Small business statistics in the USA

● Since the late 1990s, small businesses have accounted for between 43.5% and 50.7% of the United States' gross domestic product (GDP).

● This equates to $5.9 trillion being generated in 2014 (as per the most recent available data).

● Small businesses comprise 99% of all firms. 

● Small businesses comprise $3.5 trillion of private sector payrolls, $17.8 trillion of private sector receipts, and $588.4 billion of known export value.^[1]

● Between January 1995 and December 2024, small businesses created 20.7 million net new jobs (compared to 13.2 million by large businesses).

● This accounts for 61% of net new job creation since 1995.

● Small businesses contributed 1.2 million net job increases.

● They represent 88.9% of total net job creation between March 2023 and March 2024

● The average hourly earnings of an employee at a small company are $33.51.

● This reflects a growth of 2.74% over the past twelve months, according to the Paychex Small Business Employment Watch.

● Healthcare and social assistance workers carry the highest total employer cost at $67.64 per hour.

● Retail trade workers average just $26.41 per hour. 

● Small businesses pay 39% of all private sector payroll (despite employing nearly 46% of the private workforce).

The bottom line: While the small business share of GDP has fallen from 48.0% to 43.5% between 1998 and 2014, we can say that this was not due to a decline in small business output. In fact, it’s the share of large businesses increasing, at 2.5% annually versus 1.4% for small firms.

Beyond direct output, local multiplier effects matter. When someone spends $100 at a local small business, about 68% stays within the local economy, compared to 48% when spent at a large business.

It is safe to say that no large corporation comes close to matching the job creation record of small businesses. And in recent years, this pace has only accelerated. Compensation, of course, varies significantly by sector, but it reflects a persistent compensation gap in comparison to large firms.

The data across all three dimensions, output, jobs, and wages, show that small businesses deliver outsized economic value relative to their size. The 43.5% GDP contribution is a powerful number, but it understates the full picture when you factor in local economic multipliers and patent output. Small business owners should actively use this data when engaging with local governments, banks, or investors.

● 2023 holds the record for the highest number of businesses started in the US at 5,479,144.

● 5,199,984 businesses were started in 2024, showing a 47.8% increase from pre-pandemic 2019 levels. 

● The momentum held well above historical norms.

Applications for high-propensity businesses hit a cumulative high as of November 2025, about 16.1% greater than the year-to-date total in November 2024. Professional services, construction, and healthcare consistently lead sector-specific formation activity.

According to the 2024 Annual Business Survey of approximately 5.9 million U.S. employer firms, the demographics of business ownership look like this:^[2][3]

● California is the leading state with 4.34 million small businesses, followed by Texas at 3.52 million and Florida at 3.49 million.

● Montana has the highest share of employment at small businesses, at 65.9%, followed by Wyoming and Vermont, states where large corporations have minimal footprints. 

● Nearly 97% of establishments outside metropolitan areas are small businesses, employing roughly 57% of workers in those areas. Urban markets concentrate volume.^[4]

● The New York-Newark-Jersey City metropolitan area has the largest number of small businesses at 2.6 million, with 4.1 million people employed by them.

The bottom line: The post-2020 entrepreneurship surge or the post-pandemic business surge is one of the most significant economic shifts in the past two decades. With 2023 holding record numbers, and 2024 and 2025 showing massive increases compared to pre-pandemic levels, the pivot towards small business establishment is stronger now than ever before. 

Who owns these businesses is also changing fast. Older founders remain dominant for now, but generational momentum is clearly shifting, with millennial ownership of businesses sharply rising.

Among many different variables, geography is one that shapes opportunity. Rural areas depend on small businesses more deeply than urban centers do. The demographic and geographic data point to a clear opportunity.

Underrepresented founders, particularly women, minorities, and veterans, still lag in employer-firm ownership relative to their share of the population. If you fall into one of these groups, federal and state-level programs specifically designed for you exist and remain underutilized. Seek them out before assuming capital is out of reach. Location matters too. Rural markets offer less competition and deeper community loyalty.

According to 2024 data from the U.S. Bureau of Labor Statistics,

● 20.4% of businesses fail in their first year, meaning roughly 80% survive it. However, everything changes depending on which industry your business falls under. 

● Mining, quarrying, and oil and gas extraction face the highest first-year failure rate at 30.8%

● Agriculture, forestry, fishing, and hunting have the lowest at just 6.9%.

Industry resilience diverges sharply at the ten-year mark. 

● Agriculture, forestry, fishing, and hunting had the highest ten-year survival rate at 50.5%. Utilities were at 45.7%, and manufacturing at 43.6%. 

● Ten-year failure rates range from 52.8% in Utah to 72.7% in the District of Columbia.

● 48% of small employer firms show that weak sales are a major financial challenge that leads to unstable revenue and volatility of their business. Undercapitalization compounds the problem early.

● A lack of adequate capital caused almost 40% of a sample of more than 100 recent startups to fail.

The bottom line: A common myth within the sphere of entrepreneurship is that half of all businesses fail within their first year. If you look at the data, it tells a very different story.

Economic cycles play a decisive role as well. One-year survival rates were generally lowest for establishments born in 2001 and 2008, both years in which recessions occurred. Timing your launch matters more than most founders realize. Getting past year one is an achievement. Surviving a decade is a different challenge altogether. 

After five years, nearly half of businesses (48.6%) have closed, and after ten years, about two-thirds (65.3%) are no longer operating. Most businesses do not fail because of bad ideas but rather because of bad financial management. Cash flow is the leading culprit. Poor management, inability to delegate, and weak hiring decisions round out the most frequently cited structural causes of closure.

The businesses that fail most often share a common thread: they ran out of money before they ran out of opportunity. This makes it very clear that your small business should build a cash reserve before you even need one. So, a good amount of cash reserve and knowing your industry's specific survival benchmarks will help you plan your runway. 

Agriculture survives at twice the rate of mining and information firms over ten years, largely because of lower operating costs and steadier demand. Whatever your sector may be, understanding where your industry sits on the survival curve should shape every financial decision you make from day one.

● The share of small businesses with a website rose from roughly 55% in 2017 to 73% by 2022.

● Yet 27% of SMBs still lack a website entirely.

● Nearly one in three U.S. shoppers decided against purchasing from a small business because it did not have a website.^[5]

● As of 2025, there are 114.3 million social media buyers in the United States, a 43% increase from 79.9 million in 2020.

● Mobile commerce accounts for 59% of total retail e-commerce sales.

● 79% of smartphone users have made a purchase online using their mobile device in the last six months.^[6]

● The 2025 cohort of new small businesses reached 10% AI adoption in approximately six months, compared to 77 months for the 2019 cohort, nearly 13 times faster.

● AI adoption among small businesses jumped from 39% in 2024 to 55% in 2025, with content marketing emerging as the most popular use case.^[7]

● 58% of small business AI users save more than 20 hours per month.

● Nearly two-thirds report saving between $500 and $2,000 per month as a result.

● The IT spending by the SMB market was valued at approximately $466.2 billion in 2025.

● Small businesses are the target of roughly 43% of all cyberattacks.

● Yet only about 14% say they are sufficiently prepared to defend themselves.

The bottom line: Having a website is no longer an option for a business. In fact, it is a baseline expectation, one that helps in visibility and discoverability for potential customers. There is a high negative cost of staying offline that is measurable. Additionally, social media has become a parallel storefront. With access to smartphones, purchasing online and making transactions have become much easier.

Small business statistics also show that the AI adoption curve has compressed dramatically. What once took years now takes months, and the payoff is real. Technology spending at the SMB level has reached a scale that rivals entire industries of the past.

Out of all this spending towards technology, cloud services claim the largest share as it becomes a clear requirement for businesses to collaborate online and host their platforms. SMBs are projected to allocate more than half of their technology budgets to cloud services in 2025.

Cybersecurity is the fastest-rising line item, and for good reason. The gap between small businesses that have embraced digital tools and those that have not is growing faster than ever.

A business without a mobile-optimized website, an AI-assisted workflow, and a basic cybersecurity plan is taking on compounding risk. Start with the highest-leverage moves: build a functional website, trial one AI tool for a task that eats your time each week, and invest in even basic cybersecurity measures before an incident forces your hand.

● Professional, scientific, and technical services alone account for 4,594,752 small businesses, employing 5.62 million people.

Based on data and trends, the BLS (Bureau of Labor Statistics)

● Management, scientific, and technical consulting services will see a 9.4% employment growth from 2024 to 2034, driven by demand across healthcare, technology, and financial clients.

● Professional services firms, including legal, accounting, and engineering, also carry the highest five-year survival rates at 55%.

● Healthcare and social assistance small businesses employ 9.26 million people, making it one of the largest industry employers among smaller firms. Telehealth services are reshaping how small practices operate.

● Their revenue has been rising at a CAGR of 4.7%, reaching $36.1 billion.

● 3.5% growth expected in 2025, data for which is yet to be corroborated.

● 90% of healthcare small businesses project growth.

● U.S. brick-and-mortar retail sales totaled $5.93 trillion in 2024, with a projection of more than $6.6 trillion by 2030.

● In-store sales represent 84.5% of total U.S. retail sales in 2025.

● In 2024, brick-and-mortar stores saw a 3.5% increase while e-commerce sales surged 5.3%, reflecting the accelerating shift to omnichannel retail.

● Construction and trade-based small businesses in the US employ 5.94 million people.

● The industry encompasses over 3.9 million companies.

● The industry projected a need for almost 340,000 new workers in 2024 due to acute shortages in skilled trades like electricians, plumbers, and carpenters.

● The U.S. restaurant and foodservice industry is projected to reach $1.5 trillion in sales in 2026, a 4% increase from 2024.

● It currently supports 15.7 million workers, roughly 10% of the total U.S. workforce.

● Top-performing restaurants' net profit margins are near 10%, while the industry average hovers between 3% and 5%.

The bottom line: No single industry tells the same story. Healthcare and professional services offer stability and durability. 

From most of the small business statistics available to be studied, professional services is the single largest sector by firm count. The opportunities for growth here are often strong and durable. The professional and business service sector rewards expertise and reputation over the amount of capital your business has, making it one of the most accessible arenas for small business formation.

Healthcare is often known as the sector where small businesses tend to survive more than others. The confidence level in its growth trends, particularly in telehealth, is unmatched in any other sector. Still, regulatory complexity remains a persistent burden, particularly for independent practices navigating insurance reimbursement and compliance requirements.

Small businesses in the construction sector are everywhere and seem to always be in demand. Though skilled labor shortages are one of the sector's biggest constraints. Seasonal employment patterns remain pronounced, with activity concentrating heavily in warmer months across most U.S. regions.

Retail will reward those who blend physical and digital channels in an innovative way. Physical retail is not dying, contrary to popular belief. Most people still need the feeling of physically experiencing the products in a real environment before they make a purchase, and it also acts as a social activity for many. 

E-commerce, however, is growing at nearly twice the pace. Seasonality remains a defining challenge, just like it does with the construction and trade sectors. Holiday quarters still drive disproportionate revenue for small retailers, and consumer traffic trends remain uneven across segments.

Though the COVID-19 pandemic might have been one of the worst times for F&B businesses, restaurants are resilient. We can see that the widely repeated claim that 90% fail in their first year is simply not true. Only 20.1% of restaurants fail in their first year, giving them a survival rate comparable to the broader small business average.

Yet, even with all these seemingly positive trends, profitability remains razor-thin as margins in this type of business, especially for small establishments, are not very high. Before entering or expanding into any sector, study your industry's specific survival curve, margin profile, and labor dynamics.

● Federal regulatory compliance has an annual economic impact of at least $2.155 trillion, equivalent to approximately 7% of GDP.

● Americans will spend approximately 7.1 billion hours complying with IRS tax filing requirements in 2025.

● This is equivalent to 3.4 million full-time workers, at a total cost of $536 billion, or nearly 1.8% of GDP.

● In September 2025, 64% of small business owners reported that supply chain disruptions were affecting their business to some degree, up 10 points from the previous month.

● The Effective Federal Funds Rate climbed from 0.08% in January 2022 to 5.33% by August 2023.

As of February 2026, competition from large businesses was cited as a growing stress factor for Main Street firms, with the NFIB (The National Federation of Independent Business) noting it as a top concern alongside taxes and labor quality. 

Market entry barriers varied sharply by sector, with capital requirements, licensing costs, and brand recognition all working in favor of incumbents. Pricing pressure is relentless. Small firms often suffer because they cannot match the volume discounts, supply chain efficiencies, or marketing budgets that large corporations get, forcing these small businesses to compete on service quality and community connection rather than price.

● The average commercial insurance rates rose by around 3% in the first half of 2025.

● Social inflation increased liability claims in the U.S. by 57% in the past decade. It reached an annual peak of 7% in 2023, driven by rising court verdicts and third-party litigation funding.

● Small businesses were targeted in roughly 43% of all cyber attacks, yet they are among the least prepared to absorb the financial impact.

● Abuse within the legal system has cost the U.S. economy 4.8 million jobs and generates $160 billion in annual tort costs specifically for small businesses.

● Approximately 95% of civil lawsuits are resolved through settlement or dismissal before they can even reach the trial stage.

● Of these cases, the federal civil cases seem to settle in a median of 6.9 months.

● Those that reach trial extend to a median of 35.6 months.^[8]

● The legal defense costs for a large company increased by 10% annually between 2018 and 2023.

The bottom line: Compliance is not a minor line item. It is one of the highest ongoing costs a small business faces, and we can see that tax compliance alone is staggering.

Small manufacturers feel the weight most acutely, as per-employee compliance costs hit hardest at the smallest firm sizes. State-level obligations compound federal burdens, creating a dual compliance layer that consumes time and capital that could otherwise drive growth. Rising interest levels are also raising borrowing costs and making previously viable projects financially unjustifiable.

Inflation has been the defining pressure on small business economics since 2021. Inflation averaged 4.1% in 2023, 2.9% in 2024, and 2.6% in 2025. Despite the progress, it remains above the pre-pandemic pace and the Fed's 2% target, which continues to put pressure on pricing, budgeting, and long-term investment decisions for small businesses. Supply chain disruptions continue to persist due to this reason and other factors. Interest rates added another layer of complexity and strain during this cycle.

As per small business statistics, insurance costs are rising, and the coverage for how much and what can be insured is constantly tightening. Though, the rate hikes were significantly steeper for specific coverage types. The cost of availability for insurance ranked as the single most important problem for 13% of small business owners in January 2026, as per the NFIB (The National Federation of Independent Business). Cybersecurity was also a major threat. 

The legal dispute system has grown significantly more hostile for small businesses. Even settled cases are costly. This is a trend and cost that rippled down to smaller businesses through insurance premiums and supplier contract terms. As you can imagine, this is an unfair system, making it more and more difficult for small businesses to receive legal help. 

The risk environment for small businesses has never been more layered. Regulation, inflation, competition, insurance, and litigation all pull in the same direction of increasing costs for the business. The companies that survive these pressures tend to share one trait. They treat risk management as a standing business function, not a reactive measure.

Build compliance checklists into operations, carry adequate insurance before you need it, document contracts meticulously, and maintain a legal contingency fund. Waiting until a problem forces your hand is almost always more expensive than addressing it in advance.

● Business applications for March 2026 came in at 491,941, a decrease of 0.9% from the prior month.

● Projected business formations within four quarters are declining 0.2% compared to February 2026, according to the U.S. Census Bureau.^[9]

● A 1% increase in establishment births is associated with 0.18% higher GDP growth, 0.16% higher payroll job growth, and a 0.15% decline in unemployment, according to GoDaddy Small Business Research Lab data.

● Analysts expect U.S. GDP growth to slow to about 1.6% in 2026, with inflation easing toward 3%

● Unemployment is expected to rise slightly to 4.5%.

● As of 2025, 43% of Gen Z workers participate in the gig economy, more than any previous generation at the same age, with that participation rate projected to reach 50 to 55% by 2028. 

● 50% of U.S. students aged 16 to 25 say they wish to start a business.

● 80% of Gen Z and 78% of Millennials describe their lifestyle as green or eco-friendly, and nearly 90% say sustainability certifications influenced a purchase decision.^[10]

● The 20% Qualified Business Income deduction is now permanent, starting in 2026, applying to eligible pass-through entities with a minimum $400 deduction for anyone earning at least $1,000 in qualified business income. 

● Capital investment becomes more attractive immediately. For most qualifying business property placed in use after January 19, 2025, businesses can now deduct 100% of the cost in the first year, removing the prior requirement to spread deductions over multiple years.

● Childcare credits also expanded sharply. Eligible small businesses can now claim a childcare credit of up to $600,000, up from the prior cap of $150,000, at a rate of 50% of qualified childcare expenses.

● On the minimum wage front, no change is currently planned at the federal level, though state-level increases continue to create a varied and complex compliance environment for multi-state small business operators.

The bottom line: Business formation momentum is slowing from its record highs but remains structurally elevated. Macro headwinds are palpable, and small businesses will feel that deceleration. 2025 also brought with it a significant shift in the legislative landscape. 

The broader picture remains encouraging, though. Professional and business services carry durable momentum. Small business statistics show that the gig economy, generational ownership shifts, and sustainability as a competitive differentiator are on the rise.

That quickly populating gig economy pipeline will produce a new wave of small business owners. Additionally, with sustainability no longer a soft value proposition (for both small and large businesses), small businesses have the benefit of reaching wider audiences and implementing sustainability into their practices at a local scale. In fact, small businesses that embed sustainability into their operations are competing for a generation of consumers who will actively avoid those that do not.