Newspaper Page Text
THE ISLANDER, SEPTEMBER 21, 2009, PAGE 15
Q&A from the Small Business Advocate
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 Stan
dards. These standards vary by
industry; see www.sba.gov/size.
How important are small
businesses to the U.S.
economy?
Small firms:
• Represent 99.7% of all
employer firms.
• Employ just over half of all
private sector employees.
• Pay 44% of total U.S. pri
vate payroll.
• Have generated 64% of
net new jobs over the past 15
years.
• Create more than half
of the nonfarm private gross
domestic product (GDP).
• Hire 40% of high tech
workers (such as scientists,
engineers, and computer pro
grammers).
• Are 52% home-based and
2% franchises.
• Made up 97.3% of all iden
tified exporters and produced
30.2% of the known export
value in FY 2007.
• Produce 13 times more pat
ents per employee than large
patenting firms; these patents
are twice as likely as large firm
patents to be among the one
percent most cited.
Source: U.S. Dept, of Com
merce, Bureau of the Census and.
International Trade Admin.; Advo
cacy-funded research by Kathryn
Kobe, 2007 (www.sba.gov /advo /
research / rs299tot.pdf and CHI
Research, 2003 (www.sba.gov/
advo / research / rs225tot.pdf); U.S.
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Dept, of Labor, Bureau of Labor
Statistics.
What share of net new jobs
do small businesses create?
Firms with fewer than 500
employees accounted for 64%
(or 14.5 million) of the 22.5 mil
lion net new jobs (gains minus
losses) between 1993 and the
third quarter of 2008. Continu
ing firms accounted for 68% of
net new jobs, and the other 32%
reflect net new jobs from firm
births minus those lost in firm
closures (1993 to 2007).
Source: U.S. Dept, of Labor,
Bureau of Labor Statistics, Busi
ness Employment Dynamics. Note
that the methodology used for the
figures above counts job gains or
losses in the actual class size where
they occurred.
How many businesses open
and close each year?
An estimated 627,200 new
employer firms began opera
tions in 2008, and 595,600 firms
closed that year. This amounts
to an annual turnover of about
10% for entry and 10% for exit.
Nonemployer firms have turn
over rates three times as high
as those of employer firms,
mostly because of easier entry
and exit conditions.
Source: U.S. Dept, of Commerce,
Bureau of the Census; Administra
tive Office of the U.S. Courts; U.S.
Dept, of Labor, Employment and
Training Administration.
What is small firms' share of
employment?
Small businesses employ
just over half of U.S. workers.
Of 119.9 million nonfarm pri
vate sector workers in 2006,
small firms with fewer than
500 workers employed 60.2 mil
lion and large firms employed
59.7 million. Firms with fewer
than 20 employees employed
21.6 million. While small firms
create a majority of the net new
jobs, their share of employment
remains steady since some
firms grow into large firms as
they create new jobs. Small
firms’ share of part-time work
ers (21%) is similar to large
firms’ share (18%).
Source: U.S. Dept, of Commerce,
Bureau of the Census: Statistics of
U.S. Businesses, Current Popula
tion Survey.
How many small businesses
are there?
In 2008, there were 29.6 mil
lion businesses in the United
States, according to Office of
Advocacy estimates. Census
data show that there were 6.0
million firms with employees
in 2006 and 21.7 million with
out employees in 2007 (the lat
est available data). Small firms
with fewer than 500 employees
represent 99.9% of the 29.6 mil
lion businesses (including both
employers and nonemployers),
as the most recent data show
there were about 18,000 large
businesses in 2006.
Source: Office of Advocacy esti
mates based on data from the U.S.
Dept, of Commerce, Bureau of the
Census, and U.S. Dept, of Labor,
Employment and Training Admin
istration.
What is the survival rate for
new firms?
Seven out of ten new
employer firms last at least two
years, and about half survive
five years. More specifically,
according to new Census data,
69% of new employer estab
lishments bom to new firms
in 2000 survived at least two
years, and 51% survived five
or more years. Firms born in
1990 had very similar survival
rates. With most firms start
ing small, 99.8% of the new
employer establishments were
started by small firms. Survival
rates were similar across states
and major industries.
Source: U.S Dept, of Commerce,
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Bureau of the Census, Business
Dynamics Statistics. Note that the
figures could be skewed slightly by
the rare occurrence of new firms
opening multiple establishments in
their first few years.
How are small businesses
financed?
Commercial banks and other
depository institutions are the
largest lenders of debt capital to
small businesses. They account
ed for almost 65% of total tra
ditional credit to small busi
nesses in 2003. (This includes
credit lines and loans for non-
residential mortgages, vehicles,
equipment, and leases.) Credit
cards account for much of the
growth in small business lend
ing over the past few years. For
more information, see Advoca
cy’s annual publication, Small
Business Lending in the Unit
ed States (www.sba.gov/advo/
research/lending.html).
How do regulations affect
small firms?
Very small firms with fewer
than 20 employees annually
spend 45% more per employee
than larger firms to comply
with federal regulations. These
very small firms spend four
and a half times as much per
employee to comply with envi
ronmental regulations and 67%
more per employee
on tax compliance than their
larger counterparts. For data
broken out by industry, see
www.sba.gov/advo/research/
rs264tot.pdf.
Whom do I contact about
regulations?
To submit comments on pro
posed regulations, send email
to advocacy@sba.gov or visit
Advocacy’s regulatory alerts
page atwww.sba.gov/advo/laws/
law_regalerts.html. To inquire
about unfair regulatory enforce
ment, contact SBA’s Office of
the National Ombudsman at
ombudsman@sba.gov.
How can I get more
information?
For more information, visit
Advocacy’s website: www.sba.
gov/advo. Specific points of
interest include:
• Economic research: www.
sba.gov/advo/research.
• Firm size data (U.S., state,
and metropolitan static and
dynamic data): www.sba.gov/
advo/research/data.html.
• Small firm lending stud
ies:
www.sba.gov/advo/research/
lending.html.
• Small business profiles by
state and territory: www.sba.
gov/advo/research/profiles.
• The Small Business Advo
cate newsletter: www.sba.gov/
advo/newsletter.html.
Direct questions to (202) 205-
6533 or advocacy@sba.gov. □
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