STARTUP STATISTICS – The Numbers You Need to Know



STARTUP STATISTICS - The Numbers You Need to Know

Each year, thousands of ambitious entrepreneurs start new businesses. These entrepreneurs feel bright and full of hope. And plenty of small business statistics show that by the end of four years more than half of them will be gone.

Small business failure rate aside, many small businesses make it past that critical period and thrive. How many make it and what industries fare best? We’ve collected these startup statistics for small businesses from a variety of sources to answer those questions.

GENERAL STARTUP STATISTICS

  • 69 percent of U.S. entrepreneurs start their businesses at home.
  • According to the National Association of Small Business’s 2017 Economic Report, the majority of small businesses surveyed are LLCs (35 percent) followed by S-corporations (33 percent), corporations (19 percent), sole proprietorships (12 percent), and partnerships (2 percent).
  • 51 percent of people asked, “What’s the best way to learn more about entrepreneurship?” responded with “Start a company”.

SMALL BUSINESS OWNER STATISTICS

Who’s starting small businesses today? Here’s a look at small business owners:

  • Gender:
    • 73 percent identify as male; and
    • 25 percent identify as female.
  • Age Range:
    • 50-59 years old: 35 percent;
    • 40-49 years old: 25 percent;
    • 60-69 years old: 18 percent;
    • 30-39 years old: 14 percent;
    • 18-29 years old: 4 percent; and
    • 70+ years old: 4 percent.
  • Education:
    • High School / GED: 33 percent;
    • Associates Degree: 18 percent;
    • Bachelor’s Degree: 29 percent;
    • Master’s Degree: 16 percent; and
    • Doctorate: 4 percent.
  • Reason for starting business:
    • Ready to be his/her own boss: 26 percent;
    • Wanted to pursue his/her passion: 23 percent;
    • The opportunity presented itself: 19 percent;
    • Dissatisfied with corporate America: 12 percent;
    • Laid off or outsourced: 6 percent;
    • Not ready to retire: 6 percent;
    • Other: 5 percent;
    • Life event such as divorce, death, etc.: 3 percent.
  • Ethnicity:
    • White/Caucasian – 71 percent;
    • Hispanic/Latino – 6 percent;
    • Black/African American – 7 percent;
    • Asian/Pacific Islander – 11 percent;
    • Other – 5 percent.
  • 82 percent of successful business owners did not doubt they had the right qualifications and proper experience to run a company.

STARTUP FAILURE RATE STATISTICS

  • Of all small businesses started in 2014:
    • 80 percent made it to the second year (2015);
    • 70 percent made it to the third year (2016);
    • 62 percent made it to the fourth year (2017);
    • 56 percent made it to the fifth year (2018).
  • Given those numbers, a bit more than half of all startups actually survive to their fourth year, while the startup failure rate at four years is about 44 percent.
  • Top 10 causes of small business failure:
    • No market need: 42 percent;
    • Ran out of cash: 29 percent;
    • Not the right team: 23 percent;
    • Got outcompeted: 19 percent;
    • Pricing / Cost issues: 18 percent;
    • User un-friendly product: 17 percent;
    • Product without a business model: 17 percent;
    • Poor marketing: 14 percent;
    • Ignore customers: 14 percent; and
    • Product mistimed: 13 percent.

STARTUP FINANCE STATISTICS

Money is a key ingredient to the small business success rate. Here’s a financial snapshot of small business startups:

  • A third of small businesses get started with less than $5,000 and 58 percent got started with less than $25,000.
    • In addition, 65 percent admitted to not being fully confident they had enough money to start their business and;
    • An overwhelming 93 percent said they calculated a potential run rate of shorter than 18 months.
  • The most popular small business financing methods in 2018 were:
    • Personal funds 77 percent;
    • Bank loan 34 percent;
    • Borrowing from family/friends 16 percent;
    • Other funding 11 percent;
    • Donations from family/friends 9 percent;
    • Online lender 4 percent;
    • Angel investor 3 percent;
    • Venture capital 3 percent;
    • Crowdfunding 2 percent.
  • 40 percent of small businesses are profitable, 30 percent break even and 30 percent are continually losing money.
  • Having two founders, rather than one, significantly increases your odds of success as you’ll:
    • Raise 30 percent more money,
    • Have almost 3X the user growth, and
    • Are 19 percent less likely to scale prematurely.
  • 82 percent of businesses that fail do so because of cash flow problems
  • 27 percent of businesses surveyed by the NSBA claimed that they weren’t able to receive the funding they needed.

FASTEST GROWING SMALL BUSINESS INDUSTRIES

The industries with the top number of small business startups in 2018 were:

  • Business services: 11 percent;
  • Food/Restaurant: 11 percent;
  • Health/Beauty/Fitness: 10 percent;
  • General retail: 7 percent;
  • Home services: 6 percent.

INDUSTRIES WITH THE BEST STARTUP STATISTICS

The 10 most profitable small business industries by net profit margin (NPM) are:



  • Accounting, Tax preparation, Bookkeeping, and Payroll Services: 18.4 percent NPM
  • Lessors of Real Estate: 17.9 percent NPM
  • Legal Services: 17.4 percent NPM
  • Management of Companies and Enterprises: 16 percent NPM
  • Activities Related to Real Estate: 14.9 percent NPM
  • Offices of Dentists: 14.8 percent NPM
  • Offices of Real Estate Agents and Brokers: 14.3 percent NPM
  • Nonmetallic Mineral Mining and Quarrying: 13.2% NPM
  • Offices of Other Health Practitioners: 13 percent NPM
  • Medical and Diagnostic Laboratories: 12.1 percent NPM

INDUSTRIES WITH THE WORST STARTUP STATISTICS

The 10 least profitable industries in the US by net profit margin (NPM) are:

  • Oil and Gas Extraction: -6.9 percent NPM
  • Software Publishers: -5.1 percent NPM
  • Beverage Manufacturing: -3.7 percent NPM
  • Semiconductor and Other Electronic Component Manufacturing: -0.3 percent NPM
  • Forging and Stamping: 0.4 percent NPM
  • Farm Product Raw Material Merchant Wholesalers: 0.9 percent NPM
  • Beer, Wine, and Distilled Alcoholic Beverage Merchant Wholesalers: 2.1 percent NPM
  • Petroleum and Petroleum Products Merchant Wholesalers: 2.8 percent NPM
  • Grocery Stores: 2.2 percent NPM
  • Bakeries and Tortilla Manufacturing: 2.3 percent NPM

Bottom Line

So, if you want to start your own business, don’t let the startup statistics above put you off. After all, you’re more likely to succeed if you’ve failed than if you’ve never tried:

  • Consider, founders of a previously successful business have a 30 percent chance of success with their next venture, founders who have failed at a prior business have a 20 percent chance of succeeding versus an 18 percent chance of success for first time entrepreneurs.

Startup Photo via Shutterstock More in: 38 Comments ▼


Matt Mansfield


Matt Mansfield Matt Mansfield is the Tech Editor and SEO Specialist at Small Business Trends where he is responsible for directing and writing many of the site’s product reviews, technology how-to’s, and lists of small business resources as well as increasing the reach of our content.

38 Reactions

  1. The harshest stat on there for me was that 46% of businesses fail because of incompetence. Ouch!

  2. As a longtime entrepreneur and mentor, if I knew what it took to be successful, and all of the success vs failure stats before starting my first business I never would have done it. I always tell young entrepreneurs “Stats are for losers”…successful entrepreneurs don’t pay attention to them. It is just a readymade excuse to explain away flawed strategies and poor work ethic. The most important stat any entrepreneur should know is how many hours a day they have wasted on things that don’t drive revenue. If you take the 46% and extrapolate what those founders did with their time and energy you will always find a common thread. Gravitating to business activities that don’t grow your customer base. Spending prime time customer hours on things that don’t add value to your bottom line. Many entrepreneurs are not prepared to do “anything” necessary for their dream to thrive. Not willing to properly educate themselves on their market, competitors and product placement. Just looking to be the next Startup Billionaire but going into the startup with a 9-5 employee mentality. I can’t tell you how many entrepreneurs say when asked “why are you starting a business?”….answers like I just really think I can….I have a great idea for a_____and know people will buy them…and my all time favorite, I got burned out in Corporate America and always wanted to be my own boss….It’s a ton of this in that 46%. Change your mindset…change the statistics.

    • Matt Mansfield

      Great insight, T.D.! Value-add activities are key. Unfortunately, it’s often hard to distinguish the difference in the moment.

      • Starlett E. Powers

        I’m one those types that is late stepping outside the box. I’m a woman striving to better but have to give it a try. I took up business but never tried to apply towards an idea which I have a lot of but a little afraid of going about the right way. I am writing a small cook book for balance diets. I know there are a lot out there. But I just want to give it try to see if it will go through. This book is for people who want to eat what they want but with less of it. More fruits and vegetables of course which we have a tendency of not eating enough of. I’m one of those people. So I will try to write this recipe book. I’m not really a writer. But will try I already started on the rough draft. It is a lot of work. I sort of a procrastinator.

  3. Robert,

    The reason is that many entrepreneurs are competent at the one thing they started their business for; it’s the other 647 things that must be in your skillset to succeed in business that trip them up. One thing that successful entrepreneurs grasp early on is how to accurately asses their own strengths and weaknesses. They then hire or outsource to complement their weaknesses or those areas where their time is not best spent.

  4. Thank you for all of your insight. It is much appreciated. I am just starting out and while I’m nervous about jumping into a new world of entrepreneurship, I also know that like what was written above – if you know ahead of time some of the obstacles and prepare for them, you are a step ahead of the game. It won’t be easy, but I am excited at the opportunities in front of me.

  5. As an accountant, I do the math. So here’s what I see:

    “Leading causes of small business failure:
    • Incompetence: 46 percent;
    • Unbalanced experience or lack of managerial experience: 30 percent;”

    46+30 = 76%

    76%!! And coming in at a meager 11% is a lack of experience in the area of expertise. That means that the overwhelming majority of startup failures can be attributed to the ‘business-end-of-business’, not the time spent making the ‘special sauce’. And is it any wonder?

    Look at the thousands upon thousands of pages of statutory legislation, in addition to tax rules and, …uh…what’s a debit and a credit? Section 179 depreciation what?

    I specialize in the business end of business, which allows the business owners to focus on what they do best, whatever that might be. And when they can rely on key people keeping an eye on the machinery itself, advising on cash flow, increasing operational efficiency, and instituting legal compliance, they can spend their time exercising their competitive advantage. Which is the point, in my estimation.

  6. That is good to know. What about ecommerce business. What are the statistic for this?

    • Having owned a traditional business or B&M, and now having a lucrative I-commerce business, I’m assuming the numbers are higher. These types of businesses are relatively easier to open, but it’s also much easier to loose focus on the actions needed to achieve the goals. Exactly as T.D. Stated above.

  7. nice research. may i ask where are the sources of the info?

    also, do you have any updated statistic of the following finding?

    In fact, of all small businesses started in 2011:
    4 percent made it to the second year
    3 percent made it to the third year
    9 percent made it to the fourth year
    3 percent made it to the fifth year

  8. Hey Matt, I was just writing a new blog post about how many people start small businesses each year and glad that I found this article! Thanks for taking the time & doing the footwork of collecting all of these stats and sharing them with us!

  9. The overall analysis is good to know. But if the sector-wise analysis will be provided then it will be awesome.

  10. Aira Bongco

    The startup industry is really growing fast. And it is bound to grow bigger in the upcoming years.

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