Every year, National Small Business Week (established in 1963) recognizes the critical contributions of America's entrepreneurs and small business owners. National Small Business Week runs from April 30 through May 6, 2017, and the theme this year is #DreamSmallBiz. There are good reasons for this worthy recognition. The Small Business Administration's (SBA) Office of Advocacy has some impressive information about small businesses nationwide, and they show the contributions of small business to the U.S. economy.
About Small Business
According to the SBA, there are 29.6 million small businesses in the U.S. They make up 99.9% of all businesses in the country. Small businesses usually are defined as those with fewer than 500 employees.
Ownership in these companies reflects diversity in the U.S., with 8 million businesses owned by minorities (African-American, Asian, Hawaiian/Pacific Islander, Hispanic, Native American/Alaskan, or other ethnicity).
Small businesses are a source of jobs. They've generated 64% of net new jobs over the past 14 years and created 1.4 million jobs in 2014 alone.
Once small businesses create jobs, they continue to employ a considerable number of workers. In 2014 (the latest year for statistics), small businesses employed 57.9 million workers. This accounted for 47.8% of the private workforce. Most of those employed by small businesses are in companies with fewer than 100 employees. In 20 states, more than half of employees work for small businesses, and in two states—Montana (66%) and Wyoming (62%)—more 60% work for small businesses.
In some industries, the percentage of employees who work for small businesses is even higher than 47.8%. For example, the small business employment share in construction is 83% and in accommodation and food services it's 60%. Other industries heavily represented by small businesses include:
- Agriculture, forestry, and fishing and hunting (86%)
- Arts, entertainment, and recreation (62%)
- Professional, scientific, and technical services (58%)
- Real estate/rental/leasing (69%)
- Wholesale trade (58%)
Of the nearly 30 million small businesses in the U.S., the vast majority is nonemployee; owners are the only people who work for their company. Previous statistics showed that 23 million small businesses had no paid employees (statistics for 2015 will be released in May 2017); this group of businesses effectively created jobs for their owners.
Small businesses aren't only the dry cleaners or pizzeria in the neighborhood. They also make significant contributions to innovations. For example, they are awarded 8% of all U.S. patents. That percentage grows to 14% for green technology patents. And 80% of prolific inventors (those with 5 or more recent green patents) were previously employed by a large company, or government or university lab.
International trade accounts for 30% of the U.S. economy. It's common to think about exporting in terms of multinational corporations. The reality is that of all the exporters since 2006, 97.7% are small businesses. In 2013, they generated 33.6% of the $1.4 trillion in exports.
Small businesses add significantly to the U.S. economy, accounting for more than half of nonfarm private gross domestic product (GDP). Even nonemployee businesses bring in significant revenue ($1.1 trillion in 2013). Bottom line: The importance of small businesses can't be ignored. Let's celebrate it!
About the Author
Barbara Weltman is a tax and business attorney and the author of J.K. Lasser's Tax Deductions for Small Business as well as 25 other small business books. She has been named a Small Business Influencer from 2011 to 2013.