Small Business in the USA - Statistics
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| 1. What
is a small business?
What is a small business?
The Office of Advocacy defines a small business for
research purposes as an independent business having
fewer than 500 employees. Firms wishing to be designated
small businesses for government programs such as contracting
must meet size standards speci?ed by the U.S. Small
Business Administra- tion (SBA) Office of Size Standards.
These standards vary by industry; see www.sba.gov/size.
| 2. How
important are small businesses to the U.S. economy?
- Represent 99.7 percent of all employer firms.
- Employ about half of all private sector employees.
- Pay nearly 45 percent of total U.S. private payroll.
- Have generated 60 to 80 percent of net new jobs
annually over the last decade.
- Create more than half of nonfarm private gross
domestic product (GDP).
- Hire 40 percent of high tech workers (such as
scientists, engineers, and computer
- Are 52 percent home-based and 2 percent franchises.
- Made up 97.3 percent of all identified exporters
and produced 28.9 percent of the known
export value in FY 2006.
- Produce 13 times more patents per employee than
large patenting firms; these patents are twice as
likely as large firm patents to be among the one
percent most cited.
Source: U.S. Dept. of Commerce,
Bureau of the Census and International Trade Administration;
Advocacy-funded research by Kathryn Kobe, 2007
and CHI Research, 2003 (www.sba.gov/advo/research/rs225tot.pdf);
Federal Procurement Data System; U.S. Dept. of
Labor, Bureau of Labor Statistics.
| 3. How
many new jobs do small firms create?
Since the mid-1990s, small businesses have
created 60 to 80 percent of the net new jobs.
In the most recent year with data (2005), employer
firms with fewer than 500 employees created 979,102
net new jobs, or 78.9 percent. Meanwhile, large
firms with 500 or more employees added 262,326 net
new jobs or 21.1 percent. For an in-depth look at
employment dynamics by firm size from 1989 to 2005,
| 4. What
is small firms’ share of employment?
Small businesses employ about half of U.S.
workers. Of 116.3 million nonfarm private
sector workers in 2005, small firms with fewer than
500 workers employed 58.6 million and large firms
employed 57.7 million. Firms with fewer than 20
employees employed 21.3 million. While small firms
create 60 to 80 percent of net new jobs, their share
of employment remains steady since some firms grow
into large firms as they create new jobs.
Source: U.S. Dept. of Commerce, Bureau of Census.
| 5. How
many small businesses are there?
In 2007, there were 27.2 million businesses
in the United States, according to Office of Advocacy
estimates. Census data show that there
were 6.0 million firms with employees and 20.4 million
without employees in 2005. Small firms with fewer
than 500 employees represent 99.9 percent of the
27.2 million businesses (including both employers
and nonem- ployers), as the most recent data show
there were slightly more than 17,000 large businesses
Source: Office of Advocacy estimates based on data
from the U.S. Dept. of Commerce, Bureau of the Census,
and U.S. Dept. of Labor, Employment and Training
| 6. How
many businesses open and close each year?
The number of nonemployer firms has risen steadily
in this decade, from 16.5 million in 2000 to an
estimated 21.1 million in 2007. An estimated 637,100
new employer firms began operations in 2007 and
560,300 firms closed that year.
e = Advocacy estimate. For a discussion of methodology,
see Brian Headd, 2005 www.sba.gov/advo/research/rs258tot.pdf).
Source: U.S. Dept. of Commerce, Bureau of the Census;
Administrative Office of the U.S. Courts; U.S. Dept.
of Labor, Employment and Training Administration.
| 7. What is the survival rate for new firms?
Two-thirds of new employer establishments
survive at least two years, 44 percent survive at
least four years, and 31 percent survive at least
seven years, according to a recent study.
These results were constant for different in- dustries.
Firms that began in the second quarter of 1998 were
tracked for the next 28 quarters to determine their
survival rate. Of special interest, the research
found that businesses that survive four years have
a better chance of surviving long- term. After the
fourth year, the rate of firm closings declines
Earlier research has found that the major factors
in a firm’s survivability include an ample supply
of capital, being large enough to have employees,
the owner’s education level, and the owner’s reason
for starting the firm.
Source: “Business Employment Dynamics Data: Survival
and Longevity, II,” by Amy E. Knaup and Merissa
C. Piazza, Monthly Labor Review, vol. 30,
no. 9 (Sept. 2007), pp. 3-10; “Redefining Business
Success: Distinguishing Between Closure and Failure”
by Brian Headd, Small Business Economics,
vol. 21, no. 1 (August 2003), pp. 51-61.
| 8. How
are small businesses financed?
Commercial banks and other depository
institutions are the largest lenders of debt capital
to small businesses. They accounted for
almost 65 percent of total traditional credit to
small businesses in 2003. (This includes credit
lines and loans for nonresidential mortgages, vehicles,
equipment, and leases.) Credit cards account for
much of the growth in small business lending over
the past few years. For more information, see Advocacy’s
annual publication, Small Business Lending in
the United States (www.sba.gov/advo/research/lending.html).
| 9. How
do regulations affect small firms?
Very small firms with fewer than 20 employees
annually spend 45 percent more per employee than
larger firms to comply with federal regulations.
These very small firms spend four and a
half times as much per employee to comply with environmental
regulations and 67 percent more per employee on
tax compliance than their larger counterparts. For
data broken out by industry, see www.sba.gov/advo/re-search/rs264tot.pdf.
Source: The Impact of Federal Regulations
on Small Firms, an Advocacy- funded study by
W. Mark Crain, 2005 (www.sba.gov/advo/research/rs264tot.pdf).
| 10. Whom
do I contact about regulations?
To submit comments on proposed regulations,
send email to firstname.lastname@example.org
or visit Advocacy’s regulatory alerts page
To inquire about unfair regulatory enforcement,
contact SBA’s Of?ce of the Ombudsman at email@example.com.
| 11. What
is the role of women, minority, and veteran entrepreneurs?
Of the 23 million nonfarm businesses in 2002, women
owned 6.5 million businesses. These firms generated
$940.8 billion in revenues, employed 7.1 million workers,
and had $173.7 billion in payroll. In addition, another
2.7 million firms were owned equally by both women
and men; these firms added another $731.4 billion
in revenues and employed another 5.7 million workers.
In 2002, minorities owned 4.1 million firms that
generated $694 billion in revenues and employed
4.8 million people. Hispanic Americans owned 6.6
percent of all U.S. businesses; African Americans,
5 percent; Asian Americans, 4.6 percent; American
Indians or Alaska Natives, 0.8 percent; and Native
Hawaiian or other Pacific Islanders, 0.1 percent.
Male veterans’ self-employment rates were higher
than those of non-veterans from 1979 to 2004. The
rate was 13.7 percent in 2003, compared to 12.2
percent for non-veterans. According to a study on
veteran business ownership, about 22 percent of
veterans in the U.S. household population were either
purchasing or starting a new business or considering
purchasing or starting one in 2004, and almost 72
percent of these new veteran entrepreneurs planned
to employ at least one person at the outset of their
Source: U.S. Dept. of Commerce,
Bureau of the Census, Survey of Business Owners;
Office of Advocacy: Women in Business (www.sba.gov/advo/research/rs280.pdf)
and Minorities in Business (www.sba.gov/advo/research/rs298.pdf);
Advocacy-funded research by Robert Fairlie, 2004
and Waldman Associates, 2004 (www.sba.
| 12. What
research exists on the cost of health insurance?
For many years, the cost and availability of health
insurance has been a top small business concern.
Aspects of insurance that drive small business concerns
are premium increases and administrative costs.
Advocacy research shows that: (1) insurers of small
health plans have higher administrative expenses
than those that insure larger group plans, and (2)
employees at small firms are less likely to have
coverage than the employees of larger entities.
These results are confirmed by the Kaiser Family
Foundation, which also finds that firm size is an
important indicator of whether a firm offers health
insurance. This survey shows that about half of
businesses with fewer than 10 workers offer health
benefits to their employees. The ratio grows to
about three-fourths for firms with 10–24 employees,
to almost 90 percent for firms with 25–49 employees,
and to 98 percent for firms with 200 employees or
more. Two-thirds of workers in firms of all sizes
take health insurance coverage if offered..
Source: National Federation of Independent
Business; Kaiser Family Foundation; Advocacy-funded
research by Rose C. Chu and Gordon R. Trapnell,
Joel Popkin and Com-pany, 2005 (www.sba.gov/advo/research/rs262tot.pdf);
and Econometrica, Inc., 2007 (www.sba.gov/advo/research/rs295tot.pdf).
| 13. How
can I get more information?
For more detailed information, visit www.sba.gov/advo.
Sign up at http://web.sba.gov/list
for email delivery of Advocacy’s
newsletter, press, regulatory news, and research.
For RSS feeds, visit www.sba.gov/advo/rsslibrary.html.
Economic research by the Office of Advocacy can
be found at www.sba.gov/advo/research.
Specific points of interest include:
| 14. Is
there a PDF version of the FAQ?
Yes. The pdf version is located at: http://www.sba.gov/advo/stats/sbfaq.pdf
Published - November 2008
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