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How Much Does the Average Small Business Make?

Government data shows that the average business generates about the same amount of revenue as a typical job would pay.

Growth Potential Is Unlimited

Many people dream of starting their own business as a way of achieving financial success. With their own business, their pay will no longer be limited by the policies of the company they work for. The benefits of business ownership do include unlimited potential, in theory.

Many businesses have grown from humble beginnings. Dell Computers was started in a college dorm room. Other computer companies were started in garages. Retail giants have also started small. Wal-Mart has grown from a single store to a company with more than $400 billion in annual sales. Even restaurant chains start small, with McDonald’s, Starbucks, and many other multinational success stories starting with just one location.

Income Is Not Unlimited

These examples are, of course, exceptional and rare. Most businesses never grow into multi-billion dollar operations with locations around the world. However, that level of success is not necessary for financial security, and in many cases, the business owner is not even trying to create a business that large.

According to the U.S. Census Bureau, the average one-person small business reported annual revenues of about $44,000 in 2011. Average revenues are close to the average annual salary, which is about $45,790. Business owners need to deduct their operating expenses from revenue to obtain their profit, and their compensation (on average) is lower than what an average employee will make.

Some business owners do significantly better than average, and there is the potential for almost any business owner to reap more financial rewards than they would in a salaried position. It is important for potential business owners to understand that the average business will not generate millions in sales or create incredible wealth, but there are rewards to owning a small business beyond the finances.

Author:

Michael Carr is a small business expert who has been involved in the successful development of three small businesses.