Average Small Business Can Survive 27 Days With No Income

By:
Chris Gaetano
Published Date:
Sep 21, 2016
Cracks

A study by JPMorgan has found that your average American small business has about 27 days worth of reserve cash on hand to cover expenses if inflows suddenly stopped, according to Bloomberg. This was the conclusion reached after analyzing 470 million transactions by 570,000 small businesses last year. While 27 days is the average, the data showed great variability from this figure depending on the type of business: restaurants, for instance, actually had an average of just 16 days of cash reserve, while real estate companies had about 47. 

The study also found that many small businesses operate on razor-thin margins. Median daily net income for these types of companies is just $7, again with variability above and below based on industry. Businesses categorized as "personal services" had a daily margin of $3, while restaurants--despite having few cash reserves as mentioned earlier--weighed in at $11.

JPMorgan said this data indicates that the business environment seems to be made up mostly of small operators living month to month. These small businesses, though, add up in terms of their economic significance: Bloomberg noted that they account for 50 percent of GDP and 50 percent of new job creation. 

Click here to see more of the latest news from the NYSSCPA.