might comfort you to know that a full one-fifth of small businesses owe between $25k and $100k.
The Trouble with Growth
While most businesses have a desire to grow larger, the timing and structure of that growth can be debilitating. Many small businesses fail when they attempt to scale up to a larger model. There are several factors to consider and sometimes consultancy is the best way to gather the knowledge that your business doesn’t have the time and energy to collect.
Do you have positions that require a “certain set of skills”? If your small business is in a position to grow, it’s likely because you hired a few very skillful practitioners. Before scaling up, it’s important to assess whether you think you can find comparable people to handle a larger workflow. In one survey of over 300 companies, 40% of businesses quote a lack of qualified workers as the largest factor impeding their growth — they cite both low application rates and more applications coming from those that were not currently skilled enough to perform the jobs required.
Can you hire people to work remotely? One of the solutions to the hiring issue is to open up your small business to remote workers. The gig economy is taking hold with close to 60 million Americans quoted as having worked at least one freelance job in 2019. As for retaining remote workers, businesses that hire remote workers have demonstrated improved retention rates and better productivity. You might see this as a wave of the future. Young and eager workers under 30 make up about half of all of remote workers and the sector is growing. In fact, Forbes reports that by 2027 half of all workers will do their jobs from home.
Learning these statistics and looking over infographics full of small business-related metrics can give you a fuller picture of how your business stacks up. Sometimes it’s comforting to know that you are facing the same issues as so many of your fellow business leaders, and sometimes it’s important to realize that your problems are not as pervasive as perhaps you originally thought and that you may need to address something right away from a new direction.
