Prepared for Jairek R. | Delivered September 13, 2019
Small Business in the US
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To understand the profitability of small businesses in the United States, as well as factors that determine how much profit a small business makes, and how much debt a small business acquires.
Small Business Profitability
A 2018 study by Business Knowhow found that approximately
66% of small business
owners make less than $100,000 per year.
Since most small businesses are not required to file annual reports, determining the actual profit small businesses is difficult. However, the Business Knowhow study utiiized the
of small businesses owners as an indicator to profitibility, as in most small business, the company's profits pass through to the owner.
According to the study,
had household incomes between $50,000-$99,999 and
had household incomes over $100,000.
For comparison, a study by Payscale reported that the average income in 2018 for a small business owner was
Factors that Determine Profitibility
of the company must provide enough to cover the exisiting expenses of the company in order to have a positive profit margin.
must be strategic in order to compete with larger enterprises while at the same time maximizing profits.
can impact the profitibility of a business. The lower the expenses and costs of overhead, the greater the profitibility.
can impact profitibility also. Small businesses should control labor costs through maintaining wages and ensuring appropriate staffing for current needs.
mix can have an affect on sales and, therefore, profitability. Many small businesses have limited services or small inventory mixes. Services or products that do not sell can drain the company's profit. Routine analysis should be done to determine how a service can be changed or eliminated or the product mix can be adjusted, can help increase company profitibility.