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SBA Releases Updated Data on Small Business Impact on Economy

  • U.S. Small Business Administration Office of Advocacy releases data on small businesses’ impact on the economy
  • Small businesses account for the vast majority of all firms, but much smaller shares of employees, payrolls, and exports
  • More than half of small businesses were negatively affected by the COVID-19 pandemic in April 2020, but the share fell to about one in four in July 2021

Summary by Dirk Langeveld

Small businesses account for the vast majority of businesses in the United States but a much smaller share of payrolls and exports, according to the latest data provided by the U.S. Small Business Administration Office of Advocacy. The report also showed that more than 8 million small businesses closed during the COVID-19 pandemic, but that surviving firms are significantly less affected by the pandemic.

The data shows that there were 32.5 million businesses in the United States with less than 500 employees. By comparison, only 20,516 entities were classified as large businesses.

Small businesses make up 99.9 percent of all firms and 99.7 percent of firms with paid employees, as well as 97.4 percent of exporting firms. However, they account for only 46.8 percent of private sector employees, and 39.7 percent of private sector payrolls, and 31.6 percent of known export value.

Eighty-one percent of small businesses were non-employer firms, with this number gradually increasing from 15.4 million in 1997 to 26.5 million in 2018. A total of 86.6 percent of non-employer small businesses are organized as sole proprietorships, while 52.1 percent of employer firms were organized as S-corps and 22.5 percent as C-corps.

A total of 11.69 million small businesses were owned by women, while 9.22 million were owned by minorities and 1.76 million by veterans. Small businesses accounted for 62 percent of net new jobs since 1995, with 29 percent of employer firms being family-owned. Women made up 19.9 percent of the owners of employer firms, while minorities accounted for 18.3 percent and immigrants for 18 percent.

Small business numbers showed more volatility in 2020 due to the COVID-19 pandemic, with 8.6 million of the more than 15 million jobs lost in the crisis occurring at small businesses. Seventy-three percent of small businesses had received assistance through the Paycheck Protection Program by the end of 2020.

While 51.4 percent of surviving small businesses said the pandemic had negatively affected their company in April 2020, this share fell to 25.2 percent in July 2021. Businesses in accommodation and food service were more likely to still be struggling, with 54.7 percent saying they were still negatively impacted in the latter month.

The average two-year survival rate for new employer firms between 1995 and 2019 was 67.7 percent. It fell to 48.9 percent for five years, 33.6 percent for 10 years, and 25.7 percent for 15 years. In 2019, 1.04 million business establishments opened and 928,000 closed; about 13 percent were startups, averaging 3.3 employees (compared to an average of 15.3 employees for all employer small businesses)

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