Small businesses account for 99.9% of all businesses in the United States and they also employ nearly half of the private sector employees in the country. While the failure rate of a new business is way too high, the fact that 99.9% of all businesses in the country are small businesses makes it a testament that if the planning is done right, it can be executed well.
We will take a look at some of the most crucial small business statistics in the United States that will help entrepreneurs and business researchers understand the sector well.
Which business is considered a small business?
According to the U.S. Small Business Association (SBA), small businesses are generally defined as companies with an employee headcount of 50 to 1500 and a revenue ranging between $1 million to $40 million.
Number of Small Businesses in the United States
There are 34,836,451 small businesses in the United States as of 2025, accounting for 99.9% of all businesses. The number of US small businesses has grown by 0.28% in the past year and over 9.7% from the start of this decade.
| Year | Number of Small Businesses |
| 2019 | 30.7 million |
| 2020 | 31.7 million |
| 2021 | 32.5 million |
| 2022 | 33.2 million |
| 2023 | 33.2 million |
| 2024 | 34.7 million |
| 2025 | 34.8 million |
Source: SBA.
General Small Business Statistics
Share of small business in United States GDP
Small businesses make up 43.5% of the United States’ GDP. Since the late 1990s, small businesses have accounted for between 43.5% and 50.7% of the United States’ gross domestic output (GDP)
From 1998 to 2014, the share of small businesses in GDP decreased from 48% to 43.5%. During this time, small business GDP grew by about 25% in real terms, averaging 1.4% growth per year. In comparison, large businesses grew faster, with an annual growth rate of 2.5%.
Top reasons to start business cited by Americans
Among current business owners, 57% said they started their business to be their own boss, 54% wanted to earn more money, 42% wanted a more flexible work schedule, and 30% wanted to follow a passion.
For those looking to start a business, 60% said they want to be their own boss, 60% are motivated by the chance to earn more money, 45% want a flexible schedule, and 45% want to pursue a passion.
| Reason | Business Owners (%) | Aspiring Entrepreneurs (%) |
| You want to be your own boss | 57 | 60 |
| An opportunity to earn more money | 54 | 60 |
| Desire for a more flexible work schedule | 42 | 45 |
| To pursue a passion project | 30 | 45 |
| To fill a need in the market | 23 | 20 |
| To make a positive impact or change | 19 | 36 |
| Someone you know encouraged you | 15 | N/A |
| You wanted to leave the corporate world | 15 | 22 |
| Family or generational expectations | 14 | 16 |
| To support your community | 11 | 24 |
Source: Gallup
Small business owners in the United States by race
85% of small businesses in the United States are mainly owned by White people. Asian Americans own 11%, Hispanic adults own 7%, and Black or African American adults own 3%. Around 1% of businesses are owned by either American Indian, Alaska Native, Native Hawaiian, or other Pacific Islander people.
Source: Pew Research.
Family-owned small business in the United States
about 27.3% of businesses are family-owned. Family-owned companies employ an average of 14 people each, while non-family-owned ones hire around 10. The sectors with the highest share of family-owned businesses are Management of Companies and Enterprises and Mining, Quarrying, and Oil and Gas Extraction, both at 41%.
In contrast, Professional, Scientific, and Technical Services have only 18%, and Health Care and Social Assistance have 15%, making them the industries with the fewest family-owned firms.
Source: SBA
Artificial intelligence usage by SMBs in the United States
99% of small businesses in the United States use at least one AI platform, with 40% of small businesses now identifying as users—almost double the 23% reported last year. Moreover, 91% of businesses actively using AI believe it will contribute to their future growth.
In response to the increasing role of technology, 81% of small businesses plan to expand their use of technology platforms, and 77% of small business owners are looking to adopt emerging technologies, such as the metaverse.
Source: US Chamber of Commerce.
Small Business Failure and Success Statistics
New businesses have a 90% failure rate
9 out of 10 new businesses are bound to fail across all segments. About 10% fail in the first year. But after that, things get tougher. Between years two and five, 70% of new businesses shut down. The U.S. Bureau of Labor Statistics says most businesses that fail are less than 10 years old, and the chances of failure get higher as time goes on.
Let’s take a brief look at the survival rate of new businesses:
- 20% of new businesses fail within the initial 2 years.
- 45% of startups don’t survive the past 5 years.
- 65% of new businesses fail within the first 10 years.
- 75% of American startups close down within 15 years.
Source: Hubspot.
New business Failure rate across industries
Startups in the IT segment are most likely to fail among all sectors, this is largely due to the industry’s low barriers to entry and risky nature. Startups in transport and utilities are the second fastest to perish due to the high operational costs and regulatory challenges involved.
Source: Startup Genome.
New business success rate
New businesses have a 10% success rate in the long run. first-time small business owners have an 18% chance of succeeding. Interestingly, those who have failed in the past do slightly better, with a 20% success rate in their next attempt.
Business owners who have previously launched a successful startup have the best odds, with about a 30% success rate when starting a new venture. These numbers show that both the good and bad experience of founders in the past plays a big role in a startup’s chances of success.
Source: Small Business Trends.
Small Business Funding Statistics
The average cost to start a new business
The average business spends $40,000 in their first year. The funding needed depends on different things, like the industry of the business, the product, or the location of the store. Some businesses can start with just around $12,000, while others, like restaurants, might cost $400,000 or more to get going.
Pro Tip: Use this startup cost calculator by the U.S. Small Business Administration to figure out the monetary needs of your startup.
How Entrepreneurs Allocate Their Startup Budget
Product costs, which include raw materials and inventory, take up the largest share of small business funds allocation at 31.6%. Operating costs, such as legal fees and accounting services, use up 11% of the budget. Online store expenses account for 9%, while shipping costs, including packaging and returns, consume 8.7%. Offline expenses, for businesses with physical operations, average 10.5%. Staffing costs, if employees are hired, take up 18.8%. Finally, marketing expenses range between 7% and 12% of total revenue.
Biggest challenges for small businesses In 2025
5 out of the top 10 challenges that small businesses face are related to business costs. In a Statista survey of small businesses in the U.S. conducted, about 21% of respondents identified quality of labor as the biggest problem they faced. Additionally, around 24% said inflation was their main concern. Another 17% said it’s the taxes while 5% said it’s the poor sales of product.
Check this table out to know the biggest challenges that small businesses face as of 2025:
| Reason | Share of small businesses |
| Inflation | 24% |
| Quality of labor | 21% |
| Taxes | 13% |
| Cost of labor | 9% |
| Government regulations | 8% |
| Poor sales | 8% |
| Cost/availability of insurance | 6% |
| Competition from large businesses | 5% |
| Finance & interest rates | 4% |
| Other | 1% |
Source: Statista.
Small Business Legal Challenges and Requirements
90% of all businesses experience a lawsuit at some point in their lifespan
9 out of 10 businesses have to face a lawsuit at some stage of their lifespan and mind it, it costs high. As per a study published by the U.S. Chamber of Commerce Institute for Legal Reform (ILR) in 2023, the U.S. tort system’s commercial liability costs reached $347 billion in 2021, with small businesses’s share accounting for $160 billion. These costs have been rising rapidly, jumping 19% from $291 billion in 2020.
Despite small businesses earning only 20% of the total revenue in 2021, they covered 48% of tort costs. The smaller the business, the bigger the burden. For businesses making $1 million or less, tort costs are 7X higher, compared to those earning $50 million or more.
Source: U.S. Chamber of Commerce Institute for Legal Reform (ILR).
Reasons why small businesses face lawsuits
The most common reason for lawsuits for small businesses is failing to meet contract obligations. Only in 2021, over 61,000 discrimination claims were filed with the U.S. Equal Employment Opportunity Commission. About 33% of these involved racial discrimination, and another one-third involved sex discrimination. Retaliation claims, often arising when businesses “punish” employees for participating in protected activities, are the most frequent.
Businesses can also be liable for accidents and injuries due to negligence. Additionally, using someone else’s intellectual property without permission can lead to costly copyright infringement lawsuits.
Source: Gierach Law Firm.
Small Business Employment Statistics
Small businesses employ 45.9% of private-sector employees
Small businesses employ 46.5% of the private sector employees as of 2025. That accounts for 59 million people. This share has dropped by 4.37% from the previous year when the total employment was 61.7 million people. This is a remarkable achievement seeing that 82% of small businesses are solo ventures (no employees).
| Year | Number of employees | Share in total private sector |
| 2020 | 61 million | 47.1 |
| 2021 | 61 million | 46.8% |
| 2022 | NA | NA |
| 2023 | 61.7 million | 46.4% |
| 2024 | 59 million | 45.9% |
Source: SBA.
82% of small businesses in the United States do not employ people
82% of small businesses are solo ventures, meaning only one person runs the business. 28.4 million small businesses in the United States do not have any employees.
Size of US businesses with employees
On average, a typical employer has about 24 workers. Small businesses usually have around 11 employees, while larger companies have significantly more, averaging about 3,302 workers. New businesses that are less than two years old tend to have around 6 employees, whereas companies that have been around for over 20 years typically employ about 58 people.
Source: SBA FAQ on small businesses report.
Number of Small Businesses and employees by State (2025 Data)
| State | Number of small businesses | Number of employees |
| Alabama | 422,586 | 818,235 |
| Alaska | 71,781 | 138,752 |
| Arizona | 650,151 | 1.1 million |
| Arkansas | 268,244 | 496,747 |
| California | 4.1 million | 7.5 million |
| Colorado | 684,726 | 1.2 million |
| Connecticut | 354,013 | 730,826 |
| Delaware | 98,356 | 205,354 |
| District of Columbia | 75,579 | 260,713 |
| Florida | 3.1 million | 3.6 million |
| Georgia | 1.2 million | 1.7 million |
| Hawaii | 133,993 | 267,388 |
| Idaho | 188,603 | 359,592 |
| Illinois | 1.3 million | 2.4 million |
| Indiana | 537,058 | 1.2 million |
| Iowa | 272,465 | 638,811 |
| Kansas | 256,287 | 597,069 |
| Kentucky | 363,068 | 706,644 |
| Louisiana | 464,681 | 898,863 |
| Maine | 149,493 | 291,387 |
| Maryland | 639,789 | 1.2 million |
| Massachusetts | 697,585 | 1.5 million |
| Michigan | 908,007 | 1.9 million |
| Minnesota | 525,156 | 1.3 million |
| Mississippi | 266,385 | 432,187 |
| Missouri | 548,647 | 1.1 million |
| Montana | 130,563 | 252,900 |
| Nebraska | 181,742 | 418,311 |
| Nevada | 312,702 | 542,167 |
| New Hampshire | 136,506 | 305,738 |
| New Jersey | 952,029 | 1.9 million |
| New Mexico | 158,296 | 345,088 |
| New York | 2.2 million | 4.1 million |
| North Carolina | 1 million | 1.8 million |
| North Dakota | 73,822 | 198,871 |
| Ohio | 989,435 | 2.2 million |
| Oklahoma | 371,640 | 717,434 |
| Oregon | 397,422 | 900,294 |
| Pennsylvania | 1.1 million | 2.6 million |
| Rhode Island | 105,320 | 228,107 |
| South Carolina | 479,314 | 839,283 |
| South Dakota | 89,679 | 209,638 |
| Tennessee | 664,681 | 1.2 million |
| Texas | 3.2 million | 5 million |
| Utah | 333,661 | 635,432 |
| Vermont | 76,878 | 155,960 |
| Virginia | 818,450 | 1.6 million |
| Washington | 644,868 | 1.4 million |
| West Virginia | 109,300 | 263,036 |
| Wisconsin | 457,769 | 1.3 million |
| Wyoming | 73,330 | 133,159 |
Source: SBA