Here's How Much the Average Small Business Makes Each Year

Does your small business earn more than the average?

If you're thinking of starting a small business, you're probably wondering how much money you can expect to make. After all, that's one of the most important factors in deciding whether or not to start a business in the first place. According to recent data from the Federal Reserve, the average small business brings in just under $53,000 each year before taxes. Of course, that's just an average, which means that some businesses make more and some make less.

How many small businesses are in the U.S.?

The Small Business Administration (SBA) defines a small business as an independent business having fewer than 500 employees. There are over 32.5 million small businesses in the U.S., with 81% of them being non-employer firms, or firms with no employees.

The remaining 19% are small businesses with paid employees, also known as employer firms. The number of employer firms have stayed relatively stable over the past 25 years. Non-employer firms have almost doubled, from 15.4 million in 1997 to 26.5 million in 2018. Small businesses make up 99.99% of all businesses in the U.S. There are 20,516 large businesses.

Small businesses are important drivers of economic growth. From 1995 to 2020, small businesses created 12.7 million new jobs, as compared to the 7.9 million jobs created by large businesses. Small businesses have accounted for 62% of net new job creation since 1995.

What is the success rate of small businesses?

Starting a small business isn't easy. About two-thirds of small businesses survive after two years, about half after five years, and only about one third survive after 10 years. The number drops to 25% after the 15-year mark. Of all the businesses in the U.S., start-ups make up 13%. In 2019, 1.04 million small businesses opened and 928,000 closed. COVID-19 negatively impacted small businesses; of the 15 million jobs lost in quarter two of 2020, 8.6 million were small business jobs.

How much do small businesses make?

While the average non-employer small business brings in about $53,000 each year, employer small businesses bring in over $6 million. These numbers can vary quite a bit depending on the industry. For example, businesses in the health care and information technology industries tend to make more than businesses in other industries.

Businesses that have been around for longer tend to make more than newer businesses. This makes sense since businesses have had more time to build up their customer base and grow their revenue streams. The key is to find a niche that you can excel in and to always be looking for ways to improve your bottom line.