- » How many small businesses are there in the United States?
- » Can I get comparable state and/or local figures?
- » How many Americans are trying to start businesses?
- » How many jobs does small business provide in the United States?
- » How many net new jobs does small business provide?
- » What share of GDP (Gross Domestic Product) does small business produce?
- » In what industries are small businesses represented?
- » How do small-business owners contribute to their community?
- » Why is small business important?
- » Where can I find additional detailed statistical information about small business?
» How many small businesses are there in the United States?
There are three generally correct, though very different, answers. But it is important to distinguish between businesses and business owners. Because many businesses have more than one owner and many owners have more than one business, the two are not necessarily identical. However, we often assume they are.
29 million – There were almost 29 million federal income tax returns filed in 2004 with business income on them. (Source: Statistics of Income (SOI), Internal Revenue Service.) Due to tax filing requirements, that number includes both individuals and businesses. The very largest and the very smallest, including those with sales of just a few dollars, are counted.
Or, 15.75 million – Self-employment, i.e., operating one’s own business regardless of its legal form, is the principal occupation in the year for nearly 16 million people (2005). (Source: Office of Advocacy, U.S. Small Business Administration from data produced by Bureau of the Census.) This figure technically measures the number of people working in their own businesses, not businesses per se.
Or, almost 6 million – Nearly 6 million businesses in the United States employ people other than their owners at some point during the year. (Source: Office of Advocacy, U.S. Small Business Administration.)
Ninety-nine (99) percent of employing businesses are “small” under prevailing definitions. Another way to look at it: 60 percent of all businesses that employ people other than the owners have 1 to 4 employees; another 20 percent have 5 to 9 employees; and yet another 10 percent have 10 to 19 employees. Businesses employing fewer than 100 people (excluding the self-employed who employ no one but themselves) constitute 96 percent of all employers (Source: calculations by NFIB Research Foundation from data published by the Office of Advocacy, U.S. Small Business Administration.)
» Can I get comparable state and/or local figures?
State business population data can be found in the State Economic Profiles produced by the Office of Advocacy at the U.S. Small Business Administration. The Web address for these profiles at this writing is: www.sba.gov/advo/research/profiles. The Bureau of the Census produces vastly more comprehensive sub-national data, e.g., County Business Patterns, but they are more difficult to use. The Web address to enter these sub-national data files at this writing is: www.census.gov/econ/www/.
» How many Americans are trying to start businesses?
About one in 10 adult (18-64 years) Americans are currently taking active steps to create a business. Virtually all are doing so because they want to (or see an opportunity to do so) rather than because they have no alternative economic opportunity. This puts the United States at the top of the industrialized world (second to Australia in 2006), a position Americans traditionally occupy. The reason that this number is important is the direct relationship between the number of people trying to start a business and national economic growth (Source: Neils Bosma and Rebecca Harding, Global Entrepreneurship Monitor, 2006, Babson College, 2006.)
» How many jobs does small business provide in the United States?
Small business provides about 55 percent of all jobs in the private sector. That percent counts small-business owners working in their firms as holding “jobs” in small businesses. Remember, these are jobs, not people (employees). People can hold more than one job, sometimes in a large business and a small business simultaneously or in a private for-profit business and the public sector simultaneously. That makes a more refined number impossible to calculate from the data available (Source: NFIB Research Foundation calculations from data produced by the U.S. Bureau of Labor Statistics, the U.S. Bureau of the Census, and the U.S. Small Business Administration.)
» How many net new jobs does small business provide?
Small business has created about two of every three net new jobs in the United States since at least the early 1970s. The number is NOT the same every year. The proportion changes with the business cycle. Large businesses tend to have much larger swings in employment over the business cycle than smaller firms. Therefore, during economic expansions (good times), small business’s share of net new jobs falls relatively; during economically difficult times, small business’s share of net new jobs grows relatively.
The important point is not the number of jobs small businesses creates. It is the number of net new jobs. “Net new jobs” is the number of jobs created minus the number of jobs lost.
» What share of GDP (Gross Domestic Product) does small business produce?
American small business produces roughly one-half of the privately generated GDP in the country, a figure unchanged since the 1970s (Source: Joel Popkin and Company, Small Business Share of Economic Growth, 2001, Office of Advocacy, U.S. Small Business Administration.) That makes American small business the world’s third largest economy, trailing only the United States as a whole and Japan.
» In what industries are small businesses represented?
Small businesses are represented in virtually every industry. However, the following are the most common among those that employ people other than their owners: retail; construction; professional, scientific, and technical services; other services (generally personal services like barber shops); health care and social assistance; accommodations and food service; wholesale; administrative support and waste management services; and, manufacturing. The following are the most common among those that do NOT employ anyone: professional, scientific, and technical services; other services (generally personal services like barber shops); construction; retail; real estate, leasing and rental; health care and social assistance; administrative support and waste management services; arts, entertainment and recreation; and, transportation and warehousing. The biggest change in the last 25 years has been the increase in service businesses and the decrease in retail businesses.
» How do small-business owners contribute to their community?
Probably the best source of information on the subject is the National Small Business Poll issue titled “Contributions to Community” which can be found in this data base. As a preview, 91 percent of small employers contributed during the last year through volunteering, in-kind contributions, direct cash donations, or some combination of them.
» Why is small business important?
Small business in the United States serves many purposes. Among them:
1. it supplies goods and services that customers demand,
2. it is a major innovator; a laboratory of economic experiment,
3. it generates the lion’s share of net new jobs,
4. it stabilizes economic cycles through relatively small employment swings,
5. its owners provide neighborhood and community leadership,
6. it is an avenue of economic opportunity,
7. it enhances pluralism in economic decision-making, and
8. it offers personal utility, i.e., personal satisfaction and happiness to its owners.
(Source: compiled by William J. Dennis, Jr., NFIB Research Foundation.)
» Where can I find additional detailed statistical information about small business?
There are few places that detailed statistical material about American small business exists. The NFIB Research Foundation’s National Small Business Poll and its Small Business Economic Trends are two important sources. The former, which is contained in this data base, offers a wide array of small employer specific data on a variety of subjects. The latter is unique, the only one of its kind in the world. It provides current information on small business economic activity and has done so for over 30 years.
The Office of Advocacy at the U.S. Small Business Administration, the U.S. Bureau of the Labor Statistics, U.S. Bureau of the Census, and the Board of Governors of the Federal Reserve System are also important sources of small business or business size specific statistical and research material. The OECD (Organization for Economic Cooperation and Development) and the World Bank provide pertinent statistical information from time-to-time, usually on an internationally comparative basis. Subject-specific statistical material can sometimes be found in private organizations focused on particular topics. For example, the Kaiser Family Foundation produces an excellent annual survey of employer-sponsored health insurance and breaks down the data by firm size.