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How much do small businesses really earn?



Last Updated: Sep 25, 2018
What are the average annual sales of small businesses? What percentage of businesses bring in more than $1 million in sales? Here’s what Business Know-How small business surveys and surveys from the Census Bureau show.

How much money do small businesses really make? Are most small businesses raking in millions of dollars a year? Do small business owners really get to live the American Dream? Vacation at luxury resorts? Fly off to exotic locations in their private jet while their legions of employees keep everything running smoothly back home? Where does the myth end and reality begin?

The answer depends on many variables, but for the most part businesses can be divided into two broad categories:

On one hand, there are the relatively small number of businesses who have 10 or 20 or more employees. Some of these – a  very, very few – have concepts, business models and leadership that venture capitalist and private equity firms believe could evolve into high-growth, high-profit companies. Although they are a tiny minority of small businesses, they are the ones that make the news when they grow from scrappy startups into the Googles and Apple Computer companies of the world.

On the other hand, there are the rest of the small businesses in the country. These are the everyday businesses that don’t interest VCs and other investors who look for big paydays. They have fewer than 20 employees, and for the most part have fewer than 10 employees.

These everyday businesses are software developers, electrical contractors, freelance writers, salvage companies, bagel store owners, consultants, automotive parts dealers, pet store owners, Internet publishers, accountants, small manufacturers, and well, the list goes on. They are the small businesses in your town or at the local strip mall. They are the businesses in the local industrial park or office building downtown. And they are the homebased businesses in your neighborhood or maybe your own basement. They generate income, but not big bucks. Some are side gigs or part-time operations. Most are full-time businesses.

For the most part, these small businesses have few employees. According to US Census Bureau statistics, while there are 7,757,807 employer firms (ie, businesses with employees) operating in the United States, 89% of those businesses have less than 20 employees.

In fact, the majority of US small businesses are very small. Census Bureau data show that in 2016 there were 24,813,048 businesses that were classified as “nonemployers.” In other words, they are self-employed individuals who pay taxes, but are not counted in the monthly jobs reports that are based on payroll data because they do not have a payroll.

These very small businesses are businesses we know well at BusinessKnowHow.com. They are our audience.*

Periodically we run surveys to determine the characteristics and the interests of the businesspeople who visit our site so we can continue to provide the type of small business information they will find useful in their business. In almost all the surveys we conduct, we include a questions asking survey takers about business ownership and gross annual sales. 

So, how much money do these small businesses really make? Here are the annual sales of our survey responders from the US this year. We’ve presented two views of annual sales. The first includes both part-time and full-time businesses. The second graph omits the annual sales of those who responded that they worked part-time in their business (ie, its full-time business owners). Not surprisingly the percentage of businesses earning less than $25,000 is higher when part-time businesses are included, and the percent of businesses making more than $200,000 is higher in the graph that excludes part-time businesses. 

As you look at the figures below, remember that annual sales does not equal profit. It does not take into account any of the businesses’ expenses.

How does this year’s sales compare to sales reported by our survey takers in previous years? Well there are some variations, as this multi-year comparison shows. But overall, a little less than half of the small businesses who visit our site report earnings of under $50,000.

While this graph isn’t broken down by length of time in business or whether the businesses are part-time or full-time, in general, the lowest earners tend to be startups and part-time businesses.

How does the information we gathered stack up against Census Bureau statistics? Because we used different income ranges than the Census Bureau does and didn’t sort our data by nonemployers vs employers, there’s no way to draw direct comparisons. But the Census data does show that few small businesses have high sales. According to the 2016 US Census statistics, the average annual sales for the nation’s 24.8 million nonemployers is only $46,978. In fact, a 2016 Federal Reserve Banks report found that 45% of the nonemployers had revenues of less than $25,000 a year.

Notes:

*BusinessKnowHow.com reaches  millions of individual small business owners and professionals worldwide. Homebased businesses accounted for 66% of the businesses who responded to our 2018 survey.  A little over 48% percent indicated they are one-person businesses.

**Our survey data was filtered to display only the responses from US business owners.

RELATED: How to Get Paid What You’re Worth

Copyright 2018 Attard Communications, Inc. All Rights Reserved. May not be reprinted or redistributed without written permission.

 

About the author:
Janet Attard is the founder of the award-winning  Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets.  Follow Janet on Twitter and on LinkedIn

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