FreshBooks’ in-depth analysis highlights the key factors driving small business success across the United States (U.S.). From evolving market trends to financial challenges, it uncovers the most important elements shaping the future of entrepreneurship.

Introduction

FreshBooks’ 2024 State of U.S. Small Businesses report examines why Americans start their businesses, what motivates them, how satisfied they are with self-employment, and the challenges they face as small business owners.

The in-depth view of the 2024 small business landscape helps would-be entrepreneurs prepare for their journey by analyzing the mindset and perspectives of self-employed individuals and small business owners.

“At FreshBooks, we understand that small businesses are the backbone of the U.S. economy. This report highlights trends and generational differences when it comes to the motivations, challenges, and successes of small businesses and entrepreneurs today. Our mission is to make life easier for small businesses by providing them with the tools and insights they need to thrive. FreshBooks is committed to the changing demographics and preferences of all small business owners, so they can build a brighter future”

– Faye Pang, FreshBooks Chief Growth Officer

Key Takeaways

• Freedom and Flexibility: 8 in 10 business owners started their businesses to gain the freedom and flexibility of self-employment, with younger generations particularly valuing work-life balance.
• High Satisfaction Rates: 73% of small business owners express positivity about their choice, with Gen Z leading in satisfaction at 56%.
• Happiness in Work: Over a third (34%) of entrepreneurs prioritize daily happiness, while 27% are motivated by the potential to increase their income.
• Health and Flexibility Matters: More than half (53%) of Gen Z report mental health concerns with traditional jobs, while 39% value flexible schedules.
• Financial Stability and Challenges: Nearly half (48%) of small businesses are financially stable, though only 36% saw improvement last year. Major challenges in 2024 include finding new customers and managing costs.

Overview

Why Americans start their businesses

Entrepreneurs are motivated to start their businesses by two key factors: personal passion and necessity.  For most (79%), the decision was fueled by a personal desire for independence or fulfillment, while 21% were driven by external circumstances such as financial or job-related needs. Employment type also impacts why people start their own businesses or begin to work for themselves. More small business owners (84%) than self-employed individuals (70%) began their businesses because they wanted to, rather than out of necessity. 

Career control and work-life balance stand out as leading motivators for beginning a business, with half of respondents sharing their desire for autonomy and balance in their professional lives. Financial necessity also plays a major role, as 41% cited income needs as a driving factor. Additionally, an entrepreneurial spirit drove 35% of respondents, who felt a strong pull to create and grow something independently.

Employment type isn’t the only differentiating factor behind the motivations of beginning a business. Generational and gender perspectives significantly shape the decision to pursue self-employment or small business ownership. Career control and income needs are critical drivers for Gen Z and Millennials, highlighting a growing focus on financial independence and flexible work compared to older generations. Meanwhile, women (30%) are nearly twice as likely as men (17%) to cite family-related reasons as their primary motivation for starting a business.

Autonomy and wellness: Key drivers for self-employment

Freedom and well-being are important reasons why many people choose self-employment. Mental health concerns play a significant role, with 21% of respondents saying traditional jobs had a negative impact on their mental health. This issue is even more pronounced among Gen Z, where 53% reported similar feelings. This indicates a growing focus on well-being in the workplace.

The desire for better work-life balance is another key factor in the move toward self-employment. For example, 39% of Gen Z mentioned flexible schedules as their main reason for wanting more freedom, while 35% of Boomers valued the chance to be their own boss.

Beginning a business or venturing out on your own isn’t without significant obstacles. The two major challenges small business owners faced in 2024 include finding new customers (46%) and managing their business costs (41%). 

In 2024, younger and older business owners struggled with customer acquisition more than anything else, despite concerns about the current economic environment and inflation. Of these small business owners, 27% reported rising interest rates actually had only a minimal impact on their business.

Balancing profitability and growth

Balancing profitability with growth remains a challenge for many businesses. While 48% reported being in a favorable financial position, only 36% saw improvement over the past year, and 29% voiced concerns about their future economic outlook. Business goals now focus on boosting profitability and efficiency, with 39% aiming to increase revenue without adding to their workforce.

Despite 42% of business owners believing the economy is in or near a recession, nearly half have achieved profitability, demonstrating resilience and a focus on sustainable growth. 

Reaching profitability in this economy shows that building and maintaining a sustainable, profitable, growing business is possible!

Satisfaction level of small business owners

For many, beginning a business or becoming self-employed can be a dream come true. The satisfaction level of most small business owners is high, with at least two-thirds of respondents saying they have some degree of satisfaction. In contrast, nearly 40% of respondents shared they are very satisfied with their work.

Satisfaction levels vary among different demographics and employment types, with 40% of small business owners reporting they’re “very satisfied” compared to 32% of the self-employed. Among the different age groups, Gen Z reported the highest satisfaction at 56% positive and 38% “very satisfied,” while Millennials, Gen X, and Boomers followed closely.

On a pursuit of happiness and financial independence in small businesses

Pursuing happiness and financial independence is a common goal among small business owners, though priorities vary by generation. Day-to-day happiness was a key motivator for 34% of respondents, with Gen Z leading at 41% and Boomers close behind at 38%. 

Financial independence also played a role, as 27% of respondents aimed to earn more than they would in traditional employment. Consistent income was a higher priority for younger generations, with 33% of Gen Z and 27% of Millennials emphasizing it. At the same time, Boomers tended to view self-employment as a path to increased earnings.

Assessing family engagement and financial optimism

Family involvement and financial outlook play key roles in starting a business. Many respondents (59%) reported that their families were not involved in their businesses. However, spouses or partners were more likely to participate in small businesses, with 28% saying their partner was involved compared to 18% of the self-employed. Among those with family involvement, more men (23%) than women (11%) said their family helped with accounting and financial tasks.

People also had mixed feelings about the economy, with 49% expressing some level of pessimism. Optimism varied by generation: only 19% of Gen Z felt positive about the future, while 26% of millennials, 31% of Gen X and 30% of Boomers were optimistic. These factors show people’s challenges and considerations when starting and maintaining their businesses.

Closing thoughts on the landscape of small businesses in 2024

U.S. entrepreneurs embrace autonomy, wellness, and growth

The 2024 State of U.S. Small Business Report highlights that freedom, financial control, and a focus on personal well-being are top priorities for U.S. small business owners. While younger generations value work-life balance more, they also found it more challenging to achieve. Gen Z (34%) and Millennials (35%) share that trying to maintain their work-life balance was a greater challenge in 2024 than older generations of Gen X (23%) and Boomers (22%).

Despite challenges like rising costs and customer acquisition hurdles, nearly half of small businesses are financially stable. Many are approaching growth strategically, aiming to boost profits while maintaining lean teams.

Generational differences also show changing goals: Gen Z and Millennials prioritize autonomy and consistent income, whereas older generations focus more on boosting earnings. These insights reflect an entrepreneurial landscape where satisfaction, resilience, and innovation guide the future of small business success across the country.

Methodology

FreshBooks designed and conducted an online survey of approximately 1,000 self-employed individuals, freelancers, and small business owners from the United States. Participants were sourced through an online panel representing a diverse range of small businesses across various industries, revenue levels, and employment sizes. The study’s margin of error is +/- 3.2% at 95% confidence.