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 specified by the U.S. Small Business Administration (SBA) Office of Size Standards. These standards vary by industry; see www.sba.gov/content/small-business-size-standards

How important are small businesses to the U.S. economy?

Small firms

  • Represent 99.9 percent of all employer firms.
  • 63.3 percent of net new private-sector jobs.
  • 48.5 percent of private-sector employment.
  • 41.2 percent of private-sector payroll.
  • 46 percent of private-sector output.
  • 37 percent of high-tech employment.
  • 97.7 percent of firms exporting goods.
  • 33.6 percent of exporting value.

Source: U.S. Dept. of Commerce, Census Bureau and Intl. Trade Admin.; Advocacy-funded research by Kathryn Kobe, (www.sba.gov/advo/research/rs299tot.pdf) and CHI Research, (www.sba.gov/advo/research/rs225tot.pdf); U.S. Dept. of Labor, Bureau of Labor Statistics.

How many small businesses are there?

In 2013, there were 28.8 million small businesses in the United States,  and 18,600 firms with 500 employees or more, according to Office of Advocacy estimates.

  • Eighty percent, or 23 million had no employees (termed "nonemployers")
  • Twenty percent, or 5.8 million, had paid employees.

The number of small employers has increased after a decline during the recession, while the number of non-employers has gradually increased since 1997.

Source: Office of Advocacy estimates based on data from the U.S. Dept. of Commerce, Census Bureau, and trends from the U.S. Dept. of Labor, Bureau of Labor Statistics, Business Employment Dynamics.

How many businesses open and close each year?

About 10 to 12 percent of firms with employees open each year and about 10 to 12 percent close (see below).

In 2013, there were about 406,000 startups (firms less than one year old) and about 401,000 firm closures. The share of businesses that were startups has hovered around 8% since the recession, although it slightly increased from 2010 to 2013.

 
Starts and Closures of Employer Firms, 2010–2013
Category 2010 2011 2012 2013
Births 387,976 401,156 411,252 406,353
Deaths 424,610 413,882 375,192 400,687
Notes: Source: U.S. Dept. of Commerce, Census Bureau; Administrative Office of the U.S. Courts; U.S. Dept. of Labor, Business Employment Dynamics (BED). Estimates based on Census data and BED trends.

 

What is small businesses' share of net new jobs?

Small firms accounted for 63.3 percent of the net new jobs created between 1993 and mid-2013 (or 14.3 million of the 22.9 million net new jobs). Since the end of the recession (from mid-2009 to mid-2013), small firms accounted for 60 percent of the net new jobs. Small firms in the 20-499 employee category led job creation.  see www.sba.gov/advocacy/10871.
Source: U.S. Bureau of the Census.

What is the survival rate for new businesses?

79.9% of establishments started in 2014 survived until 2015, the highest share since 2005. From 2004 to 2014, an average of 78.5% of new establishments survived one year.

  • About half of all establishments survive five years or longer. In the past decade, this ranged from a low of 45.4% for establishments started in 2006, and a high of 51.4% for those started in 2011.
  • About one-third of establishments survive 10 years or longer.

Source: U.S. Dept. of Commerce, Census Bureau, Business Dynamics Statistics; U.S. Dept. of Labor, Bureau of Labor Statistics, BED.

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