2024 Small Business Report

Small businesses play a significant role in the American economy, generating the majority of new jobs over the past decade. And, according to a new NerdWallet survey, despite facing challenges, most small-business owners find entrepreneurship rewarding.

The survey of over 2,000 U.S. adults — among whom 425 currently own a small business — commissioned by NerdWallet and conducted online in October 2024 by The Harris Poll, asked current and former small-business owners a variety of questions about why they started their businesses, the challenges they’re facing and how they view their businesses’ futures.

“Small businesses often act as a pillar to local economies and are pivotal to job creation and economic growth,” says Elizabeth Ayoola, a personal finance expert at NerdWallet. “Since small businesses represent more than 40% of America's GDP, it’s critical to understand their pain points, strengths and how they can be better supported.”

A record number of small businesses formed during the COVID-19 pandemic and, according to recent data, they’re sticking around. Our new survey shows that, while many small-business owners report facing economic headwinds, they’re finding the job of business owner to be a rewarding one.

Key findings

• Small-business ownership is common, and many small businesses are new: Almost one in five Americans (19%) currently own a small business; among them, more than a quarter (26%) started their business within the past 12 months.

• Finding and retaining customers is a prevalent issue for small businesses: More than nine in 10 small-business owners (93%) say they’re facing challenges right now, with the most commonly cited challenge being finding or retaining customers (54%).

• But most small-business owners find owning their business rewarding: More than four in five small-business owners (82%) say owning a small business gives them the work-life balance they want and 72% say they would open another small business in the future.

Small-business ownership is common, and many small businesses are new

According to our survey, 42% of Americans currently or previously owned a small business and almost one in five Americans (19%) currently own one.

Among current small-business owners, more than a quarter (26%) started their business within the past 12 months.

Small-business owners give a range of responses when asked why they started their business. The most common reason: Half (50%) say they wanted to increase their income.

About one in five small-business owners (19%) say the COVID-19 pandemic motivated them to start their business.

That finding tracks with statistics on business formations over the past several years.

Applications for employer identification numbers (EINs) nearly doubled in the early months of the pandemic, hitting a record 546,000 in July 2020. What’s more, applications remain elevated, with about 426,000 being filed in September 2024, according to the Census Bureau.

“While COVID ushered in a challenging time for many Americans, it propelled some toward innovation and entrepreneurship,” says Ayoola. “Post pandemic, we’ve continued to see steady growth in business applications, which could signal that more Americans are embracing entrepreneurship as an alternative way of working and see business ownership as worth the accompanying risks.”

Perhaps reflecting the flexibility that ownership provides, the amount of time owners reported spending at their small business varied widely.

The typical small-business owner reports working 30 hours per week at their business. But more than a third (35%) report working less than 20 hours per week and roughly one in five (19%) say they spend 50 hours or more at their small business.

Notably, we allowed respondents to define for themselves the term “small business,” and sought to capture the sentiment of folks who earn money outside of traditional employment through a variety of entrepreneurial methods. For example, 52% of small-business owners in our survey say they sell goods, 50% sell services, 25% say they are an influencer (e.g., selling ads and gaining sponsorships online) and 10% would describe their business in “other” terms (small-business owners could choose more than one response).

Small-business tips: Getting started

Starting a small business can seem daunting. But while every small business is unique, the first steps are often similar:

• Decide on an idea: What skills or talents do you possess? And could they translate into a successful business? You’ll want to do some preliminary market research by, for example, scoping out potential competitors and figuring out whether there’s demand for the products or services you intend to offer.

• Write a business plan: Your business plan should include an executive summary, market analysis and a financial plan.

• Choose a business entity type: Your business entity type will determine, among other things, how you’re taxed and which licenses (if any) you’ll need. You may want to consult an attorney to ensure you understand the potential tax implications.

• Set up your business finances: You should also plan to keep your personal and business finances separate. To this end, consider opening a business bank account, applying for a business credit card and purchasing accounting software.

Many small-business owners struggle to find or retain customers

While people continue to open new small businesses, they also report that owning a small business comes with challenges.

More than nine in 10 small-business owners (93%) say they’re facing challenges right now.

The most commonly cited challenge is finding or retaining customers, with more than half (54%) of current small-business owners reporting that.

Business owners are resilient, though, and report adopting multiple strategies to respond to these challenges.

Eighty-four percent of small-business owners say they’ve taken some action in the past 12 months to cope with recent economic conditions, the most common being increasing prices, something a third (33%) of owners say they’ve done. On the flip side, 17% of small-business owners say they actually reduced their prices.

Pricing isn’t the only metric that reflects differing approaches to weathering economic challenges. Equal proportions of small-business owners say they’ve expanded their product or service offerings as say they’ve reduced them (23% each). And while 20% say they’ve hired staff, 17% say they’ve fired or laid off staff.

Some owners have taken more drastic actions, with 15% saying they changed physical location and more than one in 10 (11%) saying they shut down a storefront.

Small-business tips: Growing revenue

Growing revenue is key to the success of any business. Businesses require a steady stream of income to, literally, keep the lights on, and the ability to show strong revenue is crucial when seeking financing.

So, how can you as a small-business owner grow your revenue? Here are some suggestions:

• Build your network: Word-of-mouth referrals are valuable. To get them, build up your network. Consider joining local business associations or even just ringing up contacts over the phone.

• Diversify your products and services: Consider developing less-expensive versions of the products and services you offer. Not only may these offerings attract customers with less disposable income, they’ll provide your business with exposure to a new customer base that might be more willing to spend more money on your higher-margin products or services once they’ve developed a familiarity with your lower-margin offerings.

• Look for efficiencies: You may be able to automate certain, non-core aspects of your operation. You should also be looking to negotiate with suppliers and other business partners to ensure that you’re getting the best prices you can, enabling you to pass on lower prices to customers and grow revenue.

Owning a small business is challenging but rewarding

While small-business owners face economic headwinds, large majorities indicate they’re satisfied with their decision to strike out on their own.

Seven in 10 (70%) current small-business owners say they never want to work a traditional job (that is, as an employee for someone else) again. And a similar proportion (72%) say they would open another small business in the future, including 85% of millennial small-business owners (ages 28-43).

“Owning a business requires tenacity, commitment and resilience but it can open portals for entrepreneurs to create a life that aligns with their values,” says Ayoola. “Financial stability, fulfillment and work-life-balance can especially become more tangible realities for people who own their own business.”

Many small-business owners say opening their business was a smart financial move. Almost three in four (73%) small-business owners say they make more money now than they could if they returned to working for someone else. Two-thirds (66%) say their savings are on track to have enough money to retire in the future.

Methodology

This survey was conducted online within the United States by The Harris Poll on behalf of NerdWallet from October 1-3, 2024 among 2,090 U.S. adults ages 18 and older, among whom 425 currently own a small business. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.5 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the surveyed population of interest. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact [email protected].

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