SBSI Wave-5
The Small Business Owners and their Businesses
What do small businesses in America look like? Who is the typical small business owner? The Small Business Success Survey provides a wealth of information on owner and business characteristics based on reports by the owners themselves. The definition of a small business will vary from source to source. In this study, a small business is defined as either having a payroll and/or providing half of the owner’s household income, which leaves out the minor side-businesses that account for a small share of U.S. output and jobs. “Small” is defined as having fewer than 100 employees. There are about 6 million small businesses in the U.S. that have a payroll and under 100 employees.
The Small Business. The Small Business Success Survey has compiled the traits of small businesses over the past two years, providing a profile of their characteristics and structure. The picture that emerges of a typical small business is that it has a single owner, operates within a local area, has a single location, and has sales in the low six figures. A profile is as follows:
- 30 percent have just one employee (the owner), and the median number of employees is 3
- 43 percent are home-based businesses
- On average, small businesses have 1.7 owners; 57 percent have a single owner, 32 percent have two owners, and 11 percent have 3 or more owners
- 13 percent are minority-owned – 30 percent are African-American, 22 percent are Hispanic, 17 percent are of Asian/Pacific origin
- 30 percent are women-owned (over 50 percent of the business is owned by women)
- 86 percent have just a single location
- The median age of small businesses is 15 years, and 22 percent have operated 5 years or less
- Over a third of small businesses are just getting started:
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- 5 percent are start-ups and 34 percent are early growth businesses
- 48 percent consider themselves mature businesses
- 10 percent are in various phases of closing or being sold or transferred
- The median annual revenue is $186,200; among those reporting their sales, 38 percent gross less than $125,000.
The Small Business Owner. Small business owners cross a wide spectrum of demographic groups, so it is not possible to describe a “typical” owner. Compared to the general population, however, the small business owner is older, more likely to be male, highly experienced, and relatively affluent. The following is a summary of owner traits quantified in this study:
- Small Business owners are slightly older than the U.S. population; 76 percent are at least 45 years of age, and 17 percent are 65 years or older
- 72 percent are male and 28 percent are female
- Half have a college education, but not all:
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- 17 percent have only a high-school degree and 2 percent have less than a high school degree
- 29 percent have attended trade school, have some college, or a two year degree
- 50 percent have at least a four year college degree
- Owners have considerable industry experience; 60 percent have worked in their industry for 20 or more years
- 80 percent of owners started the business
- Among those willing to share the information about their annual income, 39 percent earn at least $100,000 per year, and 10% earn at least $200,000 a year
- Small Business owners are slightly older than the U.S. population; 76 percent are at least 45 years of age, and 17 percent are 65 years or older
- 72 percent are male and 28 percent are female
- Half have a college education, but not all:
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- 17 percent have only a high-school degree and 2 percent have less than a high school degree
- 29 percent have attended trade school, have some college, or a two year degree
- 50 percent have at least a four year college degree
- Owners have considerable industry experience; 60 percent have worked in their industry for 20 or more years
- 80 percent of owners started the business
- Among those willing to share the information about their annual income, 39 percent earn at least $100,000 per year, and 10% earn at least $200,000 a year
The Small Business Owner. Small business owners cross a wide spectrum of demographic groups, so it is not possible to describe a “typical” owner. Compared to the general population, however, the small business owner is older, more likely to be male, highly experienced, and relatively affluent. The following is a summary of owner traits quantified in this study:
Who are the most competitive small businesses? Competitiveness correlates with characteristics of the business and the owner, but the success factors may change over time due to economic circumstances. Some of the factors that track with competitive success (and a few that are not currently important) are shown in Figure 30. One driver of small business success remains consistently strong: the phase of the business. Established businesses have a clear advantage as evidenced by 61 percent of “highly competitive” businesses being mature businesses, compared to only 35 percent of “failing” businesses.
Company size is also a success factor for small businesses. For instance, “highly competitive” small businesses have a higher percentage of businesses with 10 or more employees and have higher median revenues.
Just as striking as the differences in competitiveness by business traits is the lack of difference along the lines of education, age and gender. Anyone can succeed (or fail) in running a small business.
Figure 30About the Small Business Success Survey
The baseline (Wave 1) for the Small Business Success Survey was conducted in December 2008 through January 2009. A total of 1,000 small business owners were interviewed by telephone. A second wave (Wave 2) was conducted in June 2009 among 500 small business owners. The third wave (Wave 3) was conducted in December 2009 among 500 small business owners. The fourth wave (Wave 4) was conducted in June 2010 among 500 owners. The fifth wave (Wave 5), reported here, was conducted in January 2011 among 500 owners. Small businesses included in the study were privately owned (not publicly traded), for-profit, had fewer than 100 employees, and had a payroll and/or contributed to at least 50% of the owner’s household income. The data are weighted to ensure representativeness to the entire population of small businesses in the U.S.
The survey is longitudinal in nature, and tracks trends in Small Business Success over time. These are the results from the fifth wave of data collection.
The survey is sponsored by Network Solutions, LLC and the Center for Excellence in Service at the Smith School of Business, University of Maryland. Rockbridge Associates, Inc., an independent marketing research firm, conducted the survey.
Network Solutions, LLC
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University of Maryland
3461 Van Munching Hall
College Park, MD 2074Google+Shashi Bellamkonda, Director- Social Media
for Network Solutions, LLC
202-370-7716
smedia@networksolutions.comCarrie Handwerker, Public Relations Associate
for Smith School of Business
301-405-5833
chand@rhsmith.umd.edu
