Starting a business is a bold decision that requires determination, effort, and confidence. While entrepreneurship offers exciting opportunities, it also comes with risks and challenges. One way to improve your chances of success is to understand the facts before taking the leap. Statistics can provide valuable insights into what it takes to build a successful business.
Many people choose entrepreneurship because they want to be their own boss, with 29% citing this as their main reason. However, about 20% of new businesses close within their first year, often due to a lack of market demand. To succeed, 38% of entrepreneurs believe self-discipline is the most important trait, while 37% say strong communication and people skills are essential.
In this article, we will explore key statistics about entrepreneurship and small businesses. You will learn about the factors that contribute to success and the common reasons businesses fail.
General Small Business and Entrepreneurship Statistics
Why Businesses Fail
According to the Bureau of Labor Statistics and Guidant Financial, around 20% of businesses close within their first year, and about 50% do not make it past five years. The most common reason for failure is a lack of market demand, affecting 42% of businesses.
The second biggest challenge is insufficient capital or cash flow, which impacts 29% of businesses. Poor teamwork and communication contribute to 23% of failures.
To improve your chances of success, it’s important to offer products or services that meet a real need, manage finances wisely, and foster strong teamwork. Investing in helpful tools like customer relationship management (CRM) software or omnichannel support systems can also improve efficiency and customer satisfaction, giving your business an advantage.
Why People Become Entrepreneurs
There are many reasons people start their own businesses.
According to Guidant Financial, the top reason is the desire to be their own boss, with 29% of entrepreneurs citing this motivation. Dissatisfaction with corporate life is the second most common reason (17%), followed by the pursuit of passion (16%).
Top Challenges for Entrepreneurs
Entrepreneurs face unique challenges that traditional employees don’t have to worry about. According to Guidant Financial, the top three difficulties (excluding COVID-related issues) are:
- Limited capital or cash flow (23%)
- Hiring employees (19%)
- Marketing (15%)
Key Factors for Success
Many elements contribute to a small business’s success. According to National Business Capital and Services (NBCS), 38% of entrepreneurs say self-discipline is the most important factor. Entrepreneurs must stay focused on their goals, avoid distractions, and push through challenges.
Other key success factors include strong communication skills and passion for their work.
For female entrepreneurs, communication and people skills are considered the most important (37%), followed by self-discipline (34%) and money management skills.
Entrepreneur Demographics
Common Age Range for Entrepreneurs
There’s no set age to start a business. Anyone with a strong idea and determination can become an entrepreneur.
According to NBCS, 35% of entrepreneurs are between 50-59 years old, followed by those aged 40-49. In fact, 60% of small business owners fall within the 40-60 age range.
Diversity in Entrepreneurship
Entrepreneurship in the U.S. is more diverse than ever. The Small Business Administration (SBA) reports that 17.7% of employer firms are minority-owned:
- 5.6% Hispanic
- 2.2% African American
- 9.7% Asian
- 0.4% Native American
- 0.1% Native Hawaiian and Pacific Islander
Additionally, as of 2017, immigrants made up 17% of all business owners.
Women in Entrepreneurship
According to the Global Entrepreneurship Monitor, 252 million women worldwide are entrepreneurs. However, in the U.S., only 27% of small business owners are women, according to Guidant Financial.
Among female entrepreneurs, 71% start businesses to make a difference, compared to 63% of men. Additionally, 65% of women start businesses to earn a high income, compared to 73% of men. The third most common reason women become entrepreneurs is a lack of job opportunities (45%).
Education Levels Among Entrepreneurs
Unlike traditional careers, entrepreneurship does not always require a college degree. According to Guidant Financial:
- 30% of entrepreneurs have a high school diploma
- 31% have an associate degree
- 17% have a bachelor’s degree
- 18% have a master’s degree
- 4% have a Ph.D.
While education can be beneficial, it is not always a critical factor in entrepreneurial success.
Entrepreneurship in the United States
Number of Entrepreneurs in the U.S.
The Global Entrepreneurship Monitor estimates there are 31 million entrepreneurs in the U.S., making up about 16% of the adult workforce. Additionally, 55% of adults have started a business at some point, and 26% have launched multiple ventures.
Overall, entrepreneurship is seen as a positive career choice, with 63% of Americans viewing it favorably.
Most Popular Industries for Entrepreneurs
According to Guidant Financial, the top industries for new small businesses in the U.S. are:
- Food and restaurants (12%)
- Retail (11%)
- Business services (11%)
- Health, beauty, and fitness (9%)
- Residential and commercial services (7%)
Since these industries are in high demand, they also tend to be highly competitive. However, they offer good opportunities for financial support and success.
Small Business and the Economy
According to the SBA, there are 31.7 million small businesses in the U.S. compared to just 20,139 large businesses. This means small businesses make up 99.9% of all companies in the country.
Small businesses play a major role in the economy, accounting for 50% of the country’s economic activity. Between 2000 and 2019, small businesses created 10.5 million new jobs, while large companies created only 5.6 million. Small businesses are responsible for 65.1% of all new jobs and employ 47.1% of the private-sector workforce.
Financial Aspects of Entrepreneurship
How Small Businesses Are Funded
There are many ways entrepreneurs finance their businesses. According to Guidant Financial:
- 37% use personal cash
- 13% use rollovers as business startups (ROBS)
- 10% rely on friends and family
- 9% take out unsecured loans
- Others use U.S. Small Business Administration (SBA) loans
How Many Businesses Are Profitable?
Starting a business is one thing, but making it profitable is another challenge. According to NBCS:
- 40% of small businesses are profitable
- 30% break even
- 30% lose money
This shows the importance of financial planning and management in building a successful business.
Average Income of Entrepreneurs
While some entrepreneurs achieve great financial success, most do not become millionaires. According to the SBA:
- The median income for self-employed business owners with incorporated businesses is $51,816 per year.
- The median income for owners of unincorporated businesses is $26,084 per year.
Many entrepreneurs also have side jobs or part-time work, which may affect these income numbers.
Final Thoughts
Entrepreneurship is a challenging path that requires resilience and hard work. While success is not guaranteed, those who build successful businesses often experience greater happiness, confidence, and independence.
These statistics offer valuable insights into the realities of entrepreneurship. With careful planning, dedication, and passion, anyone can achieve success in business.