20 Most Profitable Small Businesses – Starting an online business is a great way to quit your full-time job and achieve financial freedom. However, building a successful small business takes a lot of effort, time and money.
To help your business grow faster, it is important to research the most profitable business ideas and understand the current state of the market.
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This article will cover the latest small business statistics that every aspiring entrepreneur needs to know in 2023, no matter what business model you choose. We’ll give you valuable insight into what works and what doesn’t to help you succeed in the business world.
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This section focuses on small business statistics in the US. Therefore, the data should benefit those who live in the US or plan to target that niche market.
However, only 18% or about 6 million small businesses have paid employees. 82% of them, or about 27 million, are non-employer companies.
The US Small Business Administration (SBA) defines non-employer businesses as independent workers and independent contractors. In addition to having more autonomy and equity, this type of business also requires low start-up capital.
Small businesses have created 12.9 million new jobs in the past 25 years. By comparison, large companies generated 6.7 million new jobs during the same period.
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In addition to the wide variety of products and services offered, small businesses contribute significantly to the growth of the US economy.
The sectors with the highest participation of family businesses are consumption and manufacturing, accounting for 37% and 27% respectively.
Meanwhile, health and wellness sciences have the lowest share at 4%. This is understandable because the government dominates this particular sector and leaves limited space for independent contractors.
Non-manufactured goods production and related service industries have the second highest share of small business employers at 18%. Business support and customer service ranked third with 15%.
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Since the manufacturing industry has the smallest number of small companies, it is less competitive than the more saturated sectors. In other words, you will be more likely to succeed.
In the US, an S corporation has a regular corporate structure with a special tax status that includes business profits in the shareholder’s income tax. It is designed to avoid double taxation for C corporations and protect the owner’s assets from business debts.
On the other hand, 86.6% of companies adopt a sole proprietorship legal structure, which is popular among non-employer companies. Its simple structure makes it easy for anyone to start a business because only one person owns and runs it.
With an estimated 4.74 billion social media users, social media marketing is an important part of any business strategy. Due to its cost effectiveness and high conversion rate, small businesses rely on this method.
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In 2021, 55% of small business owners in the US advertise on social media. 66% of small businesses surveyed use Facebook, while 42% choose YouTube.
This is not surprising given that Facebook and YouTube are the two most popular social media platforms in 2021. According to DataReportal, Facebook and YouTube have over two billion monthly active users, surpassing Instagram by about one billion.
Advertising on platforms with large audience bases will give small businesses a competitive edge in their digital marketing efforts.
94% of small businesses post monthly, 79% post weekly, and 52% post daily on social networking sites. Only 6% of small businesses publish less than once a month.
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While there is no fixed standard for posting frequency, 74% of social media users prefer brands to post once or twice a day.
Brand discovery on social networking sites is especially popular with Gen Z, as 78% of consumers in this demographic use it regularly, followed by 61% of Millennials and 56% of Generation X. Boomers surf social platforms to find new brands.
New businesses targeting Gen Z and Millennials should accelerate brand awareness by investing in popular social media platforms such as Instagram and TikTok.
54% of small businesses plan to increase spending on social media, while 30% plan to spend less on print advertising.
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Social media is one of the most cost-effective and profitable digital marketing channels due to its large user base. However, being active on social media platforms without practicing SEO can lead to unsatisfactory results or even losses.
Almost half of all small businesses run their campaigns independently. They also spend less than two hours a week on marketing efforts. Unfortunately, this can result in a lack of proper preparation and optimization.
Consider investing in marketers to improve your marketing campaign. Although it comes at an additional cost, the traffic and brand awareness you gain will help you reach a wider audience and benefit you in the long run.
Knowing how other small businesses manage their financial affairs will give you a plan to follow. Here are five small business statistics to help new businesses make better financial decisions.
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In 2021, the average small business loan amount is $52,158. In terms of interest type, the average fixed rate loan size is $73,072.
Statistics show that the average revenue for a self-employed business is $44,000/year. Meanwhile, the employer company can earn around US$4.9 million/year.
At the height of the pandemic in 2020, only 63% of small businesses made a profit. 23% of small businesses experience lost revenue.
Fortunately, 73% of small businesses have received financial assistance from the Payroll Protection Program (PPP). It provides funds for small businesses to pay interest on mortgages, rent and utilities, helping them maintain a healthy cash flow.
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Small business loans have an approval rate of 57%. However, each approval will depend on many factors such as the type of bank and the applicant’s location, race and gender.
For example, small businesses in rural areas have a higher approval rate (51%) when compared to urban businesses (38%). Businesses in big cities tend to favor big banks, which offer lower approval rates than smaller lenders.
Businesses with lower credit scores turn to online lenders and non-bank financial companies more often than businesses with higher credit scores.
35% of small businesses with lower credit scores get loans from online lenders, while 23% turn to non-bank finance companies. The latter include mortgage companies, equipment dealers and insurance companies.
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In comparison, only a small percentage of small businesses with higher credit scores submit loan applications to online lenders (11%) and finance companies (11%).
20% of small businesses use Rollovers for Business Startups (ROBS), while 10% ask for financial help from family and friends.
Home equity lines of credit (HELOC) and equipment leasing are the least popular forms of finance, with only 3% of respondents using them to leverage their business.
Learning about the demographics of small business owners will give you more insight into competitors. Additionally, this information can help you learn from your mistakes and create better business and marketing strategies.
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46.5% of small business owners are Generation X, 45.5% are Baby Boomers, and 7% are Millennials. Generation Z – born between 1997-2021 – make up just 0.5% of all small business owners.
These business trends indicate a shift in small business owners from baby boomers to Gen X. This gap could widen as many Baby Boomers retire in 2022 while Gen X is still in their productive years.
Small business growth statistics show that the number of women-owned businesses has increased by 114% over the past 20 years.
Today, women own 22.4% of small businesses or franchises in the US. 68.9% are Generation X, 19.4% are Baby Boomers and 10.7% are Millennials.
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Regarding education, 34% of business women have a bachelor’s degree, 27% have a master’s degree and only 8% have a doctoral degree.
Meanwhile, 47.6% of entrepreneurs feel ready to be their own boss. And surprisingly, only 31% of respondents went into business to pursue their passion.
Furthermore, 21.4% of respondents started a business because there was an opportunity, 23.4% did so after being laid off, and 22.7% were not ready to retire.
The average small business owner in the US earns around $67,000 a year, with annual base salaries ranging from $30,000 to $131,000.
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On average, small business owners who start a business with less than a year of experience earn about $34,000/year. Those with 1-4 years of experience typically earn around $45,000/year.
Meanwhile, mid-career and late-career small business owners with 5 to 19 years of experience are estimated to earn $62,000 to $67,000/year. Finally, entrepreneurs with 20 or more years of experience earn an average of around $74,000/year.
86% of American business people are Caucasian. Meanwhile, Asians make up 11% of entrepreneurs, followed by African Americans (2.5%) and American Indians, Alaska Natives, Native Hawaiians and other Pacific Islanders (<1%) collectively.
According to a March 2022 Kauffman Foundation survey, there are 580 new immigrant entrepreneurs for every 100,000 adults, compared to just 320 for native-born individuals.
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As the Internet has become more accessible, many companies have moved to online platforms to expand their market reach. Small businesses can also take advantage of this e-commerce trend.
71% of growing small businesses are surviving the pandemic through digitization. E-commerce sales in the US and Europe increased by 17.9% and 22.15% year-on-year, respectively.
With 27% of the global population turning to online shopping, customers expect small businesses to have an e-commerce presence to support online transactions. This trend is likely to continue for years to come.
The number of AI users will continue to grow as many business owners believe the technology can help them increase employee productivity and reduce operating costs.
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