55 Statistics on Small Business Valuations for 2024

Valuing your small business for sale and curious about what the market looks like? You came to the right place.

Here are 55 interesting statistics on small business valuations in 2024.

Key Statistics

Our top 5!

1. 50% of small businesses fail within 5 years – This highlights the significant challenges small businesses face in long-term sustainability. (2)
2. The median small business sale price was $324,500 in 2023 – A key benchmark for understanding current business valuations. (3)
3. Small businesses make up 99.9% of all U.S. firms – Demonstrating the immense role small businesses play in the U.S. economy. (1)
4. 82% of small business failures are due to poor cash flow management – A critical factor contributing to business survival and success. (2)
5. Small businesses contribute 43.5% of the United States’ GDP – This underscores the significant economic impact of small businesses across the country. (1)

Financial Statistics

Small business financials are key to understanding their value and challenges. The average business valuation ranges from 2-3 times annual revenue, with those earning $1-2.5 million typically valued higher at 3.3 times earnings.

6. The average small business valuation is between 2-3 times annual revenue (1).
7. Small businesses with $1-2.5 million in annual revenue are valued at an average of 3.3 times earnings (1).
8. 20% of small businesses fail within their first year (2).
9. 65% of small businesses fail within 10 years (2).
10. The average small business owner’s salary is $69,579 per year (3).
11. 57% of small business owners rely on personal savings as their top source of startup capital (2).
12. 8% of small businesses rely on bank loans or credit cards for startup funding (2).

Industry and Size Statistics

Small businesses make up a huge part of the U.S. economy, with approximately 33.3 million operating nationwide and making up 99.7% of firms with paid employees. Texas leads with 10% of the country’s small businesses, followed closely by California and Florida at 9% each, while Georgia accounts for 6%.

13. There are approximately 33.3 million small businesses in the United States (1).
14. Small businesses comprise 99.7% of firms with paid employees (1).
15. Texas has the most small businesses of any state, with 10% of the U.S. total (1).
16. California and Florida each have 9% of U.S. small businesses (1).
17. Georgia has 6% of U.S. small businesses (1).

Ownership Demographics

Small business ownership in the U.S. reflects diverse demographics, with 26% of businesses owned by women and nearly half owned by Generation X. 14% of owners are Black, Hispanic, or Asian, and the average age of a small business owner is 50.3 years. 

18. 26% of small businesses are owned by women (1).
19. Just under 50% of small businesses are owned by Generation X (1).
20. 14% of small business owners are Black, Hispanic or Asian (1).
21. The average age of a small business owner is 50.3 years old (2).

Employment and Job Creation

Small businesses play a critical role in job creation and revenue generation, which directly influences their valuation. Employing 61.7 million people, or 46.4% of private sector employees, small businesses have created 17.3 million net new jobs since 1995. 

22. Small businesses employ 61.7 million Americans, which is 46.4% of private sector employees (3).
23. Small businesses created 17.3 million net new jobs from 1995 to 2021 (3).
24. This accounts for 62.7% of net new jobs created since 1995 (3).
25. Small businesses with 1-4 employees have average annual revenue of $387,000 (1).
26. Small businesses with 5-9 employees average $1 million in annual revenue (1).
27. Small businesses with 10-19 employees average $2,164,000 in annual revenue (1).

Financing and Cash Flow

Access to finance plays a key role in small business valuations, with 55% of businesses taking government funding and 51% borrowing from financial institutions to fuel growth. The median venture capital deal size of $9.9 million in 2020 highlights the potential for high-value investments, which can boost a company’s valuation.

28. 55% of businesses have taken government funding (1).
29. 51% of small businesses have borrowed from a financial institution or lender (1).
30. The median size of venture capital deals for small businesses was $9.9 million in 2020 (2).
31. Big bank approval rates for small business loans dropped to 8.9% in May 2020 (2).

Marketing and Technology

Now let’s talk about marketing and technology. The use of SaaS tools, with 80% of businesses feeling they don’t fully utilize them, suggests untapped efficiency that could enhance operational performance and, ultimately, boost a business’s valuation.

32. 55% of small businesses in the U.S. were advertising on social media in 2021 (3).
33. Of those advertising on social media, 66% used Facebook and 42% used YouTube (3).
34. 28% of small businesses don’t have a website (3).
35. 46% of small businesses have in-house employees managing their websites (3).
36. 32% of small businesses use DIY website builder software (3).
37. On average, small businesses use between 25-50 SaaS tools (4).
38. 80% of small businesses feel they don’t take full advantage of their SaaS tools (4).

Challenges and Concerns

Challenges like economic uncertainty, increased costs, and declining sales are some concerns that can significantly impact small business valuations. In 2021, 89% of owners were concerned about the economy, with 78% experiencing rising costs and 46% reporting declining sales, which can reduce profitability and market appeal.

39. 89% of small business owners are concerned about the state of the U.S. economy (3).
40. 78% of small businesses experienced increased costs in 2021 (3).
41. 46% of small businesses reported declining sales in 2021 (3).
42. 27% of small businesses withdrew from cash reserves in 2021 (3).
43. 53% of small businesses experienced supply chain disruptions in 2021 (3).
44. 22% of small business owners cite recruiting and retention as their main challenge (4).
45. 14% of small business owners report cash flow as a main concern (4).
46. 11% of small business owners face supply chain issues as a primary challenge (4).
47. 43% of cyberattacks target small businesses (4).
48. 57% of cyberattacks on small businesses are phishing attacks (4).
49. 33% of cyberattacks on small businesses involve stolen devices (4).
50. 30% of cyberattacks on small businesses involve credential theft (4).

Future of Small Business Valuation

The future of small business valuations is expected to see a rise, with the median sale price projected to reach $350,000 by 2025, up from $324,500 in 2023. Private equity firms, holding $1.35 trillion in capital, are likely to drive up valuations for smaller, low-risk businesses. 

51. The median small business sale price is projected to reach $350,000 by 2025, up from $324,500 in 2023 (1).
52. Private equity firms have approximately $1.35 trillion in “dry powder” capital available for acquisitions, which is expected to drive up valuations for smaller, lower-risk firms in 2024 (3).
53. Overall business valuation multiples have contracted from their 2018 highs, with the average selling price/EBITDA multiple decreasing from over 8x in 2018 to approximately 5x in 2023 (3).
54. The “size effect” is expected to continue influencing valuations, with larger companies commanding higher multiples. Companies with $1-2.5 million in annual revenue are currently valued at an average of 3.3 times earnings (1).
55. Industry-specific valuation trends are emerging, with the information sector seeing median selling price/EBITDA multiples drop from 17.4x in 2021 to 7x in 2022, while the accommodation and food service industries saw a modest rise from 2.3x to 2.4x over the same period (3).

Sources:

1. https://www.usatoday.com/money/blueprint/business/business-formation/small-business-statistics/
2. https://websitebuilder.org/blog/small-business-statistics/
3. https://blog.hubspot.com/marketing/small-business-statistics
4. https://www.cin7.com/blog/small-business-statistics/
5. https://www.chamberofcommerce.org/small-business-statistics/
6. https://www.nerdwallet.com/article/small-business/small-business-statistics
7. https://www.venasolutions.com/blog/small-business-revenue-statistics
8. https://ninjatransfers.com/blogs/dtf/small-business-statistics