Startup Business Statistics That Prove the Strength of Small Businesses

Rapid advances in technology and a shifting change in buyer behavior has encouraged many people across the country to start their own business. Small businesses and startups make up more than 99.7% of employer firms are small businesses. These startup business statistics should be encouraging; in fact, a study by think-tank Cambridge Associates estimates that over 50% of small businesses and startups succeed, with 9% making it to a 4th year of business and beyond.

The global investment firm conducted this study to track the performance of 27,259 venture-backed startups between 1990 and 2010. Although some people are still hesitant to create a startup business, statistics show that more and more people are turning towards this as a lucrative source of income.

Emergent Technologies

The biggest boon to the startup business industry is the internet. Starting out as a communications network in the 60’s and 70’s, the internet has managed to completely integrate itself into all sectors of society. Social media, one of the most well-known products of the internet, is one of the driving forces of small businesses, capable of reaching thousands of people with a single social media profile.

Aside from the internet, various other technologies have also helped startups scale up their business with tools that maximize the efficiency of their processes while keeping costs low: PBX systems for small businesses have allowed startups to field numerous phone calls at a time, cloud computing services allow startups to store and use vast amounts of data, and many more.

More Startups, More Diversity

According to startup business statistics, the rate of new entrepreneurs grew by 15% between 2015 and 2017. The Kauffman Index of Growth Entrepreneurship notes that this indicates business growth in the country and it’s mainly due to an increasing rate of female entrepreneurship.

In the past few years, the rate of new startup entrepreneurs grew by about 15%, reflecting the country’s recovery from the Great Recession of the late 2000’s. This startup business statistic is also bolstered by the entry of more female entrepreneurs into the industry, with 40% of startups being run by women.

The small business industry is as diverse as it is profitable, with 14.6% of small businesses being owned by ethnic minorities, which include 2.3 million Hispanic-American-owned businesses, 1.9 million African-American-owned businesses, and 1.6 million Asian-owned businesses.

Small Businesses are Profitable

Profitability of Small BusinessThe first four years of a business seem to be the toughest. However, startup business statistics from various sources indicate that 40% of small businesses are profitable while 30% break even., with 9% surviving to 10 years of operations.

70% of small businesses remain above board during their first year, especially with startups that have more than one founder. Again, these trends are helped by emerging and emergent technologies that have allowed the common person to operate a business at lower costs, which increases profit.

Even high-risk businesses, such as restaurants and retail stores, are seeing a statistical upswing in terms of profit. With most of the country recovering from the Great Recession, statistics show that Food-and-Beverage startups are seeing a 40% success rate. Startup retail stores are also enjoying a resurgence, with new stores seeing a 20% success rate in their first year alone.

It’s also interesting to note that more than 18,000 businesses in the country with 500 or more employees all started out in the small business sector. Makes sense, considering that Facebook started out in Zuckerburg’s room and Apple started out in a garage!

Many Startup Entrepreneurs Work from Home

Info-graphic about small business in the U.S.

Small Business Info-graphic by: Maddie Deming & Peter Messmer from: addshoppers.com

While Silicon Valley may seem like the perfect place to start and run a startup, a study by the Global Entrepreneurship Monitor examined the Total Entrepreneurial Activity (TEA) across industry sectors in the United States and found that 69% of entrepreneurs started their businesses from home.

While this might lead some people to believe that home-based entrepreneurs are lone wolves operating from a spare room or garage. However, further research shows that only 25% of home-based entrepreneurs do this, with the rest of business stating that they have multiple employees working for them, either on-site or remotely as well.

There are plenty of reasons for choosing to have a home-based business. One of the first benefits is that starting (and running) a business from home costs less than finding office space in the city. This also stems from the fact that 82% of startup entrepreneurs rely on personal funds or funds from family and friends. Venture capital is rare in startups, so relying on those around you is the best choice.

But it’s not just funding that home-based entrepreneurs get from family and friends; 20% of small business owners state that they’ve employed family members to help along with unpaid interns and part-time workers, with another 30% of business owners stating that they outsource several their business processes. All of these contribute to lowering overheads and increasing profit in general.

Even after they go big, however, some home-based businesses remain at home: 59% of established businesses don’t leave the garage or the spare room, even after 3 years or more of operation. All because it’s easier and cheaper than renting office space (not to mention cutting down on the commute!).

A Few Thoughts on Small Businesses

Despite these startup business statistics, some companies will fail, it’s a fact of life and it’s unavoidable. From mismanagement to fraud, to neglect and disaster, there are plenty of reasons why a small business could fail, but fortunately, there are many steps entrepreneurs can take to avoid failing.

A small entrepreneur team with little capital A common mistake that startup entrepreneurs make is spending too much on overheads. Fancy offices and shiny gadgets might seem like they can draw in clients, but they won’t. Instead, start small. Invest money into growing the business and improving business processes.

Learn as much as possible about the business’ demographics well-before launching. Knowing the market and its conditions can go a long way to planning out an effective business strategy and marketing collaterals.

Thanks to the internet, social media in particular, customers can now leave instantaneous reviews of a business’ products and services. Now more than ever, it’s important to maintain the highest standards of quality in all business processes. The best way to improve is to listen to customer reviews. Startups should invest time in finding more about customer preferences and experiences via online surveys.

Learn from your peers. H can you find them? One way is through an online business forum joined by like-minded folks looking to move to the next level in business, or scope out your competition through trade shows and job fairs.

Lastly, the most successful people don’t try to do a thousand different things; instead, they focus on doing few but specific things better than their competition. Small businesses need to focus on cornerstone products or services and making them the best of that class.

At the moment, startup business statistics favor the entrepreneur. Yes, conditions vary, and the market will always change. But as the saying goes, “nothing ventured, nothing gained”.