Key Takeaways

•  About 33-34.3% of small businesses survive by 10 years, i.e., approximately 65.7 - 70% of them fail within 10 years.

• Most small businesses start to generate profits after 2 to 3 years, but they become more successful after reaching 7 to 10 years in business.
•  36,984 nonemployer small businesses in the US generate $1 million to $2.49 million a year in revenues.

Introduction

The Percentage of Small Businesses that Fail in the US Within a Given Period

• In the US, there are about 31.7 million small businesses. Of these firms, 31.8 - 33% of them fail within the first two years.
• Within 5 years, about 50% of them fail. For example, "49.3% of small businesses founded in March 2013 were closed by March 2018."
•  About 33-34.3% of small businesses survive by 10 years, i.e., approximately 65.7 - 70% of them fail within 10 years. For example, "66.3% of small businesses founded in March 2008 were closed by March 2018." However, according to an Inc. article (published in 2015), 96% of businesses also fail within this period.

Other Helpful Findings Regarding Small Businesses Failure

• As per research conducted by SBA on about 700,000 US small businesses between 2010 and 2019, it was discovered that 120,157 businesses failed after 1 year, 246,673 failed after 5 years, and 374,715 failed after 10 years.
• On average, 1 in 12 businesses closes every year.
• Most small businesses start to generate profits after 2 to 3 years, but they become more successful after reaching 7 to 10 years in business.
• According to the Small Biz Trends survey in 2013, It could be found that "40% of small businesses are profitable, 30% break-even, 30% continually lose money, and 9% have a chance of surviving 10 years."
• The failure rate of small businesses has decreased by 30% since 1977.

The US Small Businesses Annual Revenue

• According to the SBA definition, "a small business is one that has fewer than 1,500 employees and a maximum of $38.5 million in average annual receipts." However, as per a report by The Kickass Entrepreneur, 80% of small businesses in the US are run/managed by the owner, i.e., they don't have employees.
• Therefore, according to a survey conducted by the US Census Bureau in 2017 regarding one person (nonemployer) business, i.e., small businesses run by one person (the owner), it was found that there were:
• i] 36,984 small businesses in the US generating $1 million to $2.49 million a year in revenues.
• ii] 2,229 businesses generating between $2.5 million to $4.99 million in revenues annually.
• iii] 356 nonemployer businesses generating $5 million or more per year in revenues.

• In 2017, there were 7.6 million employer businesses in the US, i.e., those with employees. Out of that number, 89% had less than 20 employees.
• In the US, 15% of small businesses that have 5-9 employees generate an average revenue of $1.08 million per year, firms with 20-99 employees generate about $7.124 million in revenue annually, while those that have 100-499 employees (0.10% of small businesses) make an average revenue of over $40.775 million annually.

 

Source

 

Other Helpful Findings Regarding Small Businesses Revenue

• On average, the US nonemployer businesses generate a revenue of about $46,978 per year.
• In 2015, small businesses making less than $5 million per year in revenue experienced an average growth of 7.8% in annual sales.
• In 2020, 43% of small businesses in the US operating full-time estimated their annual sales to be under $50,000, while bigger firms (27%) projected their sales to be more than $200,000 at the end of the year.

Research Strategy