25 Important Stats on Small Businesses that Vertical SaaS Platforms Need to Know

In today's business landscape, small businesses are the lifeblood of the American economy. These companies range from solo entrepreneurs to companies with up to 500 employees. No matter the size, they all face unique challenges and opportunities in managing their finances. As technology continues to evolve, vertical SaaS platforms have emerged as powerful allies for small businesses, offering tailored solutions that address their industry-specific needs.

From the sheer number of small businesses driving the U.S. economy to the financial hurdles they face and the technological trends shaping their operations, these 25 stats highlight the current picture of small businesses in the U.S.

Small Business Landscape:

1. Small Businesses, those with 500 employees or fewer, account for 99.9% of the businesses in the U.S. (via U.S. Small Business Administration)

Small businesses dominate and power the U.S. economy. Your platform can cater to this vast market by offering industry-specific financial tools that address the unique needs of different business types, from sole proprietorships to mid-sized companies.

2. 28.4 million of those businesses don't have paid employees. (via U.S. Small Business Administration) 

Many of these businesses are truly small in size as they do not have any paid employees on their team. Platforms should offer one-stop shops and financial management solutions tailored for solo entrepreneurs. These platforms have the ability to help them handle accounting, invoicing, and financial planning since these operators are juggling multiple challenges all alone.

3. Majority of small businesses (82%) operate without employees. (via U.S. Small Business Administration) 

Majority of these small businesses operate as a one-person show. Vertical SaaS platforms can provide automated financial processes and time-saving tools, allowing solo entrepreneurs to focus on growing their business rather than getting bogged down in administrative tasks.

4. 6.2 million of the businesses have paid employees and account for just under half of the total private sector employment (46%). (via U.S. Small Business Administration) 

Although many of these SMBs have no employees and/or paid employees, there are many with teams that help run the business and help power the labor market in the U.S. Vertical SaaS platforms can offer payroll management and employee expense tracking features specifically designed for small businesses, streamlining these processes and ensuring compliance with labor laws.

5. Small businesses employed 56.4 million workers in 2021. (via Pew Research)

As mentioned above, small businesses not only help to power the economy, but also the labor market as well. Vertical SaaS platforms can provide centralized HR and financial management tools, helping small businesses efficiently manage their workforce while keeping track of labor costs and productivity.

Economic Impact:

6. Small businesses brought in over 16.2 trillion in revenue. (via Pew Research) 

This significant revenue highlights the financial impact of small businesses. Vertical SaaS platforms can offer sophisticated revenue tracking and forecasting tools tailored to specific industries, helping small businesses make data-driven financial decisions and identify growth opportunities.

7. Small businesses represent between 43.5% and 50.7% of the U.S.'s GDP. (via U.S. Chamber of Commerce)

This statistic underscores the critical role of small businesses in the economy. Vertical SaaS platforms can provide financial analytics tools that help small businesses understand their contribution to their industry and the broader economy, potentially opening doors to new opportunities or partnerships.

8. The number of U.S. business applications has been trending upwards since before the pandemic. As of April 2024 1.75 million applications have been filed this year. (via U.S. Small Business Administration)

Although the failure rates paint a tough picture, people are still opening and starting their SMBs. We're seeing growth beyond pre-pandemic numbers. Vertical SaaS platforms can offer startup-friendly financial tools with industry-specific guidance, helping new entrepreneurs navigate the financial challenges of their particular sector from day one.

Business Longevity and Challenges:

9. In 2021, over 59% of the accounted Small Businesses in the US had been operational for at least 6 years. About a third (35%) had been running for 5 years or fewer and 9% had launched in the last year. (via Pew Research)

This statistic shows a mix of established and new businesses. Vertical SaaS platforms can provide scalable solutions that grow with the business.

10. About 80% of small businesses survive their first year. And close to 50% remain open for at least five years. (via Bureau of Labor Statistics) 

Running a small business is not a small feat and the failure rates for SMBs grow every year that SMB is running. If vertical SaaS platforms can provide financial health monitoring tools and industry benchmarking, then this will only curb the failure rates by helping businesses identify potential issues early and make informed decisions to improve their longevity.

11. 38% of small businesses fail due to lack of capital. (via Forbes)

This highlights the importance of proper financial management. Vertical SaaS platforms can offer cash flow forecasting and management tools specific to each industry, helping businesses anticipate and avoid capital shortages. They can also integrate with lending platforms to facilitate easier access to industry-specific financing options.

12. 82% of small businesses fail due to poor cash flow management (via U.S. Bank)

Cash flow management is critical for business survival. Vertical SaaS platforms can offer industry-specific cash flow forecasting and management tools, helping businesses anticipate cash flow issues and take proactive measures to maintain financial stability.

13. 41% of small business leaders have indicated trouble filling job vacancies and over 90% have struggled to find new applicants. (via National Federation of Independent Business)

Staffing challenges can have significant financial implications. Vertical SaaS platforms can provide industry-specific hiring and onboarding tools integrated with financial systems, helping businesses understand the cost implications of hiring decisions and manage the financial aspects of recruitment more effectively.

14. Over 50% of small businesses say inflation is their top challenge. (via U.S. Chamber of Commerce) 

Inflation can significantly impact a business's financial health. Vertical SaaS platforms can offer industry-specific pricing strategy tools and cost analysis features, helping businesses adjust their financial strategies to cope with inflationary pressures in their particular sector.

Financial Management and Performance:

15. Of all small businesses that applied for credit in 2020, 68% did so through a bank. (via Federal Reserve Board of Governors)

Banks remain a primary source of credit for small businesses. Vertical SaaS platforms can integrate with banking APIs to streamline loan applications and provide industry-specific financial reports that banks require, making the credit application process smoother and potentially improving approval rates.

16. 31% of small businesses that applied for credit in 2020 received full funding. (via Federal Reserve Board of Governors). 

This low full funding rate suggests room for improvement in credit applications. Vertical SaaS platforms can offer tools to help businesses prepare stronger, industry-specific loan applications, including detailed financial projections and business plans tailored to their sector.

17. 33% of small businesses launched with less than $5,000. And 58% launched with less than $25,000. (via U.S. Chamber of Commerce). 

Many small businesses start with limited capital. Platforms can provide cost-effective, scalable financial management solutions that grow with the business, allowing entrepreneurs to start small and add features as they expand, without a large upfront investment.

18. 44% of small businesses reported revenue increases in 2022. And 18% recorded no change in revenue. (via Federal Reserve Board of Governors)

While many businesses are growing, others are stagnating. Vertical SaaS platforms can provide industry-specific revenue analysis tools, helping businesses identify growth opportunities and optimize their financial strategies based on sector trends.

19. Across all small businesses, the accounting bill comes to roughly $11,000. (via Cornerstone Advisors Survey)

This represents a significant expense for small businesses. Vertical SaaS platforms can offer cost-effective, industry-specific accounting solutions directly within their platform, through embedded accounting, that reduce reliance on external 3rd party services, potentially lowering this cost while providing more real-time financial insights.

Technology Adoption:

20. 87% of small businesses have increased efficiency due to technology platforms. (via U.S. Chamber of Commerce)

This statistic demonstrates the positive impact of technology adoption and this can be furthered if vertical SaaS platforms can offer industry-specific automation for financial processes, which will only increase efficiency and allow small businesses to allocate resources more strategically.

21. 95% of small firms use at least one technology platform in their operations. (via U.S. Chamber of Commerce)

Technology adoption is high among small businesses. Vertical SaaS platforms can leverage this by offering seamless integrations with other commonly used tools in specific industries, creating a comprehensive financial management ecosystem.

22. 38% of small businesses with employees use specialized software in their daily operations. (via U.S. Small Business Administration)

There's room for growth in specialized software adoption. Platforms have the ability to educate and market to businesses on the financial benefits of using industry-specific tools, demonstrating ROI through case studies and industry benchmarks.

23. More than half of small businesses rely on spreadsheets — or no technology support at all — for bookkeeping, invoicing, expense tracking and financial reporting. (via Cornerstone Advisors Survey)

While technology adoption is high, there is still a significant opportunity for more expansion. Vertical SaaS platforms can offer user-friendly, industry-specific alternatives to spreadsheets, demonstrating how automated financial processes can save time and reduce costly errors.

Vertical SaaS Adoption and Preferences:

24. Roughly 6 in 10 small businesses use a vertical SaaS offering like Shopify, Toast or Jobber to support their business' operations. (via Cornerstone Advisors Survey)

Vertical SaaS adoption is growing. Platforms can capitalize on this trend by continuously enhancing their financial management features, ensuring they meet the evolving needs of businesses in their specific industries.

25. 8 in 10 small businesses would be more likely to select an industry-specific software provider if it had all accounting functions integrated into one application. (via Cornerstone Advisors Survey)

This demonstrates a clear preference for comprehensive, industry-specific solutions. Vertical SaaS platforms can focus on developing all-in-one financial management solutions tailored to specific industries, meeting this demand and potentially increasing their market share.

Tailored Solutions in a Complex Landscape

Small businesses grapple with a spectrum of monetary challenges, ranging from day-to-day expense tracking to securing long-term investment for growth. Yet, these challenges also present opportunities for innovation and growth, particularly with vertical SaaS platforms and their financial management capabilities. 

Vertical SaaS platforms stand at the forefront of this innovation, offering tailored solutions that address the unique needs of different industries. By providing comprehensive, industry-specific financial management tools, these platforms have the ability to give small businesses the  access to sophisticated financial insights and processes. As small businesses continue to adapt and evolve, the role of vertical SaaS in supporting their financial health and driving their success is likely to become increasingly significant.