The reality of small business survival paints a stark picture. Each year, 595,000 businesses in the United States shut their doors or fail. Yet small businesses remain the foundation of the American economy. They represent 99.9% of all US businesses, an impressive testament to their vital role.

Success rates for small businesses tell an interesting story. A promising 80% of businesses make it through their first year. However, this number drops substantially with time. Nearly 65% don't survive beyond their tenth year. The bright side shows small businesses as powerful job creators.

They generate 1.5 million jobs every year and make up 64% of all new US employment opportunities. Small businesses have added an impressive 12.9 million jobs to the American economy in the last 25 years.

This detailed piece dives into small business statistics for 2025. You'll learn about success rates in different industries and discover why certain businesses flourish while others falter. The information will help you direct your path through the challenging yet promising landscape of small business ownership.

Small Business Statistics: How many small businesses are started each year?

America's entrepreneurial spirit is soaring with record-breaking numbers of new businesses starting each year. The Census Bureau data shows 470,571 business applications filed in July 2025 – a 2.6% increase from June. This growth isn't just a one-time spike but shows a steady pattern of new business creation.

New business formation trends

Business creation has stayed remarkably strong since the pandemic boom. The United States saw an unprecedented 5.5 million new businesses start in 2023, making it the biggest year on record. This number is a whopping 56.7% higher than pre-pandemic levels in 2019. The momentum hasn't slowed down in 2025, and monthly business applications keep topping 450,000.

High-propensity business applications – those most likely to hire employees – have grown impressively too. These applications jumped 3.3% to 165,555 in June 2025. This number matters because it shows not just new businesses, but potential job creation.

The Census Bureau expects about 28,494 new business startups with payroll tax liabilities to form within four quarters from July 2025's applications. While this is just 0.3% higher than last month, it points to healthy business formation continuing.

Economic conditions' effect on entrepreneurship

Economic confidence is a vital factor in business creation. A recent survey shows 73% of small business owners feel optimistic about staying viable in 2025. They maintain this positive outlook even though 57% say the economy isn't as strong as last year.

Cost increases worry many owners, with 17% of businesses raising their prices in the last six months because of inflation. On top of that, uncertain market conditions have affected small business confidence.

The latest MetLife and U.S. Chamber Small Business Index reveals:

  • Just 24% of small business owners think the economy has improved from last year
  • 44% want to hire more employees this year
  • 57% expect to make more money in the next 12 months

Tariffs have become a big concern, with 54% of small businesses expecting negative effects on their operations. In spite of that, people keep starting businesses, which suggests many Americans see business ownership as a good path forward despite broader economic challenges.

States with the highest startup activity

Location plays a big role in small business success rates. Florida ranks as the best state to start a business in 2025. It has the second-most startups per capita and leads in adult entrepreneurship rates. Small businesses in Florida grew by nearly 16% between 2016 and 2022 – the fourth-highest percentage nationwide.

Georgia takes second place as the best state for entrepreneurs. It boasts the third-highest entrepreneurship rate nationally and shows great growth potential. Utah comes in third because it's the second-easiest state to get business financing and has the third-highest yearly employment growth at 2%.

Alabama ranks as the worst state for business growth in 2025. New business openings dropped 14.5% and consumer spending fell 0.6%. Iowa, Minnesota, Mississippi, and West Virginia also face challenges from high corporate taxes to flat consumer spending.

Business owner demographics are changing faster than ever. Millennial ownership has jumped 25% (now at 21% of all small business owners), while Gen X leads with 49% (up 6%). Baby Boomers now make up 30% of small business owners, down 18% from before.

What is the success rate of small businesses in 2025?

Small businesses showed remarkable resilience in 2025, with 64% reporting profits despite economic uncertainty. The path isn't easy though – 1 in 5 new ventures fail within their first year, and half don't survive beyond five years. These numbers paint a clear picture of both possibilities and challenges that entrepreneurs face today.

Latest survival rates by year

The Bureau of Labor Statistics shows some encouraging numbers – 79.6% of businesses make it through their first year. This number drops to 50.6% at the five-year mark and falls further to 34.7% after ten years. Just a third of all businesses celebrate their tenth anniversary.

Business survival rates in 2025 varied by region. Companies in the Pacific division led the pack with an 84.6% first-year survival rate for businesses born in 2021. The South Atlantic region struggled the most, with just 71.4% of businesses surviving that were born during the 2008 recession.

The economy plays a huge role in business survival. Companies born in 2001 and 2008 had the lowest one-year survival rates. This pattern shows how broader economic conditions can substantially affect a business's chances of making it.

Comparison with 2024 small business statistics

Small business owners started 2025 feeling less confident than they did in late 2024. The MetLife and U.S. Chamber of Commerce Small Business Index dropped to 62.3 from 69.1 in Q4 2024. Revenue concerns and ongoing inflation seem to be behind this decline.

Money worries have grown considerably. 35% of owners now list revenue as their main concern – up 10 points from Q4 2024. Cash flow confidence has also taken a hit, falling from 72% to 63% between Q4 2024 and Q1 2025.

The future still looks bright for many businesses. 40% of owners plan to hire more staff next year, with manufacturing businesses leading at 56%. That's quite optimistic considering only 20% of businesses added staff in the last year.

How success is defined across industries

Different industries tell different success stories. The agriculture, forestry, fishing, and hunting sector stands out with just a 12.5% first-year failure rate and 49.5% failure rate after ten years. These businesses are twice as likely to survive compared to other sectors.

Industry survival rates after 10 years:

  • Agriculture, forestry, fishing and hunting: 50.5%
  • Utilities: 45.7%
  • Manufacturing: 43.6%
  • Real estate and rental/leasing: 42.2%
  • Mining, quarrying, and oil/gas extraction: 24.5% (lowest)

Restaurants aren't the risky bet many think they are. The myth about 90% failing in their first year doesn't hold up. The real number is closer to 17% – better than the 19% average for other service businesses.

Success means more than just staying open. A 2025 survey found 68% of owners felt good about their cash flow. 22% grew their workforce in the last year, showing that many businesses found creative ways to thrive despite challenges.

Today's business owners know success depends on adaptability. The fact that 82% of failed businesses point to cash flow problems shows that knowing how to manage money remains crucial for long-term success in any industry.

What qualifies as a small business in the U.S.?

A small business in the U.S. means more than just counting employees. The Small Business Administration (SBA) sets size standards that change based on industry type. These standards look at employee count or yearly earnings. Right now, 102 different size standards cover 978 industries and 18 subindustries across the American economy.

Employee count and revenue thresholds

The SBA uses two main ways to label a business as "small": yearly earnings and employee numbers. Businesses need to count their staff by looking at the average number of people employed for each pay period over the business's latest 24 calendar months. Every person on payroll counts as one employee, whatever their hours or temporary status.

Revenue-based standards need "total income" plus "cost of goods sold" averaged over a company's last five complete fiscal years. New businesses can multiply their weekly revenue by 52 to figure out yearly earnings.

Most industries follow the SBA's standard levels between $8 million and $47 million. Agricultural businesses in Subsectors 111 (Crop Production) and 112 (Animal Production and Aquaculture) have lower limits from $2.25 million to $5.5 million.

Differences by industry

Different sectors have vastly different size limits. Manufacturing companies with 500 employees or fewer and non-manufacturing businesses earning under $7.5 million yearly usually qualify as small. Many exceptions exist based on each industry's needs.

Here are some examples that show these differences:

  • Logging operations must stay under 500 employees to be small businesses
  • Crude petroleum extraction can have up to 1,250 workers
  • Peanut butter makers need fewer than 750 employees

Each industry has its own competitive landscape, money needs, and operational reality. The 2025 threshold to claim the 20% qualified business income deduction sits at $191,950 for single filers and $383,900 for joint filers. Service businesses see their deduction start dropping at these levels until it hits zero at $241,950 for individuals and $483,900 for joint filers.

SBA classification standards

The SBA uses North American Industry Classification System (NAICS) codes to assign size standards. The U.S. Census Bureau updates these codes every five years. The standards include 73 based on yearly earnings covering 496 industries and 13 subindustries, while 27 look at employee numbers covering 478 industries and five subindustries.

Business owners seeking federal help should know they must include their affiliates' yearly earnings and employees. An affiliate connection exists if someone else can control your business, even if they don't use that control.

Small businesses must meet these extra requirements:

  • Run as a for-profit enterprise (any legal structure works)
  • Work independently (not part of a bigger business)
  • Not lead their field nationally
  • Operate within the U.S. or its territories

The Small Business Jobs Act of 2010 requires the SBA to review all size standards every five years. This helps keep standards current with market conditions. Money-based standards also get inflation adjustments at least every five years.

Your business's "small" status depends on checking your industry's NAICS code and comparing your numbers to those standards. The SBA offers online tools to help you find your classification and size standard.

Why do small businesses fail?

Small business failures tell stories filled with important lessons. Numbers from the U.S. Bureau of Labor Statistics show that almost half of all startups don't make it past five years. A closer look at why these businesses close their doors gives current and future entrepreneurs valuable insights. Here are the five most common reasons small businesses struggle.

1. Cash flow issues

Money problems top the list of small business killers. The U.S. Chamber of Commerce points to this as the main reason businesses fail, even with good revenue numbers. Cash shortages can hit suddenly or build up slowly until the business can't recover.

82% of failed businesses blame cash flow problems for their closure. A 2025 QuickBooks survey reveals that 43% of small businesses struggle with cash flow, and 74% say things have gotten worse or stayed the same in the last year.

Cash flow shortages show up as:

  • Missed chances to grow
  • Less money for essential marketing
  • Business costs paid from personal savings
  • Late paychecks and unhappy employees

Business owner Tim Berry shares, "One of the toughest years my company had was when we doubled sales and almost went broke". This happens because growth needs money upfront while payment comes months later.

2. Lack of market demand

About 35% of small businesses fail because not enough people want what they're selling. No marketing campaign, no matter how clever, can save a business without real customer demand.

Market research should come before any business launch.

This means looking at demographics, economic signs, location factors, and how crowded the market is. Many business owners skip this vital step and trust their gut feelings or passion instead.

The Small Business Administration says market research helps entrepreneurs "reduce risks even while your business is still just a gleam in your eye". Established businesses must keep watching how customer priorities change – those who don't adapt quickly lose customers.

3. Poor planning and strategy

Starting without a plan ranks as the biggest business mistake. This basic error shows up in many statistics, with money mismanagement among the top reasons small businesses fail.

A complete business plan builds the foundation for success, yet many owners jump straight into business without proper preparation. They end up lost at the first sign of trouble. One small business coach explains, "This is the real reason many small businesses fail.

A thorough business plan flushes out all of the reasons a business may not be successful".

Businesses without S-M-A-R-T goals (Specific, Measurable, Achievable, Relevant, Time-based) can't track progress or use resources well. They're basically driving without directions.

4. Weak management teams

Bad management often leads to failure because many founders know their product but lack leadership skills. Investopedia notes, "The owner may have the skills necessary to create and sell a viable product or service but they often lack the attributes of a strong manager".

Many small business owners try to do everything themselves instead of sharing responsibilities. This creates inefficient operations and poor decisions that hurt the company's chances of survival.

Clear, written contracts with employees, vendors, and investors make a big difference. Without them, verbal agreements often create legal headaches that take time and money away from running the business.

5. Marketing and customer acquisition failures

Poor marketing directly kills small businesses, with 22% of failed businesses using the wrong marketing approach. Getting new customers presents a special challenge – 70% of small businesses with 1-9 employees find it hard to attract new customers.

Business owners list finding new customers as their biggest challenge (31%), followed by staffing issues (17%), and turning leads into sales (14%). The cost of getting new customers often ends up higher than what these customers spend over time, which isn't sustainable.

A venture capital expert who studied hundreds of failed startups observed: "A very large number of these had solved the product/market fit problem, but still failed because they had not found a way to acquire customers at a low enough cost".

Which industries have the highest and lowest success rates?

Business survival rates show remarkable differences between industries. Some sectors consistently perform better than others. Agriculture, forestry, fishing, and hunting leads with an 87.5% first-year success rate and maintains a strong 66.2% survival rate after five years, dropping to 50.5% after ten years.

The Transportation industry doesn't deal very well with survival rates. Only 60% of businesses make it through their first year, which drops to 30% after five years.

Top-performing industries in 2025

Agriculture stands as the most resilient sector. Utilities follows with a 45.7% ten-year survival rate, while Manufacturing achieves 43.6%. Many entrepreneurs find it surprising that Healthcare and Social Assistance businesses show exceptional stability. 85% of new ventures in this sector survive their first year.

Real estate and rental/leasing businesses complete the top performers list with a 42.2% ten-year survival rate.

Several growing sectors attract investment because of their strong performance:

  • E-commerce (expected 9% yearly growth over five years)
  • Telehealth services (predicted 16% CAGR revenue increase)
  • Renewable energy (ranks among fastest-growing occupations)

Sectors with the highest failure rates

The Information sector faces tough challenges. Its first-year failure rate reaches 25.1%, rises to 55.7% by year five, and hits 70.9% by year ten. Mining, quarrying, and oil/gas extraction businesses show the weakest long-term survival rates. Only 24.5% make it past ten years.

Construction businesses face major early obstacles. They rank second in first-year failures. High startup costs, unpredictable material prices, and irregular project income make it hard for these businesses to establish themselves.

The Accommodation and food services sector sees a 45.9% failure rate by year five. This contradicts the popular belief that 90% of restaurants fail in their first year.

What makes healthcare and social assistance resilient?

Healthcare businesses thrive for several reasons. Healthcare remains in demand whatever the economic conditions. The aging population's complex healthcare needs drive continuous growth.

State-of-the-art developments have brought new life to this stable industry. Telemedicine has become essential since the pandemic. Usage has grown 38 times compared to pre-pandemic levels. Healthcare providers now have new revenue streams and lower overhead costs.

Healthcare profit pools should grow from $605 billion in 2022 to $837 billion by 2027. These numbers explain why entrepreneurs see this sector as a sustainable business opportunity. Steady demand, technological advances, and supportive policies make healthcare an exceptionally stable industry for small business owners.

How profitable are small businesses in 2025?

Small business owners in 2025 care most about making money. Latest data shows average monthly earnings reaching USD 62,300 in June 2025, which is a big jump from May's USD 49,300. Small businesses have seen their earnings soar by 75% in early 2025, while inflation stayed below 3%.

Average revenue by business size

Business size and structure play a huge role in revenue numbers. A typical small business brings in about USD 1.22 million yearly. This number tells only part of the story. Businesses without employees make USD 47,794, while those with 1-4 employees earn around USD 378,000 each year.

Revenue potential relates directly to business size:

  • Solo entrepreneurs: USD 49,489 average annual income
  • Businesses with 1-4 employees: USD 387,000
  • Businesses with 10-19 employees: USD 2.16 million

The gender gap still exists in 2025. Male-owned businesses earn USD 675,643 on average compared to USD 475,707 for female-owned businesses—a 30% difference. This gap has shrunk from 34% in 2023.

Percentage of profitable businesses

Small businesses worldwide show promise with 65.3% reporting profits. Guidant Financial's 2024 research backs this up, showing 64% of owners say their businesses make money. These numbers match previous years, showing small businesses remain healthy overall.

Success breeds confidence among owners. 51% want to grow their business this year and 24% plan to hire more people. Small businesses run by one person paint a different picture—78% make less than USD 50,000 yearly, and just 0.2% break the USD 1 million mark.

Common cost structures and margins

Small businesses spend money in similar ways across industries. Staff costs eat up the biggest chunk, taking 70% of small business spending through wages and benefits. Inventory comes second, using 17%-25% of budgets.

Healthy profit margins for small businesses usually range between 7% and 10%. Rising costs pose ongoing challenges. 22% of owners say inflation hurts them most, followed by money shortages (18%) and hiring problems (17%).

Monthly numbers show businesses handle these challenges well. June 2025 saw average monthly revenue hit USD 614,200 with expenses at USD 551,900. This led to USD 62,300 in monthly earnings—proof that many businesses stayed profitable throughout 2025.

Who owns small businesses in America?

Small business ownership in America shows a rich mix of women, minorities, and veterans who play bigger roles today. The numbers tell an interesting story – 39.1% of all U.S. businesses (around 14 million) belong to women, while 20.4% are owned by racial minorities and 6.1% by veterans.

Women-owned business statistics

Female entrepreneurs continue to make their mark nationwide. These businesses pump more than $2.5 trillion annually into the national economy, and their revenues have jumped 43% since 2012. The last five years have seen women-owned businesses grow by 13.6%, which beats the overall business growth rate.

These enterprises create jobs for more than 10.5 million people across the country. However, women business owners still face hurdles – they get full funding less often, with just 24% receiving their requested loan amounts compared to 41% for male-owned businesses.

Minority and veteran ownership trends

Minority business ownership has surged from 9% in 2019 to 15% in 2022. Recent numbers show 76.2% of small business owners are White/Caucasian, 5.2% are Black/African-American, 4.8% are Asian-American, and 4.7% are Latino.

Hispanic business owners have become a powerful force, running 4.7% of total small businesses and generating $619.8 billion in sales. Black-owned businesses have also made their mark, bringing in $217.3 billion while creating jobs for more than 1.27 million Americans.

Veteran entrepreneurs owned roughly 5.4% (304,823) of employer businesses in 2021 and generated $922 billion in revenue. Most of these businesses (92.6%) had White owners, and men owned the vast majority (94.3%).

Generational breakdown of business owners

Looking at age groups, Gen X leads the pack with 46-47% of small businesses. Baby Boomers follow at 40-41%, then Millennials at 13%, and Gen Z at just 1%.

Younger business owners seem more optimistic. Gen Z and Millennial-owned businesses report better health (79% vs. 64% and 53% for Gen X and Baby Boomers). They also feel better about

their cash flow (80% vs. 71% and 61%).

The business world keeps changing, and minority-owned businesses have grown 35% between 2014 and 2019, while non-minority businesses grew just 4.5%.

How much does it cost to start and run a small business?

Small business owners need considerable capital to get started. The average first-year costs reach USD 40,000. This investment changes based on the type of business, where it's located, and what it needs to run.

Average startup costs by business type

Business expenses vary greatly by industry. Some home-based businesses can start with zero costs. Physical stores need tens of thousands of dollars, while some industries need millions to get going.

Location plays a key role in costs. Retail space costs USD 23.98 per square foot on average nationwide. Western states cost more at USD 29.01, while the Midwest offers better rates at USD 18.26.

Funding sources: self-financed vs. loans

The data shows 77% of entrepreneurs without employees use their own money to start businesses. About two-thirds of small business owners rely on personal or family savings. Only 16% ask for business loans. Banks remain the top choice for funding among entrepreneurs. However, 93% of small businesses faced money problems in 2024.

Ongoing operational expenses

Monthly fixed costs include rent (2-20% of predicted revenue), taxes (13.3-26.9%), insurance (USD 500-684 annually), and marketing (7.7% of revenue). Employee costs take up the biggest part of budgets. Each worker costs between USD 44.40-46.84 per hour. This adds up to USD 92,000-97,000 yearly for each employee.

Conclusion

Small business statistics paint a complex picture of success that depends on many factors like industry choice, location, financial management, and market needs. About 64% of small businesses make a profit, yet the path remains tough. Only a third make it past ten years. The entrepreneurial spirit stays strong with new business applications breaking records each month.

Current and future business owners can learn valuable lessons from these numbers. Poor cash flow management leads 82% of businesses to fail, making it the most vital skill to master. Some industries show better survival rates. Agriculture, healthcare, and utilities do better than transportation and information sectors.

Location plays a big role in business success. States like Florida, Georgia, and Utah give entrepreneurs better chances to succeed. Alabama and similar regions face tougher odds. Business cycles affect survival rates too. Companies that start during recessions often struggle more.

American entrepreneurship keeps changing faster than ever. Women own 39.1% of U.S. businesses and add $2.5 trillion to the economy yearly. Minority business ownership jumped from 9% in 2019 to 15% in 2022. Gen X runs 46-47% of small businesses, while younger business owners show more confidence.

Starting a business needs about $40,000 in the first year. Staff costs eat up 70% of budgets. Yet the drive to start businesses stays strong. Many won't last long, but successful ones keep creating jobs and helping the economy grow.

These statistics tell a story of both risk and possibility. Entrepreneurs who plan well, research their market, and manage money wisely can join the successful few who last beyond ten years. These businesses make up 99.9% of American companies and power our economy's growth and innovation.

FAQs

Q1. What percentage of small businesses survive their first year?

According to recent data, approximately 79.6% of small businesses survive their first year of operation. However, this percentage decreases over time, with only about 50% making it to the five-year mark.

Q2. Which industries have the highest success rates for small businesses?

The agriculture, forestry, fishing, and hunting sector has the highest success rate, with 87.5% of businesses surviving their first year and 50.5% still operating after a decade. Other top-performing industries include utilities, manufacturing, and healthcare.

Q3. How much does it typically cost to start a small business?

The average cost to start a small business is around $40,000 for the first year. However, this amount can vary significantly depending on the type of business, location, and operational needs.

Q4. What is the most common reason small businesses fail?

Cash flow problems are consistently cited as the number one reason for small business failure. About 82% of failed businesses point to cash flow issues as a key factor in their downfall.

Q5. What percentage of small businesses in the U.S. are owned by women?

As of 2025, 39.1% of all U.S. businesses (approximately 14 million) are owned by women. These women-owned businesses contribute more than $2.5 trillion annually to the national economy.