Small Business Statistics (1)
COURTESY OF THE UNITED STATES SMALL BUSINESS ADMINISTRATION
In 2003, there were approximately 23.7 million businesses in the United States, according to Office of Advocacy estimates. The Internal Revenue Service (IRS) estimates there were 27.0 million business tax returns in 2003; however, this number may overestimate the number of firms, as one business can operate more than one taxable entity. IRS estimates the number of sole proprietorships (roughly equivalent to nonemployers) increased by 2.4 percent in 2002 and by 1.9 percent in 2003. Census data show there were 5.7 million firms with employees and 17.0 million without employees in 2001. Applying the sole proprietorship growth rates to the nonemployer figures and similar Department of Labor growth rates to the employer figures produces the 23.7 million figure. Small firms with less than 500 employees represent 99.7 percent of the 23.7 million businesses.
Estimates for businesses with employees indicate there were 572,900 new firms and 584,800 closures (both about 10 percent of the total) in 2003.
Starts and Closures of Employer Firms, 1995–2003
|
Category |
|
|
|
|
|
|
New Firms |
594,369 |
574,300 |
585,140 |
589,700e |
572,900e |
|
Firm Closures |
497,246 |
542,831 |
553,291 |
569,000e |
554,800e |
|
Bankruptcies |
51,959 |
35,472 |
40,099 |
38,500 |
35,037 |
e = Estimate using percentage changes in similar data provided by the U.S. Department of Labor, Employment and Training Administration
Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; U.S. Department of Labor, Employment and Training Administration.
In 2000-2001 (according to the most recent data), small businesses created all of the net new jobs in the U.S. Firms with less than 500 employees saw a net increase in employment of 1,150,875; however, large business employment decreased on net by 150,905. Overall net employment increased 999,970. The small business share varies from year to year and reflects economic trends. Over the decade of the 1990s, small business net job creation fluctuated between 60 and 80 percent. Having small businesses account for all of the net new jobs is not unique to 2000-2001. During the last economic downturn in the early 1990s, a similar result occurred. During an economic downturn in the early 1990’s, a similar result occurred.
Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; Endogenous Growth and Entrepreneurial Activites.
The small business share of employment remains around 50 percent. Although small firms create more than half—and sometimes all—of the net new jobs, some firms will become large firms as new jobs are created. Of 115.1 million nonfarm private sector workers in 2001, small firms with fewer than 500 workers employed 57.4 million and large firms, 57.7 million. Smaller firms with fewer than 100 employees employed 41.0 million.
Two-thirds of new employer firms survive at least two years, and about half survive at least four years. Owners of about one-third of the firms that closed said their firm was successful at closure. Major factors in a firm’s remaining open include an ample supply of capital, the fact that a firm is large enough to have employees, the owner’s education level, and the owner’s reason for starting the firm in the first place, such as freedom for family life or wanting to be one’s own boss. Business survival also varies by industry and demographics. The industry with the highest 1992–1996 survival rate for firms owned by white non-Hispanics was oil and gas extraction (82 percent survival rate over the four-year period). African Americans were most successful in legal services (79 percent), and Hispanic and Asian Americans in health services (66 percent and 76 percent, respectively).
Sources: Business Success: Factors Leading to Surviving and Closing Successfully by Brian Headd, Center for Economic Studies, U.S. Bureau of the Census, Working Paper #CES-WP-01-01, January 2001; Advocacy-funded research by Richard J. Boden (Research Summary #204)
About 82.5 percent of small firms used some form of credit in 1998. Small firms use many different sources of capital, including their own savings, loans from family and friends, and business loans from financial institutions. Credit cards, credit lines, and vehicle loans are the most often used types of credit. Commercial banks are the leading suppliers of credit, followed by owners and finance companies. Data from the Federal Reserve Board Survey of Small Businesses Finances, 2003 are currently being prepared.
Small Firms using Financial Services, 1998
(Percent reporting use of various types of credit)
| Credit Type | |||
| Any Credit | 82.5% | 78.2% | 76.9% |
| Traditional Credit Types | 55.0 | 46.1 | 49.0 |
| Business Credit Cards | 34.1 | 28.8 | 28.6 |
| Personal Credit Cards | 46.0 | 47.5 | 45.5 |
Source: Tabulation from Survey of Small Business Finances, 1998, from the Federal Reserve Board.
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 specified by the U.S.Small Business Administration (SBA) Office of Size Standards. These standards vary by industry; see http://www.sba.gov/size.
Small firms:
Represent 99.7 percent of all employers.
Employ half of all private sector employees.
Pay 44.3 percent of total U.S. private payroll.
Generate 60 to 80 percent of net new jobs annually over the last decade.
Create more than 50 percent of nonfarm private gross domestic product (GDP).
Supplied over 23 percent of the total value of federal prime contracts in FY 2003.
Produce 13 to 14 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.
Are employers of 39 percent of high tech workers (such as scientists, engineers, and computer workers ) .
Are 53 percent home-based and 3 percent franchises.
Made up 97 percent of all identified exporters and produced 29 percent of the known export value in FY 2001.
Sources: U.S. Bureau of the Census; Advocacy-funded research by Joel Popkin and Company (Research Summary #211); Federal Procurement Data System; Advocacy-funded research by CHI Research, Inc. (Research Summary #225); Bureau of Labor Statistics, Current Population Survey; U.S. Department of Commerce, International Trade Administration.
