How Many Small Businesses Are in the United States

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If you are an established small business owner or considering starting your own small business , you might ponder just how many small businesses are in the United States presently. It’s a fair question and one that we have the answer to. There is a lot of information to consider, as small businesses are incredibly essential to our country’s operations. Without them, consumers would be extremely limited in their shopping and service options. Thankfully, small businesses are everywhere. More and more, people have the motivation to not only being their own boss but also be able to create their own schedule. Business ownership has always required a grind, hard work, and luck to find success. However, operating during the COVID-19 pandemic had thrown all the usual rules to the sidelines, as food services and the brick and mortar retail trade were both affected in light of the Coronavirus pandemic. Small business owners have worked tirelessly to ensure their doors remain open. Sure, many changes had to be made due to the pandemic to make it possible, but many are thriving today and for the better.

Small Businesses : By the Numbers

Number of Small Businesses

The United States is home to 30.2 million small businesses , accounting for 99.9% of all businesses in the United States . These statistics come from the Small Business Administration ( SBA ), which defines small businesses as any entity employing fewer than 500 people. These standards cover many startups (including highly respected companies), hedge funds, law firms, and other companies. Whenever you hear the term “ small business ”, you may not even think of these companies.

Number of Employees

Nearly 60 million people work in small businesses , accounting for 47.5% of the country’s total number of employees . That’s almost half of the United States ’ workers. As you can see, small businesses are essential for consumers and add employment opportunities across the nation.

States with the Most Small Business Employment

In Montana and Wyoming, small businesses employ the largest number of people. Respectively, these two states hire 67.6% and 62.3% of state employees . That’s an impressive number of each state’s total population. What’s more, it shows that Montana and Wyoming are home to a significant number of working-class people.

States with the Lowest Small Business Employment

At the other end of the spectrum are states with the least amount of workers. The total population has a lot to do with it, but small businesses hire the fewest employees in Florida and Nevada. Small businesses in these states employ 40.8% and 43.3% of the state’s total workforce, respectively.

Industries with the Most Small Businesses

We checked with the Small Business Administration and found that the number of small businesses with services other than public administration is the largest, with more than 4,375,000 total companies. Following the Other Services category, the top three industries for small businesses are:

  • 4,207,592 Professional , Scientific , and Technical services companies
  • 3,098,210 Construction companies
  • 2,925,953 Rental and Leasing and Real Estate companies

Number of Educated Small Business Owners

Many small business owners are college-educated, with 38.71% having college degrees. Following that, 26.51% of small business owners have some type of university education. High school graduates account for 26.05%, while those without a high school diploma account for 8.73% of the total number. It is important to note that these figures are from a Kauffman Index study conducted in 2016.

Jobs Created by Small Businesses

Also, back in 2016, studies revealed that nearly 2 million jobs result from small business employment opportunities. Moreover, almost all new jobs are from new business entities. What’s more, most jobs are from new small businesses , which account for almost all new net job opportunities. Conversely, nearly 20% of gross jobs are the product of new small businesses . When you look at small business statistics over the past five or more years (which we did), there is a significant reduction in job opportunities.

Pay Scale of Small Businesses

This one’s a bit trickier to nail down because each state and business vary wildly in how employee compensation is handled. What we do know is that the states paying their employees the most are as follows:

  • $62,929: District of Columbia
  • $49,444: Massachusetts
  • $48,790: New York
  • $48,711: Connecticut
  • $47,973: Alaska

Small Businesses Created Each Year

According to the Small Business Administration, more than half a million new small businesses open each year in the United States . With approximately 600,000 small businesses opening with each passing year, it’s easy to see how so many job opportunities are available. For those hit by job loss due to the pandemic, small businesses offer an opportunity to make ends meet. While the pay rate is likely to be less than what you’re used to, it’s an opportunity nonetheless. Thanks to small businesses everywhere, many people have found a solution to putting food on the table and paying bills. Again, many small businesses were forced to shut down, some permanently. However, the ones that remain open are lucrative options for much of the public, even with reduced incomes.

Small Businesses : Net Gain or Net Loss?

There is currently a net gain in small businesses . The number of small businesses has increased by 25,000, according to data released in 2016. However, that this number varies depending on the state of the economy. It's worth noting that around 17% of small businesses fail simply because they lack a business model.

Small Businesses : Job Loss and Exits

“Exits” is a term used by the SBA to describe when a company drops its employment numbers to zero. The company in question has to maintain no employees for a minimum of one year to be defined as an exit. In the third quarter of 2016 alone, small business exits accounted for nearly 750,000 job losses.

States with the Most New Small Business Startups

Each state is different in terms of what kinds of new small businesses are cropping up every year. Let’s look at a study conducted by the Kauffman Index, which breaks down all 50 states to determine which ones produce the newest small businesses by location. Top 5 of the Largest 25 States:

  • Massachusetts
  • Pennsylvania
  • Minnesota
  • Wisconsin
  • Colorado

Top 5 of the Smallest 25 States:

  • South Dakota
  • North Dakota
  • Montana
  • Vermont
  • Maine

Top 5 Metropolitan Locations:

  • Washington -Arlington-Alexandria
  • Portland-Vancouver-Hillsboro
  • Boston-Cambridge-Quincy
  • SF-Oakland-Fremont
  • Pittsburgh

For the sake of time, we’ve only included a portion of what the study reveals. If you’d like to research the Kauffman Index further, be sure to click here .

Number of Small Businesses with Employees

More than 6 million small businesses have regular employees on the payroll. This equates to 20% of small businesses with a minimum of one person on the payroll. What’s more, small businesses account for 99.7% of all entities with paid employees .

Number of Small Businesses Owned by Minorities

The Kauffman Index broke down small business stats by ownership to see what percentage of each race owns their own business.

  • White: 71.67%
  • Black: 6.22%
  • Latino: 13.99%
  • Asian: 6.16%
  • Other: 1.96%

It’s interesting to note how these figures have changed since 1996:

  • White: -14.33% (↓)
  • Black: +2.06% (↑)
  • Latino: +8.44% (↑)
  • Asian: +2.35% (↑)
  • Other: +1.46% (↑)

Number of Small Businesses Owned by Men versus Women

The percentage of small businesses owned by men is 70%, while the percentage of small businesses owned by women is 30%.

Generation with the Most Entrepreneurs

Despite the hype you may have heard, millennials between the ages of 20 and 38 are not entrepreneurial, at least when opening small businesses . The Kauffman Index found the following:

  • 15.79%: Mostly Millennials between the ages of 20 and 34
  • 24.93%: Mostly Gen Xers between the ages of 35 and 44
  • 30.81%: A 50/50 mix of Gen Xers and Baby Boomers between the ages of 45 and 54
  • 28.47%: Baby Boomers between the ages of 55 and 64

It’s the older generation of Baby Boomers and Gen-Xers who get the win here. Younger Millennials and Gen Xers trail behind.

In Closing

This data is designed to help you better understand the role of small businesses in the United States economy. However, keep in mind that you should generally treat statistics with caution. The source of the data varies from researcher to researcher. You also have to take into account your definition of a small business and all that it entails. But what we do present here is a pretty accurate assessment of the current landscape of small businesses in the United States . No matter what the numbers add up, though, it is clear that small businesses are an integral part of a prosperous economy. There are more small companies than large companies, and they also provide a lot of jobs. Does this make small businesses a pillar of the United States ? By our estimation, the answer is a resounding “yes.” Are you interested in starting your own small business and becoming a part of the biggest employment infrastructure in the country? Then check out our guide to small business loans to see what you should consider going forward. Seek Capital can help with small business financing, especially for aspiring owners eager to run their own business but do not have the proper cash flow. At Seek Capital, we specialize in assisting with possibly the biggest challenge which is securing funding for entrepreneurs and small business owners . Sources: Small Business Administration | Homepage Montana | Small Business Economic Profile Kauffman Index | New Startup Study

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