It’s A Small (Business) World After All
Amidst all the Fortune firms that employ millions across our fair land, a secret exists that’s neither widely known nor broadcast to the masses. The simple truth is that small business employment in the United States is the (not so) little engine that makes our country go. The Small Business Administration ( SBA ) says that small business has accounted for sixty-five percent of all net new job growth in the U.S. for the last seventeen years, and that fifty percent of all private sector employees work for small businesses. The Ewing Marion Kauffman Foundation, for instance, asserts that young firms less than five years old were the source of much of the net job generation, and without startups, overall net job change might have been negative in most of the years since 1980. You’ll find forty percent of all high tech employees (such as scientists, engineers and computer programmers) working for small business owners, and these type firms produce thirteen times more patents per employee than their larger competitors.
SO HOW BIG IS SMALL BUSINESS?
If you think about how our country was built on innovation and hard work, it shouldn’t come as a big surprise that a few people besides Mr. Hewlett and Mr. Packard started their dream from a garage and grew them into muti-billion dollar, Fortune giants. By now, everyone knows the story of Facebook and what happened in that Harvard dorm room.
So how many small businesses are out there? The U.S. census breaks down employers by employee size. Surprisingly, small business is defined as having 500 or less employees, but for the purpose of small, let’s just consider companies with 20 employees or less. There are approximately 5.3 million in this category. In fact, 68% of those 5.3 companies employ only 4 employees or less. If you counted all those companies with more than 20 employees up to 500 employees, you would only be adding an additional 600,000 to the list.
So how many employees do these 5.3 million companies employ? When you add it up, it comes close to 21.5 million people. That’s a staggering number, especially if you contemplate how difficult it is to start a new business. If you do lump in those firms that employ more than 20 up to 500 employees, that accounts for another 38 million people. In total, the annual payroll for small business approaches $3 billion dollars. That’s a lot of economic stimulation.
We’ve also read much lately about U.S. trade deficits, but in their latest report on small business, the SBA states that for the most recent year for export data by firm size, there were 259,400 known small business exporters selling $311.7 billion in goods overseas, or 30.2 percent of the U.S. total. Small firm exporting grew steadily, almost doubling between 2002 and 2007.
WHAT’S ON THE HORIZON FOR SMALL BUSINESS?
Not unlike, everyone else, small business took a significant hit during this last economic downturn. With many of the headlines focused on the auto industry and others, small businesses accounted for almost 60 percent of our country’s net job losses. With policymakers eager to explore new avenues for job creation, the role that small business plays in generating employment has garnered greater attention over the recent past. As our latest census also revealed, the “face” of small business ownership now closely mirrors our population demographic changes as well. The number of self-employed Hispanics more than doubled from 2000 to 2008 and their share of the self-employed population rose from 5.6 to 10.2 percent. Roughly 15 percent of the self-employed were less than 35 years old in both 2000 and 2008. Older Americans are also more likely than before to be their own boss. The percent of the self-employed population who were between the ages of 55 and 64, for instance, grew from 16.4 percent in 2000 to 22.2 percent later in the decade. This trend is perhaps an indicator that more baby boomers have sought “lifestyle entrepreneurship” or a second career later in life.
Suffice it to say that small business ownership and entrepreneurism is a U.S. tradition and the lifeblood of a strong U.S. economy. If it’s to survive, our government leaders must create a culture and a pathway to help it thrive. There’s much to be done, not the least of which will be solving the issues of access to capital to start new business and help it grow, as well as legislating true healthcare reform that provides access to cost effective medical insurance for employees no matter what size company they work for.
Featured Image Credit: https://www.flickr.com/photos/harshlight/4243433706/
Category: Business Growth & Strategy
Tags: Leadership, Management, Small business
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