Average Small Business Revenue

If you are wondering if it is a good time to start or invest in a small business, it makes sense to take a look at the average revenue created by a small business.

Small businesses are a fact of life these days. Whether you are enjoying a coffee from the corner café on the way to work or stopping for groceries or a bottle of white wine on the way home, you are probably a patron of a small business or two. Small companies influence and shape the way we live our lives, and we should be grateful for their presence. These businesses supply us with products and services and generally make our lives a little easier and a little bit better.

In the United States, there are approximately 30 million small businesses in existence, accounting for most of all businesses in our country at close to 99.9%. These small companies are responsible for providing jobs to nearly half of our country.

But what about the finances that pertain to these small business ventures? Perhaps you are an entrepreneur who is interested in starting a small business or a small business owner who is curious about his or her competition. Maybe, you own one small business but are considering branching out. In any case, the Small Business Administration records the revenue created by these companies, and other details can be found in resources such as census records.

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To provide a complete picture of small business revenue in the U.S., here are the up-to-date statistics regarding small business revenue.

On average, the typical small business owner makes $71,813 annually.
86.3% of small business owners make less than $100,000 annually.
Small companies without employees make, on average, $46, 978 annually.
Self-employed small business owners made a median income of $50,347 as of 2016 (those employed by their own incorporated business).
Businesses that record less than $5 million in revenue annually and, on average, saw their annual sales jump up by 7.8% as of 2015.
The number of non-employer firms making $1 million-$2.49 million increased in 2016, from 35, 584 to 36, 161. This was an increase of 1.6%.
Female small business owners averaged four times less than their male counterparts in 2007. Female small business owners made $130,000 on average as compared to the $570,000 of the males.
82% of small businesses that folded cited a lack of cash flow as an important part of the overall problem.

Average Annual Revenue: The Details

Now that we’ve taken a look at some recent small business revenue specifics, let’s make sure that we understand what average annual revenue means and why it is a crucial measure of small companies everywhere.

The average annual revenue of a small company is a fairly simple concept: it pertains to the amount of money that the business brings in. Specifically, this refers to the capital that is made before paying taxes and expenses. You may have heard the phrase “top line” being referred to, and this refers to the company’s revenue on the top of their income statement, before expenses are subtracted, and the “top” line is adjusted to become the “bottom line.”

A small business’s average annual revenue is the average amount of money brought in by the business in its entirety. According to the U.S. Census, revenues are listed as “receipts,” and these include commissions, sales, gross receipts, and income from businesses and trades, reported on a company’s annual tax returns.

Size Matters for Small Business Revenue

You may have been under the impression that all small business owners quickly become rich; however, based on the statistics, this is not the case. If you are hoping to start your own small business, it makes sense to pay attention to the numbers and know what sort of challenge you are in for. Your projected annual revenue will start out as a modest sum, generally, and that is before taxes and other business-related expenses are taken out.

Now, when a small business can be described as a bit “larger,” it might be more viable and therefore more profitable. Larger “small” businesses with employees do tend to make more money, and business owners who have employees create more revenue than companies without employees. The chain reaction that occurs here is not surprising: businesses with employees create more revenue than those without, and then hire more employees, and so on.

The Importance of Employees

As of 2007, companies with between one and four employees made an average revenue of $387,000 annually, whereas businesses with between five and nine employees earned $1,080,000 in revenue. Employees are a key contributing factor to small business revenue, and this is clearly seen in the numbers. For example, businesses with between 10 and 19 employees brought in an average revenue of $2,164,000 annually, and those with between 20 and 99 employees topped out at $7,124,000 per year. Lastly, companies with between 100 and 499 employees saw an annual revenue that went all the way up to $40,775,000 on average.

These numbers show us that size is not the only factor that influences revenue. The number of employees a business has a direct influence on its revenue stream. This makes sense since a greater number of employees, while contributing to overhead, also increases production and efficiency in most small businesses.

Do Small Businesses Reach $1 Million in Revenue?

While owning and running a small business can be a long, difficult road, it can also be very rewarding, and the future looks bright. This is because the number of one-person businesses that earn $1 million in annual revenue is increasing. By 2016, non-employer companies creating between $1 million and $2.49 million in annual revenue increased in number from 35,584 to 36,161. This increase of 1.6% should give you a sense of hope.

It is true that less than 2% of non-employer businesses actually make millions, and at first glance, those may not seem like good odds. However, consider how difficult it is to earn a million dollars or more in annual revenue when you are the only person in charge, assuming every single business responsibility. Running a single-person company means that the entrepreneur has taken on every task individually, from marketing and production to advertising and more, and that means a lot of responsibility and long hours.

Average Household Income for Small Business Owners

For a portion of small business owners, their companies are a key source of income that they count on. Studies tell us that over the last decade, approximately two-thirds of single-person businesses were viewed as a primary source of income by their owners.

In terms of the numbers, as of 2016, self-employed small business owners saw median revenues of $50,347. Unincorporated firms made less than that, with a median income of approximately $23,060. Additionally, reports show that currently, 86.3% of small business owners see less than $100,000 annually in revenue, and the average owner of a small company makes around $70,800 per year.

These average numbers are industry-dependent. For example, business owners in the construction field see revenues around $72, 300 annually, while owners of retail stores make, on average, $50,400 per year.

Small Business Growth in Sales

As of 2015, businesses making less than $5 million annually registered a 7.8% rise in annual sales, on average. This jump in growth actually climbed a percentage point over the estimates from 2014. Small companies in accommodation and food services, construction, and health care recorded the most growth at that time.

Comparing Female and Male Small Business Owners

Female business owners bring in less revenue in receipts annually, and this makes sense since there are fewer female business owners than males in the country. By 2007, female business owners averaged 7.8 million, whereas there were 13.9 million male small business owners. Male business owners saw an average of $570,000 in revenue as compared to women, who averaged $130,000.

What Is the Small Business Failure Rate?

We all know that the key to a successful business is how much revenue is created. According to reports, 82% of companies that fail cite a lack of revenue as the main factor. Businesses fail to create cash flow for many reasons, such as an oversaturated market, poor planning, or faulty advertising. However, without money flowing through the business to keep it afloat, none of these problems can be solved. Every business depends on a solid revenue stream, and when that cannot be achieved, the business is unfortunately no longer sustainable.

For prospective small business owners, we recommend conducting an analysis of your projected cash flow. This type of foresight will help you anticipate and contend with obstacles that might curtail your profits. A well-executed cash flow analysis will also reveal if there is a strong demand for your products or services. Demand translates to sales if your business is run correctly, and this type of anticipatory planning has been proven to be helpful.

For Small Business Owners, What Do All These Statistics Mean?

In today’s age, everyone sees the business owners who have managed to make millions of dollars off their small ventures. It is important to remember that this is not the norm for small business owners. While some small businesses do become lucrative and create revenue streams that continue to grow, the majority of statistics show that most owners of small companies see more modest revenue.

If you are still debating whether to enter the small business world, it is important to stay grounded and study statistics. Research tells us that most small businesses create modest revenue over the first few years and are able to keep running and slowly grow. Approximately 80% of small companies make it through the first year, and even more importantly, about half of them make it through five years.

Since a lack of revenue and cash flow has proven to be the largest obstacle for small businesses, start your small venture off right from day one. Research and study up-to-date small business statistics, focusing on revenue. Begin with a strong, industry-tested idea that offers a product or service that is in demand. Have others help you draw up a strong business plan, as well as an advertising/marketing plan for your business. With all of these things in place, you should be off to a profitable start.

It may make sense to consult with a lawyer concerning all of the rules and regulations that surround creating a new small business. Our small business attorneys at Nakase Wade offer free consultations and have helped many small ventures get off the ground successfully. Contact us today.

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