Selected Small Business Statistics

Selected Small Business Statistics

Order Code RS22688
July 3, 2007
Selected Small Business Statistics
N. Eric Weiss
Analyst in Financial Institutions
Government & Finance Division
Summary
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
This section reports on the role of small businesses in employment, gross domestic
product (GDP), and employment in high technology occupations.
What Is a Small Business? 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-contracting programs frequently use a “size
standard” that varies by industry.1 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.
1 13 C.F. 121.

CRS-2
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 traded stock valued at $75 million or less.2

How Many Small Businesses Are There? In 2004, small businesses were
99.7% of the firms in the nation, provided 51% of the employment, and 45% of the
nation’s private sector payroll.3 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 they were
surveyed. There were an additional 19.5 million nonemployer firms with receipts.4
What Is Known About Nonemployer Firms? 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 with more than $100 million of receipts were (1) construction; (2) real estate
and rental and leasing; and (3) professional, scientific, and technical services.
What Is the Small Business Share of GDP? A 2007 study funded by the
SBA found that between 1998 and 2004, small businesses produced approximately 50%
of the nation’s private, nonfarm GDP.5 The small business share of GDP ranged from
49.9% to 50.7%.
What Role Do Small Businesses Play in High Technology Employment?
About 40% of private sector workers in high technology occupations in 2006 worked in
small businesses.6 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.
2 15 U.S.C. Section 77a et seq. See Section 404 for the small business definition. See, also, CRS
Report RS22482, Section 404 of the Sarbanes-Oxley Act of 2002 (Management Assessment of
Internal Contrals): Current Regulation and Congressional Concerns by Michael V. Seitzinger.
3 U.S. Census Bureau, Statistics of U.S. Businesses: 2004, available at
[http://www.census.gov/csd/susb/susb04.htm].
4 U.S. Census Bureau, Nonemployer Statistics: 2004, available at
[http://www.census.gov/epcd/nonemployer/]. The Census Bureau defines a nonemployer
business is one that has no paid employees, has annual business receipts of $1,000 or more ($1
or more in the construction industries), and is subject to federal income taxes.
5 Katherine Kobe, The Small Business Share of GDP, 1998-2004, Small Business Administration,
April 2007, available at [http://www.sba.gov/advo/research/rs299tot.pdf].
6 U.S. Census Bureau, Current Population Survey: March 2006. High technology applications
are defined using the classification proposed by Daniel E. Hecker in “High-Technology
Employment: A NAICS-Based Update,” Monthly Labor Review, July 2005, available at
[http://www.bls.gov/opub/mlr/2005/07/art6full.pdf].

CRS-3
What Role Do Small Businesses Play in Exports? 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 2005 and
29% of the value of exports.7
What Role Do Small Business Play in Job Creation? 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 subject of continuing research at the Bureau of Labor Statistics and
other organizations.9
Small Business Owners
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.
What Role Do Women Play in Small Business Ownership? Slightly less
than 17% of small employer firms were female-owned in 2002, and women own half or
more of 30% of employer firms.10 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.
What Are the Racial and Ethnic Characteristics of Business Owners?
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 Islanders owned 0.1%.11 Hispanics or Latinos owned 7%.
7 U.S. Census Bureau, Profile of U.S. Exporting Companies: 2004-2005, Exhibit 1a, available
at [http://www.census.gov/foreign-trade/Press-Release/edb/2005/]. CRS calculations have
included the category “no. of employees unknown” with small businesses. If this category is
excluded from all calculation, small businesses were 96% of exporting firms and 25% of the
value.
8 U.S. Census Bureau, Business Information Tracking Series, available at
[http://www.census.gov/csd/susb/susbdyn.htm].
9 Jessica Helfand, Akbar Sadeghi, and David Talan, “Employment Dynamics: Small and Large
Firms Over the Business Cycle,” Monthly Labor Review, March 2007, pp. 39-50; or Shail J.
Butani, Richard L. Clayton, Vinod Kapani, James R. Spletzer, David M. Talan, and George S.
Werking Jr., “Business Employment Dynamic: Tabulations by Employer Size,” Monthly Labor
Review, February 2006, pp. 3-22.
10 U.S. Census Bureau, Survey of Business Owners: 2002, Table P.
11 U.S. Census Bureau, Survey of Business Owners: 2002 Table A. Hispanic or Latino are ethnic
categories independent of the race of the individual.

CRS-4
How Does the Economic Status of Small Business Owners Compare
to Nonowners? In 2004, the mean (average) household income for small business
owners was $143,000 and for nonowners was $56,000, according to a 2007 study
supported by the SBA.12 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.
How Many Businesses Do Veterans Own? Veterans own 14% of all firms.13
Disabled veterans own 1% of firms. Veterans make up 11% of the nation’s population
18 or more years old, and disabled veterans make up 3%.14
Small Business Employees
This section provides a brief look at the economic characteristics of small business
employees.
What Is the Economic Status of Small Business Employees? In 2006,
69% of private sector workers receiving public assistance worked for small businesses
and 62% of private sector workers not receiving public assistance worked for small
businesses.15 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.
Small Business Administration
What Has Been the Loss Rate on SBA Loans? 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%.
12 George W. Haynes, Income and Wealth: How Did Households Owning Small Businesses Fare
from 1989 to 2004? Small Business Administration, April 2007, available at
[http://www.sba.gov/advo/research/rs300tot.pdf].
13 U.S. Census Bureau, Characteristics of Business Owners: 2002. Table 4, available at
[http://www.census.gov/prod/ec02/sb0200cscbo.pdf]. This section refers to all businesses, not
just small businesses, but most businesses owned by individuals are small.
14 U.S. Census Bureau, American Fact Finder: 2005., “Veterans Status,” available at
[http://factfinder.census.gov/servlet/STTable?_bm=y&-geo_id=01000US&-qr_name=ACS_2
005_EST_G00_S2101&-ds_name=ACS_2005_EST_G00_].
15 U.S. Census Bureau, Current Population Survey: March 2006, available at
[http://www.census.gov/cps/].
16 U.S. Small Business Administration, FY 2006 Loss Report, available at
[http://www.sba.gov/aboutsba/sbaprograms/cfo/reports/index.html]. This included the 7(a), 8(A),
FIS 8a, Small Business Energy, Handicap Assistance, Veterans, Pollution Control, Import Export,
USCAIP (NAFTA) and RFC Business loans.