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How many small businesses in the us

how many small businesses in the us

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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 . Small firms:

  • Represent 99.7 percent of all employer firms.

  • 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).

  • Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known

    export value in FY 2006.

    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, see ( ).

  • 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 in 2005.

    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 Administration. 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 ).

    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 considerably.

    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 ( ).

    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 .

    Category: Personal Finance

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