Small Businesses: Economic Heroes
Small Businesses: Economic Heroes
Small, but mighty. That would be an apt description of the 32.5 million small businesses operating in the U.S. As a group, they punch above their weight when it comes to job creation, exports and several other economic categories.
As the spotlight shines on our nation’s entrepreneurs during Small Business Week 2022 (May 1-7), here’s a snapshot of some of their critical economic contributions.
Economic Might: By the Numbers Nationally
According to the U.S. Small Business Administration’s Office of Advocacy, small businesses (those with fewer than 500 employees):
- Make up the majority of all businesses. At 32.5 million strong, they account for 99.9% of U.S. businesses. Small businesses in the bi-state area put up similar numbers. In Missouri, 99.4% of businesses are classified as small, and Kansas boasts 99.1%. And, in spite of the pandemic (or maybe because of it!), Federal Reserve Economic Data (FRED) shows that in 2021 total business applications reached record levels, including for so-called “high-propensity” businesses that are likely to have payrolls. Total business applications registered 5.4 million, with high-propensity business applications totaling 1.8 million.
- Deliver 43.5% of U.S. gross domestic product.
- Employ 46.8% of the U.S. workforce. Given the number of small businesses, it shouldn’t come as a surprise that they collectively employ nearly half of our private-sector workforce.
- Account for 39.7% of the private-sector payroll.
- Are major job creators. Despite losing 9.1 million jobs in the first two quarters of 2020, small business job growth rebounded quickly after the pandemic recession. In the four quarters following, small businesses gained 5.5 million jobs, making up for 60% of the decline during the early pandemic. Small businesses have generated 12.9 million net new jobs during the past 25 years, accounting for two-thirds of the jobs added to the economy.
- Are actively involved in global trade. The U.S. Census Bureau notes that, based on 2020 census data, small business enterprises account for $413 billion of exports. Of this dollar value, $131 billion involved manufacturing companies, $178 billion was attributed to wholesalers and $104 billion by various types of companies. On the flip side, small businesses are also active as importers, with a 2020 total known import value of $651 billion. Broken down by industry, $117 billion related to manufacturing firms, $366 billion to wholesalers and $167 billion to other types of firms.
Leading the Way
Small business owners are innovators. What often begins as an entrepreneur’s dream may eventually become a national or global game-changer, transforming industries and everyday lives. Think: Steve Jobs and Apple, Jeff Bezos and Amazon, Laura Boccanfuso and Van Robotics.
The U.S. Senate Committee on Small Business and Entrepreneurship notes that small businesses produce more than 14 times more patents than large businesses and universities and employ nearly 40 percent of America’s scientists and engineers. Notably, large firms often hire smaller, more innovative companies to develop products and processes and to test and validate innovations.
Local Heroes
Interestingly, one often overlooked contribution of small businesses is their charitable giving. SCORE (Service Corps of Retired Executives) notes that according to one survey, small businesses donate 250% more than larger businesses to local nonprofits and community causes, with 75% of business owners donating an average of 6% of their profits annually to charitable organizations.
In addition to charitable organizations, small businesses support their communities by sponsoring youth programs and activities, donating to local first responders and volunteering.
As we celebrate Small Business Week 2022, remember this: The company sponsoring your child’s Little League team is likely a small business; the group of volunteers you see cleaning a neighbor’s yard might well be the employees of a small business; there’s a good chance the new job your friend just accepted is with a small business; and maybe, just maybe, a small business you pass each day is developing a cure for a disease, creating a transformative technology, or building a product that will improve our lives.