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So How Important Are Small Businesses to the U.S. Economy?

Oct 2008

According to research released by the SBA, small firmsRepresent 99.7% of all employer firms.

• Employ about half of all private sector employees.
• Pay nearly 45% of the total U.S. private payroll.
• Have generated 60 to 80% of net new jobs annually over the last decade.
• Create more than half of non-farm private gross domestic product.
• Made up 97.3% of all identified exporters and produced 28.9% of the known export value.
• Hire 40% of high tech workers.
• Produce 13 times more patents per employee than large patenting firms.

The Universe of Small Gets Bigger

The number of America's small businesses is growing, yet the businesses within that total are getting even smaller.

America's smallest small businesses -- non-employers or businesses without employees -- grew by 1.8% from 2005 to 2006, according to recently released data by the U.S. Census Bureau. These non-employers saw their average receipts grow by a nominal 0.2% from year to year, which was well below the 3.2% inflation rate for the year.

In 2005, there were 20.4 million non-employer firms. By 2006, a net 376,487 more firms had surfaced, resulting in 20.8 million non-employer firms. These non-employers produced $97 billion in receipts in 2006. That is $19.2 billion more than in 2005.

Non-employer firms represent two-thirds of America's small businesses. Often, these enterprises do not represent their owner's principal job. Frequently, a non-employer firm is a side venture to a full-time career, or a testing ground to learn about entrepreneurship.

Because non-employer firms make up such a large part of America's small businesses, it is important to watch and understand how the number of firms changes from year to year.

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