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.
  • 99.7 percent of firms with paid employees.
  • 97.6 percent of exporting firms (287,835 small exporters)
  • 32.9 percent of known export value ($440 billion out of $1.3 trillion)
  • 47.5 percent of private sector employees (59 million of 124 million)
  • 40.8 percent of private sector payroll.

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 2015, there were 30.2 million small businesses in the United States,  and 19,464 firms with 500 employees or more, according to Office of Advocacy estimates.

  • Eighty percent, or 24.3 million had no employees (termed "nonemployers")
  • Twenty percent, or 5.9 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 2015, there were about 414,000 startups (firms less than one year old) and about 396,000 firm closures. The share of businesses that were startups has hovered around 8% since 2010.

 
Starts and Closures of Employer Firms, 2012–2015
Category 2012 2013 2014 2015
Births 408,591 404,475 403,902 414,043
Deaths 362,398 367,419 391,553 396,602
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 65.9 percent of the net new jobs created between 2000 and 2017. From 2000 to 2017 small businesses created 8.4 million net new jobs while large businesses created 4.4 million.  see https://www.sba.gov/sites/default/files/advocacy/Frequently-Asked-Questions-Small-Business-2018.pdf
Source: U.S. Bureau of the Census.

What is the survival rate for new businesses?

79.8% of establishments started in 2016 survived until 2017. From 2005 to 2017, an average of 78.6% 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 51.0% 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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