The History of Small Business in the United States: 101 Incredible Facts and Figures
Time and time again, small businesses and entrepreneurs have proved themselves strong in the wake of adversity. Lost jobs cuz of a financial crisis?...They’ll create their own. No funding available from banks?... They’ll look to other sources. Just comes to prove that where there’s a will, there’s a way – no matter one’s gender, ethnicity, age, or current circumstances.
Join along with us as we guide you through 101 incredible facts and figures for the history of small business in the United States.
Stick around long enough and you’ll get to the good stuff, where we cover pre- and post-COVID trends of Gen Z and millennial small business owners.
It’s not one you’ll wanna miss!
17th & 18th Centuries
The majority of colonists made their living on small family farms in rural areas (in other words, the OG microentrepreneurs).
Families produced a lot of their own goods, like food, soap, and clothing.
Of the free, White men in the American colonies (who made up about a third of the population), over 50% of them owned some land, though it was generally not much.
1739: Eliza Lucas Pinckney was the first woman recorded taking over a business (her family plantation) in the U.S.
Before the Industrial Revolution (which was from 1760 – 1840), all business was small business. With the rise of cities came small merchants, independent craftsmen, and self-reliant professionals.
For the first time in American history, wage-workers outnumbered the self-employed.
By the end of the century, America was responsible for one half of the world’s manufacturing, yet only 45% of American workers didn’t live in poverty… #unfair
1906: Madam C.J. Walker creates a haircare line that will later gain her recognition as the first self-made female millionaire.
1930s: Small businesses suffered a lot during the Dust Bowl and the Great Depression. In 1931 alone, 28,285 businesses failed at a rate of 133 a day. Most were small businesses. Sad days.
1946: Rose Meta opened the Rose Meta House of Beauty salon in New York, the world's largest African-American beauty parlor.
Post-WWII: FDR’s GI Bill enabled returning veterans benefits, like payments for education and loans for starting businesses. This caused prosperous times.
1953: The Small Business Administration (SBA) was founded under the Small Business Act established by Congress.
1958: Small business contributed 57% of the nation’s gross domestic product (GDP).
1970s: Small businesses suffered again due to a recession related to the 1973 OPEC oil embargo. It quadrupled gas prices and destabilized the economy.
1979: Fun fact - Ecommerce was invented!
1980: Small businesses’ contribution to the national GDP dropped to 50% by this year.
1995: There were 16.4 million non-farm, sole proprietorships; 1.6 million partnerships; and 4.5 million corporations in the U.S., totaling 22.5 million independent enterprises.
The number of women who were self-employed increased by 9.7%.
The number of African Americans who were self-employed increased by 36.6%.
The number of Hispanics self-employed increased by 110%.
50.2% of private sector employees worked for small businesses.
The state with the lowest percentage working for small businesses was Florida with 44%.
The state while the state with the highest percentage was Montana with 69.8%.
Also, just over 18% of the entire private sector workforce was employed by firms with fewer than 20 employees.
2007 – 2010 (In the 🔥 of the 2008 financial crisis):
The financial crisis that happened hit small businesses harder than large firms.
About 1.8 million small businesses went under.
Around about 8.7 million jobs were lost.
The total amount of commercial loans to small businesses declined by $40 billion.
The number of self-employed Americans dropped 4%.
Newer businesses are smaller, with 3.62 million businesses employing 1 to 4 workers.
Startup numbers fell dramatically, reaching 560,000 in 2010 (was 715,000+ in 2006).
The average number of workers per office fell 10%.
18% of entrepreneurs that launched their own business around this time did so after losing their jobs in the recession.
60-80% of all new jobs come from small businesses.
70% of small businesses are owned and operated by a single member.
The 28 million small businesses in the U.S. outnumber corporations 1,162 to 1.
They also employed almost 60% of the U.S.’ private workforce.
Immigrants make up 12.5% of small business owners nationwide.
Over half of small businesses are home-based (54%).
Small businesses created 1.8 million net jobs.
Firms with less than 20 employees had the largest gains, adding 1.2 million net jobs.
The smallest gains were seen by firms with 100-499 employees, adding just over 250,000 net jobs.
38.1% increase in minority small business ownership.
Of the 287,000+ companies that exported goods, 97.5% were small firms (businesses with up to 499 employees).
95% of Black-owned businesses are sole proprietors.
There are 30.7 million small businesses in the U.S.
99.9% of all businesses in the United States are small businesses.
Small businesses employ 47.3% of the U.S. private workforce.
Women own 45% of all U.S. businesses.
Minority-owned small businesses employ 8.7 million workers.
In the last decade, businesses owned by people of color grew 10 times faster (79%) than the overall growth rate for U.S. small businesses during this same period (7.6%).
The main motivations to opening one’s own business are to be your own boss (55%) and pursue your passion (39%).
Gen Z Small Business Owners, Specifically
53% of Gen Z want to start their own company in order to have more control of their lives.
About 40% of students K-12 say they plan to start a business and/or invent something that will change the world.
60% have the priority to have a job that would make a positive impact on the world.
And they’re not afraid to go down the less traveled path, with 1 out of every 5 Gen Z and young Millennials saying they may not go to college.
What’s more? A third of Gen Z said they’ve considered taking a gap year between high school and college.
And 89% of them have considered an education path that looks different from a four-year degree directly out of high school.
Less than 5% of these students are participating in internships at companies or organizations, possibly preferring to self-teach instead.
Millennial Small Business Owners, Specifically
Millennials are the most diverse group of small business owners, compared to every other generation.
A millennial entrepreneur is 77% more likely to be African American than a “baby boomer” small business owner.
25% of millennial small business owners are Hispanic, compared to only 11% of Hispanic boomer entrepreneurs.
Also, the gender gap is improving with millennials:
Women account for 28% of millennial small business owners. (This is 12% higher than the U.S. average.)
This means men make up the other 72%.
Also, millennial entrepreneurs are 22% more likely to be women than boomer entrepreneurs.
And they’re showing you don’t need higher education to be successful:
45% of millennial small business owners reported a high school degree or GED as their highest level of education, compared to only 28% of boomers.
Only 16% of millennial small business owners have an associate’s degree, compared to 18% of boomers.
The trend continues for bachelor’s and master’s degrees, with 23% of millennials and 32% of boomers having the first and 13% of millennials and 17% of boomers having the latter
Plus, they seem to be happy:
On a scale of 1-10 (10 being the happiest), 53% of millennial men small business owners report a 9 or 10.
On a scale of 1-10 (10 being the happiest), 48% of millennial women small business owners report a 9.
In general, 52% of millennial entrepreneurs are very happy as small business owners, comparable to the 54% of very happy boomer small business owners.
And their confidence levels are relatively high:
Millennial entrepreneurs averaged 7 on a scale of 1- 10 (10 being the most confident) when it comes to confidence in the state of small business in the political landscape, the same average as their boomer counterparts. (This was pre-COVID, mind you.)
However, female millennial entrepreneurs are 13% less confident in the state of small business in the political climate than male entrepreneurs.
Here’s what millennial small businesses are like:
Millennial entrepreneurs prefer independent businesses to franchises, with 67% owning new, independent businesses and 27% having purchased existing, independent businesses. (Only 36% of boomers own new, independent businesses, while 50% purchased existing independent businesses.)
Millennial men open businesses in a lot of industries, while millennial women are more concentrated, with 39% of women having opened health, beauty, and fitness businesses.
Nevertheless, millennial businesses seem to do pretty well, with 80% of businesses reporting a profit, which is 3% higher than the national average.
Unfortunately, millennials are 14% more likely to be challenged by money issues (lack of capital or cash flow, specifically) compared to boomers.
The main funding for millennial small businesses is cash, at 43%. Only 32% of boomers use cash to finance their businesses.
Andddd, in other news,
60% of millennials identify as entrepreneurs.
Millennial small business owners spend about $150 million a year, which accounts for 25% of all U.S. small business spending.
During COVID in 2021: (results from a study)
COVID had some positive and not so positive impacts on small businesses:
7% of small businesses surveyed temporarily pivoted their business models to new practices because of the pandemic, like remote workforces, curbside pick-up, delivery, and other social distancing methods.
41% say they implemented innovative or disruptive business changes because of ‘rona (e.g. digital marketing only, adding new antimicrobial products, paint-at-home kits, etc.).
78% of small business owners expect their business to survive through the rest of the pandemic; 19% were unsure, and 4% expect to fail.
Losing money was the most common thing impacted by COVID at 23%, ahead of reduced budget, temporary closure, cutting own wages, and temporary pivot.
When it comes to non-COVID challenges, lack of money and cash flow was top at 23%, followed by keeping employees, marketing/ advertising, time management, administrative work, and managing/ providing benefits.
How do they feel about what’s yet to come?
49% of small business owners said they were either somewhat or very confident about the future of small business post-COVID.
Whereas, 34% were either somewhat or very unconfident.
17% sat in the middle (neutrality).
And of these small businesses we’re talking about, it’s microentrepreneurs FTW 🙌🏽
20% percent of small businesses surveyed are solo enterprises, or sole proprietors.
44% of small businesses have between 2-5 employees.
17% have 6-10 employees.
1% of small businesses have over 100 employees.
Let’s get to know a little more about these small business owners:
2020 saw the greatest increase in the last few years, with 13% more female small business owners surveyed.
There are 68% men small business owners and 32% female small business owners.
Gen X has overcome baby boomer small business owners, 46% compared to 41%.
Right now, millennials are 13% of small business owners, while only 1% are Gen Z.
And what they’ll focus on in the near future:
49% of small business owners plan to increase staff and expand or remodel their business.
55% will pivot with the times by investing in digital marketing.
30% will invest in traditional marketing.
27% will be investing in IT infrastructure.
22% will invest in business services, like a third-party or software to help them manage payroll, accounting, or inventory management. Ya know… the boring stuff.
👉🏽 If you’re smart (and we think you are), you’ll market yourself accordingly so you can slide in these small businesses’ DMs.
For 2021 And Beyond, The History of Small Businesses Continues to Unfold 🗺
Will your new biz make the books?
· BizIQ, American Small Businesses: Past, Present, and Future