What Types Of Small Businesses Are There – Many people dream of starting their own business based on their own ideas and dreams. They try to escape workplace rules, politics and internal turmoil that can hinder their growth.
Not surprisingly, these people want to be in complete control of their time and goals. Starting your own business may seem overwhelming and complicated at first, but if you break down the process of how to start a business into steps, you will need that first big leap of courage that will carry you on your business journey.
What Types Of Small Businesses Are There
Whether it’s an e-commerce store or a brick-and-mortar business, knowing what’s going on in the small business world can help you better manage your risks and opportunities.
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Whether you already have your own business or plan to start a new one this year, these statistics will help you understand what’s new and what you can expect. They can help you understand what affects small businesses, how they operate, how the economy affects them, and more.
The latest statistics show that there are 33.2 million small businesses in the United States, which is 99.9 percent of all businesses in the United States (SBA, 2022).
The Small Business Administration (SBA) defines a small business as a company with fewer than 500 employees. This means that many high-value startups in the United States fit this definition of small business.
Interestingly, the definition of a small business varies around the world. For comparison, in the European Union, any business with fewer than 50 employees is considered a small business, while in Australia it is companies with fewer than 15 employees.
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Breaking down the small business statistics, we find that of the 33.2 million small businesses in the United States, 27 million have no employees, 5.4 million have fewer than 20 employees, and nearly 650,000 have between 20 and 499 employees.
With so many small businesses in the United States, it’s no surprise that small businesses create millions of jobs there every year. According to the Small Business Administration, small firms in the United States created 8.7 million new jobs between March 2020 and March 2021 (SBA, 2022). This is 400,000 fewer than last year, when US small businesses created 9.1 million new positions.
Last year’s statistics showed us that small businesses have always been an important part of the US economy and growth. They offer employment opportunities, financial advancement and a range of unique products and services. So even when they become big companies, they contribute to economic growth.
More than 90 percent of the business population is represented by small and medium-sized enterprises, also known as SMEs (SalesForce, 2019). As the last few statistics show, small firms are responsible for most job creation.
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Small and medium enterprises have created a significant number of jobs in the past few years. Small and medium enterprises are also an important player in contributing to innovation. This contribution varies across companies, industries and countries. But better access to world markets and developments in knowledge networks, as well as digitization, play a major role in the development of SMEs to participate in the global economy. Overall, SMEs make a significant contribution to global economic growth by providing employment, promoting sustainable industrialization and fostering innovation.
There are many reasons that motivate people to start their own business. Among the most common motivations, 29 percent of respondents said they started their own business because they wanted to be their own boss (Guidelines Finance, 2021).
The next most popular reason to start your own business is dissatisfaction with the corporate US. 17 percent of respondents chose this as their main motivation. Other common reasons include wanting to pursue one’s passions, an opportunity presented itself, feeling inspired, and not being ready to retire.
Starting your own business means that people are free not only to be their own boss, but also to be the boss of their time. This gives you the freedom to make decisions and work how, when and where you want. There may be many reasons why people around the world decide to go for this financial freedom, but many of the main motivations are related to being freed from their current job and having more freedom in their work.
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Uncertainty is a major factor that can affect small businesses, and it is particularly evident during the coronavirus pandemic.
According to the latest small business statistics, nearly one-third (31 percent) of small businesses in the United States are not currently operating (Facebook, 2020).
In March 2020, more than 70 percent of small businesses in the United States closed when the United States became the new epicenter of the virus. More than 60 percent of small businesses have closed due to government orders as large areas of the country have been shut down in an effort to prevent the spread of the virus.
Some small business owners have taken steps to adapt to the new reality created by the coronavirus. Many of them have added their online activities to try to reach their client base and keep their business alive by selling their products and services online.
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In fact, more than half (51 percent) say they have increased their interactions with their clients online. Additionally, 36 percent of private businesses using online tools now do all of their sales online.
Looking ahead, 28 percent of these small business owners say cash flow is their biggest challenge in the near future, followed by a lack of consumer demand.
Statistics show us that the new generation of entrepreneurs is more likely to fall by the wayside. In fact, Millennials and Gen Zers are 188 percent more likely to intend to create a side business, compared to Baby Boomers or traditional (Salesforce, 2019).
Compared to Baby Boomers, Millennials and Gen Zers are also 48 percent more likely to say they started a business because they have an idea they are passionate about bringing to market. The ease with which you can start your own business has made the process much easier for the new generation who want to be their own boss. With the rise of the online market, running a business from your own home has become easier.
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The biggest fear of people starting their own business is the risk of failure. And this is not an unrealistic fear. In fact, the latest statistics show that more than 20 percent of small businesses fail in the first year, and nearly 50 percent of small startups fail in the first five years (Bureau of Labor Statistics, 2021).
Now, this statistic should not discourage you from starting your own business. In fact, it should do the opposite. By knowing why and how many small businesses fail in their first year, you can design a business strategy to overcome potential risks. Of course, you can’t completely eliminate all risk, but this will help you better understand what you can do in different scenarios, which brings us to our next small business statistic.
Lack of money is the main reason new businesses fail. In fact, 38 percent of small businesses fail because they run out of money or can’t get additional financing (CB Insights, 2021).
The next most likely reason new businesses fail is that there is no market demand for their product. Statistics show that 35 percent of new businesses fail because of this. As such, aspiring entrepreneurs must go the extra mile to ensure that there is a demand for the product they are offering to customers.
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Some of the main reasons startups fail include losing out to competitors, having the wrong business model, and facing regulatory or legal challenges. Pricing issues, having a mismatched team and wrong product launches are also some of the major reasons for new business failure.
In the first few years of starting a new business, small companies face many challenges that limit their potential. One of the main challenges small businesses face is poor quality of work. In fact, 52 percent of respondents said the most important issue for small businesses is labor quality (CNBC, 2019). Small business owners say finding qualified people to hire is difficult. For businesses with more than 50 employees, 63 percent of owners find it more difficult to find qualified employees.
In addition, small business owners also face financial challenges. Since small corporations don’t have the advantage of being backed by large funds, they often struggle to figure out how to manage their finances.
Social media is a firm favorite of small business owners. In fact, 64 percent of small businesses surveyed use social media in their marketing strategy (The Manifest, 2019).
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The same study showed us that almost all small businesses run ads. And in most cases this advertisement is through a digital medium