Do you own a small business or intend to launch one soon? Well, you’re in an outstanding group; there are about 28.8 million small business across the US. According to a report released by the United States Small Business Administration, these businesses have over 56.8 million workers. What’s more surprising is that small businesses (with less than 500 workers) account for 99.7 percent of all the businesses in the United States.
Thanks to agencies like the U.S Census Bureau, the SBA, and the National Small Business Association (NSBA), you can now access statistics of business growth, numbers revealing how important these businesses are to the economy, and more. Here are essential statistics you should know if you own or manage a small business.
How important are small businesses to the economy
Small businesses play a significant role in the overall economic growth and development. These businesses create more employment opportunities as compared to the giant corporations. According to a report released by SBA, small businesses created 1.4 million new job opportunities in the first three quarters of 2014. 39 percent of these jobs were created by businesses with less than 50 workers.
Besides, small businesses played an integral role in the nation’s recovery from recession. Indeed, these businesses created 69% of all the job opportunities created between 2009 and the middle of 2013.
Do small businesses fail?
Approximately two-thirds of small businesses survive the first 24 months in business, but only 50% of small businesses survive five years, and 33.33% survive a decade in business. Companies that have been running for a long time have higher chances of operating for many years. It’s the first few years that are tough.
And what you hear about the risk profile of restaurants might not be true
You must have heard that restaurants are very risky and probably destined to fail. In fact, most people believe that about 60 percent of restaurants close within 12 months of opening. It’s easy to believe this argument because it appears to be supported by personal anecdotes; the rate at which restaurants open and close within your neighborhood.
However, this 60% applies to the first three years of business and not one year. Besides, the chart presenting this data on SBA reveals it’s like 20 percent for the first year. And the craziest part is that one of the significant reasons restaurants fail is lack of capital. Banks and other financial institutions rarely lend to restaurants as they’re too risky.
This is what creates the vicious cycle in the restaurant business failure because it’s difficult to acquire enough capital to make the restaurant more profitable.
Cash flow problems are the primary cause of business failure
According to a study done by U.S Bank, 82% of businesses failures are associated with cash flow issues. Note that cash flow doesn’t mean the money going out or the business is receiving only. Timing is an essential factor too in handling business cash fFlow.