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FAQs on Small Business in 2023

FAQs on Small Businesses in 2023

Small Business Week 2023 runs from April 30 to May 6, so it’s a great time to be talking about small business. Often “small business” is a buzz word used by politicians and large corporations that want to look sympathetic to the challenges actually faced by self-employed individuals and small business owners. But it’s also a favorable status that can help businesses get a piece of the federal government’s procurement pie.

Small Business Statistics 2023The fact is: small businesses are statistically significant. The SBA’s Office of Advocacy released FAQs about small businesses. Note that the SBA usually defines small businesses as those with fewer than 500 employees, and there are no separate statistics on what may more commonly be viewed as small businesses (i.e., those with fewer than 50 employees so as to be exempt from the employer health care mandate, the Family and Medical Leave Act, and other federal employment rules). Here are some highlights of statistics on small businesses in the U.S. Note that some statistics are more recent than others.

Overview of Small Businesses

There are more than 33.1 million small businesses in the U.S., versus 20,000+ large businesses. In effect, they make up 99.9% of all businesses in the U.S. Of these small businesses, 81.7% have no employees. In 2020, 13.1% of business establishments were startups.

Overall, 9.4% of business owners in 2021 were self-employed. The trend in self-employment is interesting: the share of self-employed (incorporated and unincorporated) for those age 65 and over increased from 14.1% in 2013 to 17.1% in 2021, while those under age 30 only had a slight increase, from 7.1 to 8.1%.

About 28% of family-owned employer firms was 28% in 2019.

Small businesses make up 97.3% of all exporters and account for 43.5% of the gross domestic product (GDP).

Openings and closures

In 2020, about 1.07 million business establishments opened while about 1.02 million establishments closed permanently. Closures can result for various reasons including business failure, owners closing up shop to retire or move on, or destruction by disasters.

Business survival rates are impressive. From 1994-2020, an average of 67.7% of new employer businesses lasted at least 2 years. During the same period, the 5-year survival rate was 48.9%, the 10-year rate was 33.7%, and the 15-year rate was 25.6%. The FAQs don’t reflect what happened to businesses—openings and closings—during the pandemic. My guess is that there were significant closures, but also significant startups once lockdowns were over.

When you drill down to owner demographics, there’s a slightly different picture. The 2017-2019 2-year survival rate for young employer businesses (2-3-year-old firms surviving to at least 4-5 years old) was 79%: 81% for women, 73% for Blacks, 82% for Hispanics, 78% for Asians, and 84% for veteran-owned businesses.

Entity selection

Small businesses can choose to set up their businesses in a variety of ways, depending the number of owners and other factors. The basic options are sole proprietorship, partnership, limited liability company (LLCs), S corporation, and C corporation. The vast majority (86.5%) of businesses with no employees is sole proprietorships. When it comes to businesses employees, more than half (52.4%) are S corporations. Note: The statistics don’t provide any glimpse into the use of LLCs.

Job creators

From 1995 to 2021, small businesses created 17.3 million net new jobs, compared to 10.3 million created by large businesses. Since 1995, small businesses have accounted for 62.7% of net new job creation. While there are certainly job losses during COVID-19, employment by small businesses has grown since then.

Final thought

I’ve been working with small businesses for many years, and what the statistics don’t show is some of the best things about small business: As a general rule, small business owners I know:

  • Have grit, ingenuity, and resilience to grow their businesses.
  • Share information and resources with other such owners and support causes in their communities.
  • Care about their employees, their customers, and their environment.

Three cheers for SMALL BUSINESS!!

Find more resources mentioned in earlier blogs written with National Small Business Week in mind.