August 03, 2005

Must-Know Facts about Small Business
By Katrina C. Arabe

A whopping 99% of all businesses in the U.S. are small companies, and that's just for starters. Here are other stats that may surprise
you:

Fact 1: Small is the majority.

According to this USA Today story, you get the 99% stat (99.7% to be exact) when a small business is technically defined as a business
with 500 employees or fewer. If you choose to define it more intuitively--say with fewer than 50 employees--small businesses would still
comprise 98% of all businesses.

Note: Facts 2 through 7 come from this SCORE site.

Fact 2: Small is big.

The estimated 23.7 million small businesses in the U.S...
* Have generated 60 to 80% of net new jobs annually over the last decade
* Employ 50% of the country's private workforce
* Represent 97% of all the exporters of goods
* Generate a majority of the innovations that come from U.S. companies
Source: U.S. Small Business Administration, June 2004

Fact 3: It's no small feat to survive.

* There were 572,900 new businesses, and 554,800 business closures. (Note: Not all closures were due to bankruptcies. Taken from Survival and Longevity in the Business Employment Dynamics Data, which appears in the May 2005 edition of Monthly Labor Review.)
* Two-thirds of new employer firms survive at least two years, and about half survive at least four.
* 66% of new establishments started in 1998 were still operating two years after they started; 44% were still operating four years later in 2002. Findings do not differ greatly across industrial sectors. Source: U.S. Small Business Administration, June 2004

Fact 4: Self-employment is on the rise.

From 1979 to 2003, self-employment went up: 33% for women, 37% for African Americans, 15% for Latinos, 10% for White Americans and 2.5% for men. Source: SBA, Office of Advocacy

Fact 5: More seniors are becoming entrepreneurs.

In 2002, the rate of self-employment for the workforce was 10.2% (13.8 million workers), but the rate for workers aged 50 and up was 16.4% (5.6 million workers). Although those age 50 represent 25% of the workforce, they account for 40% of the self-employed. People who retire early or whose jobs get phased out are expected to drive solo business formation in the future. Source: AARP/Rand Corp. "Self-employment and the 50 Population"

Fact 6: Small biz owners are advice-seekers.

* 52% get words of wisdom from individual mentors; 51% from social networks; 44% from trade associations; 36% from business advisors; 31% from the Internet and 27% from Chambers of Commerce
* Women are more likely to seek business advice: 69% women vs. 47% men.
Source: American Express

Fact 7: The Internet is hot in the small-biz world.

This year, hot markets for small businesses include...
* eBay drop-off sites
* Search engine optimization and Internet marketing
* Performance apparel
* Niche health and fitness
* Technology security consulting
* Services/products for the Hispanic market
Source: Entrepreneur magazine, "Newest Trends & Hottest Markets, January 2005

Fact 8: What's considered "small business" can vary by industry.

At least as defined by the Small Business Administration. According to this site, the SBA has established a size standard for most industries in the economy. Businesses are considered "small" if they meet or are below the following standards:
* 500 employees for most manufacturing and mining industries
* 100 employees for all wholesale trade industries
* $6 million for most retail and service industries
* $28.5 million for most general and heavy construction industries
* $12 million for all special trade contractors
* $0.75 million for most agricultural industries
About one-fourth of industries have a size standard that is different from these levels. They vary from $0.75 million to $28.5 million for size standards based on average annual revenues and from 100 to 1500 employees for size standards based on number of employees.