Selected Small Business Statistics

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

This report gathers selected statistics on the role of small businesses in the national economy that
Congress has frequently asked the Congressional Research Service (CRS) to provide. Most of the
statistics are calculated by CRS from Census data. The report uses the widely accepted research
definition that a small business has fewer than 500 employees. Members of Congress may find
these statistics useful as they consider legislation that affects small businesses.
This report uses the most recently available data and will be updated as new data become
available.

Small Business in the Economy......................................................................................................1
What Is a Small Business?........................................................................................................1
How Many Small Businesses Are There?.................................................................................1
What Is Known About Nonemployer Firms?............................................................................1
What Is the Small Business Share of GDP?..............................................................................2
What Role Do Small Businesses Play in High Technology Employment?...............................2
What Role Do Small Businesses Play in Exports?....................................................................2
What Role Do Small Business Play in Job Creation?...............................................................2
Small Business Owners...................................................................................................................3
What Role Do Women Play in Small Business Ownership?....................................................3
What Are the Racial and Ethnic Characteristics of Business Owners?.....................................3
How Does the Economic Status of Small Business Owners Compare to Nonowners?............3
How Many Businesses Do Veterans Own?...............................................................................3
Small Business Employees..............................................................................................................4
What Is the Economic Status of Small Business Employees?..................................................4
Small Business Administration........................................................................................................4
What Has Been the Loss Rate on SBA Loans?.........................................................................4
Author Contact Information............................................................................................................4

This section reports on the role of small businesses in employment, gross domestic product
(GDP), and employment in high technology occupations.
The definition of “small business” varies depending on the program. For research and general
purposes, the Small Business Administration (SBA) defines a small business as a for profit
enterprise, located in the United States with fewer than 500 employees. SBA government-¹
contracting programs frequently use a “size standard” that varies by industry. The size standard
is set either in annual receipts or employees. For example, most crop farming uses a size standard
of $750,000 in annual receipts, and the size standard for new single-family housing construction
is $31 million in annual receipts. The size standard for residential electrical lighting fixture
manufacturing is 500 employees, and the standard for scheduled air passenger transportation is

1,500 employees.

Other agencies and legislation use other definitions. For example, the Securities and Exchange
Commission (SEC) and the Sarbanes-Oxley Act of 2002 define small as a company with publicly ²
traded stock valued at $75 million or less.
In 2004, small businesses were 99.7% of the firms in the nation, provided 51% of the ³
employment, and 45% of the nation’s private sector payroll. There were 5.9 million small
employer firms with 58.6 million employees and 17,000 large businesses with 56.5 million
employees. Some small businesses are very small: 802,000 firms had no employees on the date ⁴
they were surveyed. There were an additional 19.5 million nonemployer firms with receipts.
Information on nonemployer firms comes from Internal Revenue Service records. Most
nonemployers are self-employed individuals operating very small unincorporated businesses,
which may or may not be the owner’s principal source of income. More than half of the
nonemployer firms were in five industries: (1) construction; (2) retail trade; (3) real estate and
rental and leasing; (4) professional, scientific, and technical services; and (5) other services
(except public administration). Nonemployers reported $887 billion in receipts. The industries

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with more than $100 million of receipts were (1) construction; (2) real estate and rental and
leasing; and (3) professional, scientific, and technical services.
A 2007 study funded by the SBA found that between 1998 and 2004, small businesses produced ⁵
approximately 50% of the nation’s private, nonfarm GDP. The small business share of GDP
ranged from 49.9% to 50.7%.
About 40% of private sector workers in high technology occupations in 2006 worked in small ⁶
businesses. The remaining 60% of private sector workers in high technology occupations worked
in other than small businesses. Another way to analyze the number is to note that 3% of small
business private sector employees were in high technology occupations compared with 7% of
private sector employees in larger businesses.
There are many small business exporters, but the goods they sell are a relatively small proportion
of the nation’s exports. Small businesses comprised 97% of the firms exporting goods during ⁷

2005 and 29% of the value of exports.

Between 2002 and 2003 national employment grew by nearly one million jobs (0.9%).⁸ Small
businesses added two million jobs (3.5%), and jobs at firms with 500 or more employees
decreased by nearly one million jobs (-1.8%). Firms with 1-4 employees added the most new jobs
(slightly more than one million or 20%). Larger firms (5 to 499 employees) grew by smaller
percentages. The relationship between business size and job creation is very controversial and the ⁹
subject of continuing research at the Bureau of Labor Statistics and other organizations.

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⁽^c^onti^nue^d.^..)

This section provides statistics on small business ownership rates for women, racial, and ethnic
groups. It also reports data on small business owners’ income and wealth.
Slightly less than 17% of small employer firms were female-owned in 2002, and women own half ¹⁰
or more of 30% of employer firms. Women’s ownership of businesses decreases as a percentage
as the number of employees increases. For example, women owned 20% of the firms that had no
employees and 8% of the small businesses with 100-499 employees. Women owned half or more
of 33% of employer firms without employees and 13% of employer firms with 100-499
employees.
In 2002, whites owned 87% of businesses with employees, blacks owned 5%, American Indians
and Alaska Natives owned 0.9%, Asians owned 4.8%, and Native Hawaiians and Other Pacific ¹¹
Islanders owned 0.1%. Hispanics or Latinos owned 7%.
In 2004, the mean (average) household income for small business owners was $143,000 and for ¹²
nonowners was $56,000, according to a 2007 study supported by the SBA. Mean household
wealth was $1.4 million for small business owners and $256,000 for nonowners. Between 1989
and 2004, the income gap between households with a small business and those without widened.
Veterans own 14% of all firms.¹³ Disabled veterans own 1% of firms. Veterans make up 11% of ¹⁴
the nation’s population 18 or more years old, and disabled veterans make up 3%.

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This section provides a brief look at the economic characteristics of small business employees.
In 2006, 69% of private sector workers receiving public assistance worked for small businesses ¹⁵
and 62% of private sector workers not receiving public assistance worked for small businesses.
Looking at the statistics from a different perspective, 99% of small business private sector
workers (and 99% of non-small business private sector workers) did not receive public assistance.

According to the SBA, the overall loss rate for FY2006 was 6.1%.¹⁶ The loss rate on business
loans in FY2006 was 6.2%. The SBA experience much higher loss rates on direct loans than on
guaranteed loans: for direct business loans and those with immediate SBA participation, the
FY2006 loss rate was 19.5%; the loss rate on guaranteed loans was 5.7%. The SBA’s FY2006
loss rate on disaster loans was 9.2%.
^{N. Er}^{ic W}^e^iss
^Sp^{ecialist i}ⁿ^Fiⁿ^aⁿ^c^{ial Eco}ⁿ^o^m^ics
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