Research

Scaling to $1 Million: How Small Businesses Fare by Owner Race and Gender

April 3, 2024

Small businesses rarely scale to $1 million annual revenues, especially those with Black, Hispanic, and/or female owners.

While policymakers often focus on how to scale smaller businesses into larger ones, there is surprisingly little empirical evidence on the process by which these firms scale and grow revenues. Using $1 million annual revenues as a milestone of small business growth, we ask how commonly young firms reach this milestone, how the incidence of this phenomenon varies across industries and owners of different races and genders, and how it relates to firm's initial size. Our findings have implications for understanding small business growth and equitable access to growth opportunities and resources, and suggest opportunities for policymakers in both the public and private sector to address the differential opportunities and barriers to growth these entrepreneurs may face.

Full Report

Select Findings

  • A small share of small businesses reach $1 million in revenues in the first five years, with the likelihood of reaching that milestone showing a direct relationship to revenues in a firm’s first year.
  • Black-, Hispanic-, and/or female-owned firms were least likely to earn $1 million in revenue within five years of starting business. Industry of operation and lower levels of revenue in the initial year help to explain those differences, though some persist.
Figure: Incidence of $1 million firms by initial revenues

This figure has two panels stacked vertically, each of which is a vertical grouped bar chart. The title reads “Incidence of $1 million firms by initial revenues.” In the top panel, subtitled “Owner race,” firms are grouped by initial year revenue and owner race. Initial year revenues are bucketed into five groups: less than $100,000; $100,000-$249,999; $250,000-$499,999; $500,000-$749,999; and $750,000-$999,999. Bars represent the share of firms in the given initial revenue bucket and owner race that attain $1 million in revenues. Across all races, firms with lower initial revenues are less likely to attain $1 million in revenues, but within initial revenue buckets, Black-owned firms are consistently less likely to attain $1 million in revenue than Asian-, Hispanic-, and White-owned firms. Among firms with initial revenues less than $100,000, 2 percent of Asian-owned firms, 0.3 percent of Black-owned firms, 0.7 percent of Hispanic-owned firms, and 1.3 percent of White-owned firms attain $1 million in revenue. Among firms with initial revenues between $750,000 and $999,999, 51 percent of Asian-owned firms, 42 percent of Black-owned firms, 55 percent of Hispanic-owned firms, and 53 percent of White-owned firms reach $1 million in revenue. In the bottom panel, subtitled “Owner gender,” firms are grouped by initial year revenue and owner gender. Initial year revenues are bucketed into five groups: less than $100,000; $100,000-$249,999; $250,000-$499,999; $500,000-$749,999; and $750,000-$999,999. Bars represent the share of firms in the given initial revenue bucket and owner gender that attain $1 million in revenues. Across both genders, firms with lower initial revenues are less likely to attain $1 million in revenues, but within initial revenue buckets, female-owned firms had consistently lower shares of reaching $1 million. Among firms with initial revenues less than $100,000, 0.6 percent of female-owned firms and 1.4 percent of male-owned firms attain $1 million in revenues. Among firms with initial revenues between $100,000 and $249,999, 2.8 percent of female-owned firms and 4.4 percent of male owned firms reach $1 million in revenue. Among firms with initial revenues between $250,000 and $499,999, 10 percent of female-owned firms and 13 percent of male-owned firms reach $1 million in revenue. Among firms with initial revenues between $500,000 and $749,999, 28 percent of female-owned firms and 31 percent of male-owned firms reach $1 million in revenue. Among firms with initial revenues between $750,000 and $999,999, 52 percent of both female-owned and male-owned firms reach $1 million in revenue. The chart note reads, “Firms with unknown race or gender or no classifiable majority ownership by race or gender are not shown in their respective charts. Source: JPMorgan Chase Institute.”

Data Explanation

We tracked firm revenues for the first five years of business (or fewer, if they ended their banking relationship prior to completing five years of business.) and recorded initial annual revenues and whether they attained $1 million in revenue in that time span.

This figure has two panels stacked vertically, each of which is a vertical grouped bar chart. The title reads “Incidence of $1 million firms by initial revenues.” In the top panel, subtitled “Owner race,” firms are grouped by initial year revenue and owner race. Initial year revenues are bucketed into five groups: less than $100,000; $100,000-$249,999; $250,000-$499,999; $500,000-$749,999; and $750,000-$999,999. Bars represent the share of firms in the given initial revenue bucket and owner race that attain $1 million in revenues. Across all races, firms with lower initial revenues are less likely to attain $1 million in revenues, but within initial revenue buckets, Black-owned firms are consistently less likely to attain $1 million in revenue than Asian-, Hispanic-, and White-owned firms. Among firms with initial revenues less than $100,000, 2 percent of Asian-owned firms, 0.3 percent of Black-owned firms, 0.7 percent of Hispanic-owned firms, and 1.3 percent of White-owned firms attain $1 million in revenue. Among firms with initial revenues between $750,000 and $999,999, 51 percent of Asian-owned firms, 42 percent of Black-owned firms, 55 percent of Hispanic-owned firms, and 53 percent of White-owned firms reach $1 million in revenue.

In the bottom panel, subtitled “Owner gender,” firms are grouped by initial year revenue and owner gender. Initial year revenues are bucketed into five groups: less than $100,000; $100,000-$249,999; $250,000-$499,999; $500,000-$749,999; and $750,000-$999,999. Bars represent the share of firms in the given initial revenue bucket and owner gender that attain $1 million in revenues. Across both genders, firms with lower initial revenues are less likely to attain $1 million in revenues, but within initial revenue buckets, female-owned firms had consistently lower shares of reaching $1 million. Among firms with initial revenues less than $100,000, 0.6 percent of female-owned firms and 1.4 percent of male-owned firms attain $1 million in revenues. Among firms with initial revenues between $100,000 and $249,999, 2.8 percent of female-owned firms and 4.4 percent of male owned firms reach $1 million in revenue. Among firms with initial revenues between $250,000 and $499,999, 10 percent of female-owned firms and 13 percent of male-owned firms reach $1 million in revenue. Among firms with initial revenues between $500,000 and $749,999, 28 percent of female-owned firms and 31 percent of male-owned firms reach $1 million in revenue. Among firms with initial revenues between $750,000 and $999,999, 52 percent of both female-owned and male-owned firms reach $1 million in revenue. The chart note reads, “Firms with unknown race or gender or no classifiable majority ownership by race or gender are not shown in their respective charts. Source: JPMorgan Chase Institute.”

Acknowledgements

We thank our research teammate, Laura Wilcox, for her hard work and contribution to this research. We also thank Elizabeth Ellis, Alfonso Zenteno, Annabel Jouard, Stephen Harrington, and Kate Finnerty for their support. We are indebted to our internal partners and colleagues, who support delivery of our agenda in a myriad of ways, and acknowledge their contributions to each and all releases. We would like to acknowledge Jamie Dimon, CEO of JPMorgan Chase & Co., for his vision and leadership in establishing the Institute and enabling the ongoing research agenda. We remain deeply grateful to Tim Berry, Head of Corporate Responsibility, Heather Higginbottom, Head of Research, Policy & Insights, and others across the firm for the resources and support to pioneer a new approach to contribute to global economic analysis and insight.

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Suggested Citation

Wheat,Chris.Chan, Stacey. Tremper,Nicholas. 2024. “Scaling to $1 Million: How Small Businesses Fare by Owner Race and Gender.” JPMorgan Chase Institute https://www.jpmorganchase.com/institute/all-topics/business-growth-and-entrepreneurship/1-million-annual-revenues-as-a-small-business-milestone

Authors

Chris Wheat

Director of Business Research, JPMorganChase Institute

Stacey Chan

Inclusive Banking Research Lead

Nicholas Tremper

Senior Research Associate