Good Morning!

1. Feature: You’re Not Behind. You’re In Good Company. (3 min)

2. From the Archive:

   • Changing Registered Agents in Florida & Wyoming

   • How to Build a Customer Agreement That Works for You and Your Clients

3. Dear TCoL: Should I Make an S Election for my LLC?

Rest, reset, and prepare for the week ahead.

-TCoL

Missed our last feature article? The Women-Owned Advantage Explained

Building a business can sometimes be a worrisome slog. Worry not.

If you’re leading a ten-year-old business and concerned that you should be further ahead, take a step back. Many small businesses don’t scale in the way public companies do. The reality is that survival, steady growth, and managing cash flow are themselves achievements.

Below are four meaningful benchmarks, based on credible data, to help you assess where you stand, focus on what matters next, and set realistic goals.

Reaching $1 Million in Annual Revenue

Hitting $1M in revenue often feels like a breakthrough.

The JPMorgan Chase Institute (JPMCI) analyzed hundreds of thousands of small U.S. firms and found that only a small percentage reach $1M in annual revenue within their first five years. The likelihood depends heavily on first-year revenue. Firms that start higher grow faster; those that start modestly often take longer.

Takeaway for you: If your firm started with low revenue and you haven’t yet hit $1M, you aren’t an outlier. What counts is whether your year-to-year growth is trending upward and whether you’re building repeatable systems for the next stage.

Liquidity and Cash-Buffer Days

A universal “time to profitability” is hard to find because business models differ widely. However, JPMCI’s Cash is King report gives one of the best snapshots of small-business liquidity. It found that median businesses had enough cash to cover only about 27 days of typical outflows.

In another study, the same institution reported that 50% of small businesses operate with fewer than 15 cash-buffer days in case revenue stops.

Takeaway for you: If your business has fewer than 30 days of cash buffer, you are among many peers operating on thin cushion. If you have 60+ days, you’re way ahead. That cushion gives you strategic flexibility to invest, take risk, or survive disruption.

Revenue Tiers and Their Rarity

The U.S. Census Bureau’s Statistics of U.S. Businesses (SUSB) series doesn’t tell us how long it takes to reach revenue milestones, but it does tell us how many firms are in each revenue tier (for employer firms).

Takeaway for you: If your business is doing $2–3 million in annual revenue, look up how many U.S. firms exceed $5M or $10M in your industry. That helps you understand the challenge of moving up. Growth to the next tier usually means upgrading systems, talent, operations, and cash flow.

Longevity as a Benchmark

Mindset often focuses on growth, but survival itself is a valid achievement. According to the Bureau of Labor Statistics (BLS), only about 34.7% of business establishments born in March 2013 were still operating in March 2023.

Takeaway for you: If your business is ten years old, you’re already in a minority of firms that made the first decade. That endurance gives you credibility with customers, lenders and partners, along with a stronger base to drive growth.

Quick Reference Data Table

How You Can Use This Immediately

• Check your cash cushion. Calculate how many operating days your current cash and liquid assets could cover if revenue stopped. If under 30 days, make boosting that a short-term goal.

• Locate your revenue tier. Use your industry’s SUSB tabulations to see how many firms are above your annual revenue level. Use that to set realistic next-tier goals.

• Reflect on start momentum. If your first-year revenue was below $100k, you’ll probably take longer to scale than a business that launched at $500k+. That’s okay because steady compound growth beats unrealistic leaps.

• Celebrate survival. If your company is ten years old, you have survived many peers. Use that foundation to build credibility, invest in systems, and expand deliberately.

• Recalibrate growth goals. Instead of focusing on when you’ll hit $10M or $50M, ask: “What must change to move from ___ to ___ revenue next year?” That keeps growth manageable and strategic.

A Few Important Caveats

• These metrics show what is, not how long it takes. The “time to” reach a milestone (profitability, $5M revenue, etc.) is not publicly and reliably measured across all industries.

• Business models differ widely. A service firm, a franchise, or a retail shop each have different scale paths and cost structures. Use your data contextually.

• Some definitions vary. For example, the first revenue year in JPMCI’s $1M study may not align exactly with your founding date or accounting period.

• The SUSB revenue-tier data cover employer firms (those with paid employees) and receipts categories; non-employer firms are a different universe.

Sell, Measure, Improve, Repeat

If you feel behind, don’t measure your progress against public-company narratives or tech unicorn benchmarks. The most common path for small business owners is steady survival, managing cash flow tightly, and building systems that compound over time.

These benchmarks show that:

• Many firms don’t hit $1M in revenue quickly.

• Most operate with fewer than 30 days of cash buffer.

• More than two-thirds of new businesses don’t reach ten years.
  So if you’re still here, still growing, and still improving, then you’re doing exactly what most business owners do.
  

Use these benchmarks to chart your next move. Strengthen your cash cushion. Clarify your revenue tier. Push for measurable growth on realistic foundations.

Sources & Citations

JPMorgan Chase Institute. “Scaling to $1 Million: How Small Businesses Fare by Owner Race and Gender.” April 3, 2024.

JPMorgan Chase Institute. “Cash Is King: Flows, Balances, and Buffer Days.” September 2016.

JPMorgan Chase Institute. “Small Business Cash Liquidity in 25 Metro Areas.” April 2020.

U.S. Bureau of Labor Statistics. “34.7 percent of business establishments born in 2013 were still operating in 2023.” January 12, 2024.

U.S. Census Bureau. Statistics of U.S. Businesses (SUSB) – Annual Data Tables by Establishment Industry, 2022.

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Dear TCoL: Should I Make an S Election for my LLC?

Question: I own an LLC and can’t figure out if I should make the S Election to save on taxes. How would I go about figuring that out?

Answer: The analysis is net tax savings after deducting the added annual costs of making the S election.

Background

A single-member LLC is a disregarded entity. You report income on Schedule C, and all profit is subject to both income and self-employment tax.

Filing Form 2553 allows the IRS to treat your LLC as an S corporation for federal tax purposes, if it meets eligibility rules. The LLC itself does not change under state law. You become both owner and employee. You must pay yourself reasonable compensation as W-2 wages before any non-wage distributions. 

Those distributions are not subject to FICA or self-employment tax, but wages are.

How the Tax Savings Work

Self-employment tax is generally 15.3% on 92.35% of net earnings up to the Social Security wage base, plus 2.9% Medicare tax above that. High earners may owe an additional 0.9% Medicare tax.

If your LLC earns $120,000 and a fair salary for your role is $70,000, the remaining $50,000 could avoid the self-employment portion. The possible savings are around $7,650, though exact numbers vary with the wage base and the 92.35% factor. Your actual savings will differ.

When It Makes Sense

Many advisors find the S election begins to make sense when your consistent net profit reaches the mid-five figures or higher. This is a guideline, not an IRS threshold. The math must take payroll setup, quarterly employment returns, and accounting costs into consideration.. 

You will run payroll, issue yourself a W-2, and deposit and report FICA and withholding like any employer.

How to Figure It Out

Start with your prior year’s net profit. Subtract a fair salary for your work. Multiply what remains by 15.3%. That is your potential tax savings.

If those savings well-exceed the cost of tax preparation, payroll, and compliance, the election is probably worth it.

Ask your accountant to model both scenarios, Schedule C vs. S-corp., using your real numbers, including the wage base and 92.35% factor. This is arithmetic, not guesswork.

How to Make the Election

File Form 2553 within two months and 15 days after the start of the tax year you want S status. If you miss the deadline, you may qualify for late-election relief under Rev. Proc. 2013-30. Once approved, file Form 1120-S each year and give shareholders Schedule K-1s.

Bottom line: An 1120-S tax return and related payroll accounting and returns create added annual expenses. So, be sure to also factor those costs into your decision.

The S election can turn tax drag into tax efficiency, but only if the savings beat your added costs.

Have an interesting business question and need a free bit of advice? Send your question to [email protected]. No confidential info, please!