2021’s small biz FAQs

Each year the U.S. Small Business Administration releases a new version of its popular publication, Frequently Asked Questions About Small Business. Using the most recent available data (generally 2018-2020) from the U.S. Census Bureau and the Bureau of Labor Statistics, SBA’s Office of Advocacy recently shared these facts about U.S. small businesses and their contributions to the economy.

1) How many small businesses are there in the U.S.?

There are 32,540,953 million small businesses in the U.S. Of those 81%, or 26,485,532 firms, have no employees (just the owner; “nonemployer firms”) and 19%, or 6,055,421 firms, have paid employees (“employer firms”). The number of nonemployer firms gradually increased from 15.4 million in 1997 to 26.5 million in 2018.

2) What’s the small business profile?

SBA defines a small business as an independent business with fewer than 500 employees. Just under a third (29%) of small business employers are family businesses. In terms of legal organization, 86.6% of nonemployer firms and 14% of small employer firms are sole proprietorships. More than half of small employer firms are S corps. Among the others are limited liability companies, franchises, and partnerships.

3) What is the role of small businesses in the economy? Small businesses comprise:

• 99.9% of all firms

• 99.7% of firms with paid employees

• 97.4% of exporters

• 46.8% of private sector employees

• 43.5% of gross domestic product

• 39.7% of private sector payroll

• 35.6% of private sector receipts ($13.3 trillion)

• 31.6% of known export value ($460 billion)

4) What percent of net new jobs do they create? Most of them.

From 1995 to 2020, small businesses created 12.7 million net new jobs while large businesses created 7.9 million. Small businesses have accounted for 62% of net new job creation since 1995 (not counting a volatile second quarter 2020).

5) How can small businesses generate over 60% of net new jobs, but their share of employment is less than 50%?

As firms grow, they change employment size classes. As small firms grow, their growth counts toward small firm job gains. If they pass the 500-employee mark, their employment gains are classified as large firm employment. From 2000-2019, small businesses generated about two-thirds of net new jobs.

6) What is the impact of COVID-19 on small businesses?

The percentage of small businesses negatively impacted by the pandemic declined from 51.4% in April 2020 to 25.2% in July 2021. Despite this significant progress, 54.7% of accommodations and food service small businesses were still negatively impacted in July 2021.

7) What is the new business survival rate?

From 1994-2019, an average of 67.6% of new employer establishments survived at least two years. During the same period, the five-year survival rate was 48.9%, the 10-year rate was 33.6%, and the 15-year rate was 25.7%.

Survival rates by owner demographic showed slight differences: The 2016-2018 two-year survival rate for young employer establishments (2-3-year-old firms surviving to at least 4-5 years old) was 71%. Women (67%), Black (65%), Hispanic (64%) and Asian (70%) led firms were below the national rate. Veteran-owned businesses (63%) were also below the national rate.

8) How big are business startups?

In 2019, startup employment averaged 3.3 employees per establishment. Average employment at establishments of all ages was 15.3 employees

9) How many businesses do women own? Minorities? Veterans?

Women owned 1.1 million employer firms in 2018, which represented 20% of all employers. Women also owned 10.6 million nonemployer firms in 2017, or 42% of all nonemployer firms, putting them closer to parity with men.

Minority-owned businesses represent 18% of small businesses and veterans own 5.9% of employer firms and 5.6% of nonemployer firms (roughly in line with the 5.6% of the U.S. population that identify as veterans).

10) How about WFH?

The COVID-19 pandemic changed where we work. According to the Bureau of Labor Statistics, the percentage of employees who worked from home on an average day increased from 19.4% in December 2019 to 39.5% in December 2020. It will be interesting to see if that trend outlasts COVID.

For even more information on small businesses, see SBA.gov.

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Sholeh Patrick is a columnist for the Hagadone News Network. Email sholeh@cdapress.com.