Small businesses play a critical role in driving economic growth and creating jobs. According to the Small Business Administration (SBA), small businesses accounted for 44% of economic activity in the United States in 2021. However, not all small businesses succeed, and many fail within the first few years of operation. In this blog, we will take a closer look at small business statistics for 2022 and explore the small business failure/success rate.
Small Business Failure Rate
Starting a small business is not easy, and many entrepreneurs face significant challenges. According to the Bureau of Labor Statistics, approximately 20% of small businesses fail within their first year. The failure rate increases to 30% by the end of the second year, 50% by the fifth year, and 70% by the tenth year. The most common reasons for small business failure include cash flow problems, lack of demand for the product or service, and insufficient capital.
Small Business Success Rate
Despite the high failure rate, many small businesses thrive and grow over time. According to the SBA, approximately 80% of small businesses survive their first year. The survival rate increases to 50% after five years and 30% after ten years. Successful small businesses have several key characteristics, including a solid business plan, a clear understanding of the market, a strong team, and access to capital.
Small Business Trends in 2023
The COVID-19 pandemic has had a significant impact on small businesses, with many struggling to survive. However, there are also opportunities for small businesses to thrive in the post-pandemic world. Here are some of the small business trends for 2022:
1. Digital Transformation
Small businesses are increasingly embracing technology to streamline their operations, reach more customers, and compete with larger companies. Making a digital transformation is the best way to stay afloat.
2. eCommerce
Online sales have skyrocketed during the pandemic, and many small businesses have pivoted to eCommerce to stay afloat. In fact, some businesses even started to thrive once going online due to the beauty of the internet’s 24/7 marketplace.
3. Remote Work
The pandemic accelerated the already growing trend towards remote work, and many small businesses embracing flexible work arrangements attract and retain top talent more easily.
4. Sustainability
Consumers are increasingly concerned about environmental issues, and small businesses that prioritize sustainability are likely to be more successful in the coming years.
5. Alternative Sources of Capital
Thinking of diverse ways to secure and compound funding will be key to keeping more businesses solvent as industries grapple with the increased conventional loan rate increases and other economy aspects.
6. Rising Interest Rates and the Economy
While inflation has started to fall, rising interest rates are expected to continue throughout 2023, which could cool the economy and even push it into a recession. Rising rates make borrowing more expensive for businesses and their customers, so keeping an eye on those rates could make your break your business.
7. Generative Artificial Intelligence
Investments in generative AI are reaching billions from venture capitalists and major corporations alike with the results even reaching everyday users on a regular basis. The full extent of its implications is not yet known, however, small businesses should anticipate encountering an increasing array of generative AI tools. These tools aim to transform their operations and processes.
8. The Importance of Automation
As AI advances, automation will work in tandem with existing tools used by businesses. This will help to simplify and optimize various processes and functions. The logistics sector is also expected to shift towards automation, including warehouses and the use of robotic delivery systems.
9. Adopting New Tech
Small businesses that prioritize agility and adaptability are better equipped to adapt to emerging technologies, giving them a competitive edge. This can position them as leaders in driving the mass adoption of technologies such as AR, VR, and machine learning in 2023.
What Does This Mean For Your Business?
How businesses can evolve has expanded exponentially with no signs of slowing. In the midst of ongoing technological advancements and an uncertain geopolitical climate, change and unpredictability are inevitable constants. However, you can always prepare for changes like these and position your business for success, even in the toughest times. By closely monitoring trends like those we mentioned above and proactively considering how they may impact your business, you can gain a competitive advantage.
What’s Your Next Step?
If you want to expedite your business growth, talk to our experts! We’ve got everything you need to succeed all in one place. Contact us today for your free consultation!
