The expression “small business” often evokes images of local shops, family-owned restaurants, and independent service providers. Yet the term encompasses a vast array of organizations, from innovative tech startups to home-based craft businesses. With such a diverse range of enterprises falling under the umbrella term of small businesses, it might be surprising to learn what percentage of businesses are considered small.
Interestingly, in the United States, the business landscape’s dominant feature is not the multi-national corporations or mammoth conglomerates that might initially come to mind. Instead, it is small businesses that form the backbone of the US economy, offering essential goods, services, and jobs in communities across the nation.
The Definition of Small Businesses
The definition of a small business can vary depending on several factors. Broadly speaking, a small business is an organization that operates independently, is not dominant in its field, and falls below certain thresholds regarding employees, revenues, or assets.
In the United States, the Small Business Administration (SBA) provides clear guidelines defining small businesses on an industry-specific basis, factoring in the number of employees and annual receipts. It is important to understand these criteria to get a grasp of what percentage of businesses are considered small.
Small Business Statistics
According to statistics from the SBA, small businesses make up an overwhelming majority of all businesses in the United States. To put it in perspective, as of 2020, there were approximately 31.7 million small businesses in the country.
These figures imply that small businesses account for about 99.9% of all US businesses. This statistic alone speaks volumes about the role and importance of small businesses in fueling economic growth and job creation in the United States.
Frequently Asked Questions
Some doubts and frequently asked questions resolved:
What is the maximum number of employees a company can have to be considered a small business?
The maximum employee threshold for a business to be considered small varies depending on the industry. Generally, manufacturing companies with fewer than 500 employees and non-manufacturing businesses with less than $7.5 million in annual receipts are considered small businesses.
Do all small businesses contribute equally to the economy?
While all small businesses play a critical role in the economy, their individual contributions can vary widely. Factors such as the industry sector, geographical location, and the business’s size can significantly influence a firm’s economic impact.
Why are small businesses so common in the US?
There are several reasons why small businesses predominate in the US. The country’s legal and regulatory environment fosters entrepreneurship, while cultural factors such as a strong work ethic and an encouragement of individual initiative also play a crucial role.