Employing just a tick over 47.8% of the US workforce, it’s not unreasonable to call the nearly 30 million small businesses in the United States the backbone of the US economy.
Leading the charge when it comes to innovation and job creation in this country, small businesses – how they’re doing, how they feel, and the decisions that they make – are a great barometer for how the nation is trending.
We’re getting close to the end of 2019 here and it sure looks like all signs in the small business world are lit green. Small businesses have added more jobs than big businesses over the last 12 months, micro-businesses are making up 75.3% of all private sector employers, and according to the US SBA businesses with less than $5 million in sales saw (on average) an increase in revenue of 7.8% across the board.
Things are looking pretty good as far as the state of the small business economy is concerned.
A 50,000 Foot Look at Small Business in the US Today
In a lot of ways, the small business economy in the United States has never been as strong or as robust as it is in 2019.
The US economy in general has been surging forward for quite a while now, having left the ghosts of the 2008 Great Recession behind for what looks like once and for all. Small business owner confidence is up across the board, corporate and business profitability rates are the highest they’ve been in the last four years, and the GDP continues to expand with consumer spending growing year after year as well.
On top of that, the entrepreneurial failure rate has never been lower than it is right now. More than 50% of US small businesses will last at least five years (and frequently even longer than that), with only 22.5% of small businesses folding up shop after 12 months of operation.
Happiness Hasn’t Taken a Hit
A lot of this small business confidence is (understandably) created by the skyhigh levels of profitability small business owners and entrepreneurs are seeing throughout 2019.
78% of these businesses are reporting profits, some of them for the first time in quite a while. This has led to 53% of all US small business owners ranking their “happiness level” at a 9/10 (with 10 being the happiest) – and most reporting that they are glad they decided to embrace their entrepreneurial inclinations.
Maybe even more importantly is the fact that small business owners are very confident in the state of small business in the nation in general. 76% of small business owners feel that the US economy and US economic policy is supporting these kinds of businesses, with the same amount of small business owners reporting that they feel as good about 2021 as they have about 2019.
Strong Markets Have Led to Increased Employment Competition
Employment rates are some of the highest in US history right now, with the overall unemployment rate sitting at just about 3.7% or so. This is a nearly 50 year low in American business history. Obviously, there are real benefits to the US small business economy thanks to this low unemployment level but there are some challenges brought to the table because of this, too.
Low levels of unemployment have increased overall employee recruitment and retention issues. Fewer people are looking for jobs, fewer people are looking for new jobs, and small business owners are having to pay more to compete for quality employees.
As a general rule, however, the challenges US small business owners report being the most significant to impediments to their success haven’t changed much in the last four or five years.
33% of small business owners report that financial obstacles (including a lack of financing opportunities or cash flow issues) remain their biggest challenge, 15% report struggling with marketing and advertising (particularly with new media like social media), and 13% believe that time management, recruitment and retention, and administrative issues of the stumbling blocks that are holding them back today.
Entrepreneurial Opportunities are Wide Open
One of the most exciting things about the state of the US small business economy in 2019 is that there are more entrepreneurial opportunities available today than maybe ever before.
While 57% of small business owners were at least 50 years old or older in 2019 we also saw 4% of all small businesses in the US created by entrepreneurs between the ages of 18 and 29 and another 39% of these businesses created by individuals between the ages of 30 and 49.
Small business isn’t just a young person’s game anymore, either. 4% of all US small businesses were started by individuals 70 years of age or older. We may think of the startup culture filled with millennials but there are plenty of Boomers building new businesses, too.
2.5 million businesses are owned by veterans of the US military, 12.3 million businesses in the US are owned by women, and minorities own 45% of all small businesses in the United States today. Silicon Valley reports that 55% of the “unicorn” startups created during 2019 were started by immigrants to this nation, too.
There’s more opportunity to create the business of someone’s dream today than ever before.
Ask an Expert – Excel Capital Management
As highlighted above, 33% of all small business owners find that financing and cash flow issues are their biggest impediment to success in 2019 and beyond.
Excel Capital Management has noticed this as well, seeing a significant uptick in the demand for small business loans during the last quarter of 2019. In fact, Excel Capital Management has seen an increase of 30% in these types of financing package originations.
At the same time, we are also seeing a higher default rate on small business financing options. Excel Capital Management saw a 20% increase in overall loan defaults, suggesting that the small business economy in the US is beginning to cool off a little bit as business owners have a tougher time paying their loans.
This is certainly something to keep your eyes on going into 2021.
