Good Roasts exists to empower founders, creators, and builders
Submit your project and get direct, no-fluff feedback that highlights what’s confusing, what’s broken, and what needs to improve now.
The reality of small business growth paints a stark picture. Each year, about 595,000 businesses in the United States shut their doors or fail. Small businesses make up 99.9% of all U.S. firms, yet their first-year failure rate hits 21.9%. This translates to a simple fact: all but one of these new ventures survive their first year.
The numbers tell an impressive story about small businesses in the US. These vital enterprises provide jobs to nearly half (46%) of private sector workers. They've created more than 12.9 million new positions in the last 25 years. The picture gets tougher as time goes on. Only 34.4% of businesses make it to their 10th year.
This piece will get into the real story behind small business success rates in 2025. We'll break down why certain industries perform better than others and what makes businesses succeed or fail. On top of that, we'll explore current funding trends, employment patterns, and growth possibilities to show you today's small business digital world.
Small business success rates in 2025
The survival rate of American small businesses remains a key indicator of economic health. Data from 2025 shows that 80% of small businesses make it through their first year. This means one in five closes within 12 months of opening. These numbers have stayed steady over the last several years and highlight the ongoing challenges new business owners face.
1. First-year survival rate
Different industries and locations see varying first-year survival rates. Recent data reveals that healthcare and social assistance businesses lead the pack with an 85% first-year survival rate. Information sector businesses face tougher odds with only 75% making it through year one.
Business size relates directly to survival chances. Larger companies tend to survive longer, likely because they have more money saved and loyal customers. The data also reveals that businesses started in 2020 had better first-year survival rates in most census areas compared to earlier years.
Location plays a big role in whether businesses survive. Businesses born in 2021 in the Pacific region had the highest survival rate ever recorded at 84.6%. The South Atlantic region saw the lowest rate at 71.4% for businesses that started during the 2008 recession.
2. Five-year and ten-year survival trends
Long-term survival becomes harder as businesses age. Only half of small businesses make it to their fifth year. This coin-flip chance has remained consistent through different economic cycles.
Making it to ten years proves even tougher. Just 33.8% of businesses celebrate their tenth anniversary. Two out of three small businesses close before hitting the decade mark. Companies born in 2013 had a 34.7% survival rate by 2023.
Companies that survive the early years tend to stick around longer. About 69.5% of businesses that reach five years continue operating for at least ten. The odds get even better for decade-old businesses – 76.5% of these veterans make it to year fifteen.
Ten-year survival rates vary greatly by industry:
- Agriculture, forestry, fishing, and hunting: 50.5% (highest)
- Utilities: 45.7%
- Manufacturing: 43.6%
- Mining, quarrying, and oil and gas extraction: 24.5% (lowest)
3. How 2025 compares to previous years
Business survival rates in 2025 have leveled off after the rocky early 2020s. Current patterns look like historical trends, with survival rates dropping during recessions. Companies started during the 2001 and 2008 recessions had particularly low one-year survival rates.
Recent analysis shows survival rates bouncing back above pandemic lows. Businesses under 12 months old in August 2023 had a 96.7% chance of staying open for the next six months. This rate was only 92.8% in March 2020.
Some sectors saw unique conditions during the pandemic. Small hotels and motels that opened in late 2020 survived better than those started in other periods. This might be because more people traveled locally during that time.
Seasonal patterns still affect business survival rates in 2025. Recreational services and restaurants see regular drops before winter. Companies with both online and physical locations show stronger survival rates (98.6%) compared to online-only (97.1%) or physical-only businesses.
How many small businesses are in the US?
Small business enterprise forms the bedrock of the American economy. A record 36.2 million small businesses operate throughout the United States in 2025. This remarkable number shows unprecedented entrepreneurial activity, even as new ventures face ongoing challenges.
1. Total number of small businesses in 2025
Small businesses dominate the American business world in 2025. The SBA Office of Advocacy data confirms 36.2 million small businesses operate nationwide. These enterprises serve as the economic backbone for communities both urban and rural.
Business openings and closings tell an interesting story. From March 2023 to March 2024, 1.28 million establishments opened while 1.12 million closed. This resulted in a net gain of 155,311 businesses. Small businesses made up 1.1 million of these openings and 982,940 closings. These numbers show the constant changes in the small business ecosystem.
These businesses make a huge difference beyond just their numbers. They provide nearly half (46 percent) of all private sector jobs in the country. Small businesses created about 9 out of every 10 net new jobs from March 2023 to March 2024. This proves their vital role in job creation.
2. Growth since 2020
Small businesses have shown remarkable resilience and growth since 2020. The numbers have steadily increased throughout this decade:
|
Year |
Number of Small Businesses |
|
2019 |
30.7 million |
|
2020 |
31.7 million |
|
2021 |
32.5 million |
|
2022 |
33.2 million |
|
2023 |
33.2 million |
|
2024 |
34.7 million |
|
2025 |
36.2 million |
Business growth reached 9.7% since the decade's start. The biggest jump happened between 2024 and 2025. The number of small businesses grew by 0.28% in the last year alone. This shows strong momentum in new business creation.
The COVID-19 pandemic actually boosted entrepreneurship rather than slowing it down. New business applications hit record levels recently, with 5.5 million applications filed in 2023. This marks a 50% increase in new business applications in the last decade.
3. Share of total US businesses
Small businesses make up an impressive 99.9% of all businesses in the United States. Only 19,688 large businesses exist in the remaining fraction.
The small business category shows great variety in size and structure. The 2022 County Business Patterns reveals 55.7% of all employer establishments had fewer than five employees. This shows how common micro-businesses are. The percentage dropped slightly from 56.6% in 2021, which might mean some smaller firms grew larger.
The 2022 Nonemployer Statistics counted 29,811,495 businesses with no paid employees. This jumped from 28,477,518 in 2021. Solo ventures and freelance operations make up a large and growing part of the small business world.
Small business employment growth tells an impressive story. Employment grew by 13.1% between 1998 and 2022, reaching 62.3 million employees. Small businesses generated 52.8% of all new jobs from Q1 2021 to Q2 2024. This shows their massive impact on job creation.
Top reasons small businesses succeed or fail
Small businesses have complex stories of decisions and circumstances behind their statistics. Entrepreneurs need to know why businesses succeed or fail in today's competitive world. The numbers tell a stark story – 90% of startups fail overall. This makes it vital to spot what sets successful businesses apart from failures.
1. Common causes of failure
Money problems lead the reasons why small businesses shut down. About one in four (23%) small business owners can't move past survival mode to plan for the future. Cash flow hits businesses hard – 82% of failed U.S. small businesses point to it as their main reason for closing.
Other big reasons for failure include:
- Not enough market demand (42% of failures)
- Too little capital (32.8% of businesses that close)
- Tough competition (19.6% of closures)
- Growing too fast (18.75% of failures)
- Team problems (20% of startups fail due to HR issues)
- Poor marketing choices (22% of failures stem from incorrect marketing strategies)
Many entrepreneurs start their business without knowing their financial reality. 29% of small firms run out of money before they make any profit. This shows why realistic money projections matter so much.
2. Key drivers of success
Successful businesses share some common traits. They do their homework with market research. The National Federation of Independent Business shows that companies succeed when they know their potential markets, ideal customers, and competition.
Knowing how to adapt helps businesses last longer. 72% of small business owners worry about how new laws might affect them. Yet 80% of owners feel they can make good decisions despite economic uncertainty.
Smart marketing drives success too. Most thriving small businesses use multiple channels. 81.4% rely on word-of-mouth marketing first, then social media (49.3%) and company websites (37.4%).
3. Role of planning and management
A business plan might be the best predictor of success. Research shows companies with written business plans grow 30% faster than others. 71% of fast-growing companies use strategic plans or similar tools.
The timing of planning matters too. Plans finished within 2-3 months boost survival rates and profits. Plans that take longer than 3 months actually hurt survival chances. Starting to plan 7-12 months before launch helps businesses perform better.
Bad management creates problems throughout a company. 69% of employers say skill gaps cut their productivity. Leadership issues can hurt employee morale and customer satisfaction.
4. Impact of market demand
Market demand determines if a business lives or dies. About 35% of small businesses fail because people don't want what they sell. Even the best-run company needs customers to survive.
The SBA says successful businesses study their market before launching. They look at demographics, economic signs, locations, and pricing. This helps entrepreneurs confirm demand before spending too much money.
Testing products with real customers before a full launch helps businesses survive. Companies that pay attention to what the market wants can adjust their products to meet actual customer needs.
Which industries are growing fastest?
The American economy's small business growth shows striking differences in various sectors. Healthcare and social assistance leads the pack with the highest survival rates and also the fastest overall growth in 2025. Let's get into which industries give entrepreneurs the best chances and which ones come with the biggest risks.
1. Healthcare and social assistance
Healthcare and social assistance leads all industries in small business success rates. The numbers tell the story – 85% of small businesses in this sector stay open past their first year. This beats the average small business survival rate by 5 percentage points.
These businesses also show remarkable staying power. 35.7% remain operational after ten years, creating a solid base of 10-year old providers.
Several parts of this sector show strong growth potential:
- Telemedicine services project a CAGR of 16% over the next five years
- Home healthcare workers show projected growth of 21% through 2033
- Mental health professionals expect 19% growth through 2033
- Nurse practitioners' employment projects 46% growth through 2033
Without doubt, these patterns reflect our aging population that needs more services and better acceptance of mental health care.
2. E-commerce and tech services
E-commerce continues to dominate the small business world in 2025. Recent data shows 53% of small retail businesses see most of their sales growth from online platforms.
Mobile commerce stands out as a bright spot. It should make up almost 70% of retail e-commerce sales by 2025's end. Social media has evolved beyond marketing – 80% of small retail businesses now sell through Instagram in 2023, up from 51% last year.
Cybersecurity services show promise too, with 33% growth expected through 2033. More frequent cyberattacks and ongoing talent shortages drive this trend.
3. Personal care and wellness
The U.S. wellness market has grown to USD 480 billion with yearly growth between 5-10%. 82% of US consumers now call wellness a top priority in their daily lives.
The wellness industry's fastest-growing segments include:
- Individual-specific health and wellness (10% annual growth)
- Personal financial advisors (17% growth through 2033)
- Massage therapy services (18% growth through 2033)
- Sexual health products (87% of US consumers maintain or increase spending)
More than 50% of US consumers plan to focus more on gut health in coming years, pointing to more growth ahead.
4. Industries with highest failure rates
Among other sectors, some consistently show higher failure rates. Construction tops this list – 25% fail in their first year. By year five, this number jumps to 60%.
Transportation matches these tough odds with similar 25% first-year and 60% fifth-year failure rates.
Information businesses face steep challenges. They show a first-year failure rate of about 25% and only 29.1% survive ten years. This makes information the second riskiest industry for long-term success.
Mining, quarrying, and oil and gas extraction have the worst ten-year survival rate at just 24.5%. These numbers show how resource-dependent businesses struggle in today's economy.
Small business employment and job creation
Small businesses remain the backbone of American job creation. These enterprises continue to play a huge role in providing jobs across the nation through 2025. Their ability to create employment stays strong even as the economy goes up and down.
1. Share of private sector jobs
Small businesses employ 45.9% to 46.8% of all private sector workers in the United States. This means about 59-61.7 million Americans earn their living through small business jobs. The numbers tell an interesting story – there's been a slight dip of about 4.37% from 2024 to 2025.
Looking at different sized small businesses reveals a clear pattern. Companies with less than 20 workers make up 16% of private sector jobs. Businesses with under 100 employees provide work for 32.4% of the workforce. These numbers prove that even tiny companies create plenty of jobs when you add them all up.
Small businesses create more jobs than their size would suggest. From early 2021 through mid-2024, these companies generated 52.8% of all new jobs in America. This shows how crucial they are to growing our economy.
2. Job creation over the last decade
Small businesses' job numbers look even better over time. In the last 25 years, they've added between 12.9 and 17 million new jobs to the American economy. This makes up about two-thirds (62-67%) of all new jobs during this time.
These smaller companies keep creating jobs even when times get tough. Take the second quarter of 2022 – small businesses added 324,000 jobs, which was 98.5% of all new positions. Big companies with over 250 workers only created 5,000 jobs in that same period.
Recovery after the pandemic tells a similar story. Small businesses kept adding jobs non-stop for three straight years from June 2020 until late 2023. This success stands out against the struggles many other parts of the economy faced.
3. Solo ventures vs. employer firms
The small business world has an interesting split. About 82% run without any employees. These 27-28.5 million one-person operations represent entrepreneurs working solo.
A typical small business that hires people has around 11 workers, which is way less than the overall business average of 24. New businesses under two years old usually start with 6 employees and grow from there.
One-person businesses might be the most common, but companies with employees pack more economic punch per business. They create jobs beyond the owner and usually bring in more money. Business owners who hire people tend to build more wealth and plan better for their company's future. This makes their businesses more valuable assets in the long run.
Startup costs and funding trends in 2025
New businesses spend an average of USD 40,000 in their first year to get started. This financial investment shapes how entrepreneurs make decisions and achieve success throughout 2025.
1. Average cost to start a business
Business startup costs vary substantially based on industry type. A purely online business needs around USD 35,000 in its first year. Physical stores cost more at USD 100,000 or higher. Home-based businesses are more affordable with startup costs between USD 2,000 and USD 5,000. Restaurants top the list at USD 100,000 to USD 2 million. Consulting businesses can start with just USD 5,000 to USD 20,000.
2. Self-financing vs. loans
Personal funds lead the way in startup financing. 77% of startups without employees use their own money. Business experts suggest keeping six months of operational costs as a safety net because 38% of small businesses fail when they run out of cash. Bank loans remain popular but they need collateral and strong credit scores.
3. SBA loan approval rates
The Small Business Administration helps entrepreneurs get the money they need. Their 7(a) loans range from under USD 100,000 to USD 5 million. The average loan reached USD 480,000 in FY 2023. These loans come with great perks like competitive rates, business advice, smaller down payments, and flexible terms.
4. Use of credit cards and alternative funding
Small businesses rely heavily on credit cards. 55% of companies used corporate credit cards last year. Small business owners paid 60% more in credit card interest due to Federal Reserve rate increases between 2022-2023. New funding options like crowdfunding, peer-to-peer lending, merchant cash advances, and revenue-based financing have become more popular.
Conclusion
Small business statistics paint a mixed picture of opportunities and harsh realities for entrepreneurs in 2025. Small enterprises make up 99.9% of American businesses and employ almost half the private sector workforce, yet they face major challenges. Their first-year survival rates reach 80%, but drop to 50% by year five and only 33.8% make it to year ten.
Different industries show vastly different success rates. Healthcare and social assistance businesses lead the pack with 85% surviving their first year. Construction and transportation ventures struggle more, with 25% failing in year one. The choice of industry plays a crucial role in a business's long-term survival.
Cash flow problems stand as the biggest threat to small business survival. Nearly a quarter of entrepreneurs barely keep their heads above water, while 82% of failures happen due to cash flow issues. Market demand problems sink 42% of failed ventures, which shows why solid market research matters before launching.
Business planning makes all the difference in success rates. Companies with written plans grow 30% faster than those without proper documentation. Market analysis and financial forecasting improve a business's chances of survival substantially.
Entrepreneurs now fund their ventures differently than before. Most new businesses rely on personal money, with 77% of non-employer firms using their own funds. Traditional loans, SBA programs, and other funding options continue to adapt as the economy changes.
Small businesses keep driving the economy despite these hurdles. They've created about two-thirds of new jobs in the last 25 years and consistently create more jobs than larger companies. These small firms show amazing resilience even when times get tough.
Success in small business comes down to preparation, market knowledge, and smart money management. Entrepreneurs who research their markets well, keep enough cash reserves, and develop solid business plans set themselves up for growth despite the odds. While challenges exist, millions of successful small businesses across America prove that entrepreneurial success remains possible in 2025 and beyond.
FAQs
Q1. What is the average survival rate for small businesses in their first year?
About 80% of small businesses survive their first year of operation. This means that approximately 20% of new businesses fail within 12 months of opening.
Q2. What percentage of small businesses survive beyond five years?
Only about 50% of small businesses remain operational after five years. This represents a significant drop from the first-year survival rate and highlights the challenges of long-term business sustainability.
Q3. Which industries show the highest growth potential for small businesses?
Healthcare and social assistance, e-commerce, tech services, and personal care and wellness industries are showing the fastest growth. Healthcare businesses have an impressive 85% first-year survival rate, while e-commerce and tech services are experiencing rapid expansion.
Q4. How do small businesses contribute to job creation in the United States?
Small businesses play a crucial role in job creation, employing about 46% of all private sector employees. Over the past 25 years, small businesses have added approximately 12.9-17 million new jobs to the American economy, accounting for about two-thirds of all new jobs created.
Q5. What are the primary reasons for small business failure?
The main reasons for small business failure include financial issues (particularly cash flow problems), insufficient market demand, inadequate capital, strong competition, unsustainable growth rates, and ineffective marketing strategies. About 82% of failed U.S. small businesses cite cash-flow challenges as a primary reason for closure.