Run it with less chaos · Every business
How Small Businesses Actually Grow: What the Data Shows
Bank-account data on 138,000 new businesses shows that only 2% of one-person businesses hired an employee in their second year, and that most small business growth comes from steady, self-funded gains rather than a single leap.
At a glance
- Of the 131,300 new businesses without employees in a JPMorgan Chase Institute study, 84% still had no employees a year later, 14% had closed and 2% had hired.
- Firms the Institute classed as organic growth businesses, which grow with little outside financing, made up more than half of all small businesses and earned 51% of small business revenue by their fourth year.
- Growth for a service business comes from three levers, customers, visits per customer and average ticket, and a 5% gain on each adds up to about 16% more revenue.
The number and where it comes from
The JPMorgan Chase Institute followed about 1.3 million small businesses through 3.1 billion bank transactions from 2012 to 2018, and within that sample it traced 138,000 firms founded in 2013 from their first year onward. Only 5% of those new firms had employees in their first year, and the rest moved slowly, if at all, toward hiring; nonemployer firms were more than five times as likely to close as to hire their first employee.
The pattern fits what economists see in survey data. An analysis of the Kauffman Firm Survey published in the Brookings Papers on Economic Activity found that most new small businesses, such as skilled trades, doctors, lawyers and shopkeepers, plan to offer an existing service in an existing market, and that most have little desire to grow large, with being one's own boss and flexible hours among the main reasons for starting. Census research published in the Review of Economics and Statistics adds that once a firm's age is accounted for, there is no systematic relationship between a firm's size and its growth, and that startups and young firms play an important role in U.S. job creation, which points to the first years after opening as the period when most growth is decided.
The Institute's four-year view shows which kind of growth lasts. It sorted small businesses into segments by how they grew, and the self-funded organic growth firms, more than half of the total, earned 51% of small business revenue and 52% of payroll by year four, while the much smaller group that grew with outside financing earned 22% of revenue.
Growth carries risk as well as reward; the organic growth group closed more often than the stable segments, and the Institute found that firms whose expenses swung widely against their revenue were the likeliest to close, with 21% exiting in year four compared with 3% of firms with regular weekly revenue.
Working out your own growth from three levers
For a service business, revenue is the product of three numbers: how many customers it serves, how many times each comes in during a year and what each visit is worth. Small gains on all three multiply, so a business that adds a few customers, brings each back a little sooner and adds one small service to the average ticket grows faster than one chasing a single big change.
| Active customers per year (Assumption) | 400 |
|---|---|
| Visits per customer per year (Assumption) | 4 |
| Average ticket (Assumption) | $85 |
| Revenue today (Calculated (400 × 4 × $85)) | $136,000 |
| Customers after a 5% gain (Calculated (400 × 1.05)) | 420 |
| Visits after a 5% gain (Calculated (4 × 1.05)) | 4.2 |
| Ticket after a 5% gain (Calculated ($85 × 1.05)) | $89.25 |
| Revenue after all three gains (Calculated (420 × 4.2 × $89.25)) | $157,437 |
| Growth (Calculated ($157,437 ÷ $136,000 − 1)) | 15.8% |
Illustrative example; replace every assumption with your own numbers.
The second and third levers usually cost the least to move, since a customer who already trusts the business can be rebooked before they leave or offered a fitting add-on, while a new customer has to find, choose and try the business first.
How you compare
- Hiring: if your business has hired at least one employee, it has already made a move that only 2% of new one-person businesses made in their second year in the Institute's data.
- Your challenge: reaching customers and growing sales was the most common operational challenge in the Federal Reserve's 2024 survey of 7,653 small employer firms, named by 57%.
- Your own baseline: pull last year's active customers, visits per customer and average ticket from your booking or invoicing system, and write down which of the three moved most.
About this research: Growth and closure figures come from JPMorgan Chase Institute studies of Chase business bank accounts, which describe patterns among the Bank's customers rather than every U.S. business. The survey and Census studies describe intentions and job growth across the economy. The worked example is illustrative.
Sources
- Farrell, D., Wheat, C. and Mac, C. Growth, Vitality, and Cash Flows: High-Frequency Evidence from 1 Million Small Businesses. JPMorgan Chase Institute, 2018. About 1.3 million small businesses; 2013 founding cohort of 138,000.
- Hurst, E. and Pugsley, B. W. What Do Small Businesses Do? Brookings Papers on Economic Activity, Fall 2011. Kauffman Firm Survey data.
- Haltiwanger, J., Jarmin, R. S. and Miranda, J. Who Creates Jobs? Small Versus Large Versus Young. Review of Economics and Statistics, 2013. Census Business Dynamics Statistics and Longitudinal Business Database.
- Federal Reserve Banks. 2025 Report on Employer Firms: Findings from the 2024 Small Business Credit Survey. 2025. 7,653 employer firms.
Related reading: Half of New Businesses Close Within Five Years; Here's What the Survivors Do Differently · Where Small Service Businesses Actually Get Their Customers · Revenue Isn't Profit: Why Growing Businesses Run Out of Cash · A One-Page Plan for the Next 12 Months
Work with osNOVA on steady, self-funded growth
We help owner-run service businesses find which of the three levers, more customers, more visits or a higher average ticket, is easiest to move for them, then build the rebooking, follow-up and service habits that move it, so growth comes from fuller weeks and more regulars rather than from borrowing.
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