What is a Small Business?
The U.S. Small Business Administration defines a small business as an independent business having fewer than 500 employees. Using this definition, as of 2019, there were over 40 million small businesses in the U.S. with over 80% of these being classified as ‘nonemployers’ – businesses with only one employee. We do not know, at this point, how many small businesses will survive the pandemic.
In terms of survival, 20% of small business startups make it into the second year of operation. About 50% survive 5 years and one-third survive 10 years.
About 30% of all small businesses are minority-owned. Of these, 12% are Hispanic, 10% Black, 7% Asian, and 1% Native American. Women-owned small businesses were 36%. Veterans owned slightly over 9%.
Structure of Small Businesses
Of small businesses 86% were structured as Sole Proprietorships. 7% as Partnerships, 5% as S-Corporations, and 2% as C-Corporations. About 14% of business owners are immigrants, with the greatest number of these (29%) operating in the food service industry. Transportation and warehousing took a close 2nd with 27%.
The rate of small business ownership by millennials is decreasing, and it is now less than the ownership of older individuals. About 19% of all small businesses are family-owned split 50/50 split between male or female managed. Real estate, accommodation and food service are the preferred family-owned businesses.
Home-based businesses are primarily operated from the business owner’s home and represent 50% of all small businesses. The industries in which businesses are most likely to be home-based are: information – 70%, construction – 68%, professional and technical service – 65%.
Franchises make up 3% of all small businesses.
Small Business Composition/Funding
Startup employment averaged 6 employees per business. The average employment of all companies was 23.8 people.
The most common source of funding for small businesses is owner’s savings and family contributions (22%). Loans from banks totalled 4.5% and credit cards 3%.
Federal government contracting was a major source of revenue for many small businesses. Over 23% of Federal contracting dollars were awarded to small businesses – with the highest departments being the Departmant of Argriculture (60%), Interior Department (57%), and the Department of Commerce (43.5).
There were over 250,000 small businesses involved in high-tech. That represented 98% of all firms in the high-tech industry. The majority of these firms are in the computer systems design and architecture and design sectors. Also, highly represented, was the software publishing.
Visit our website for FREE insights and articles. Additionally, our Resources/References information hosts a library of pertinent information relevant to managing a business.
Got a question? We’re here to HELP. Email us at : firstname.lastname@example.org.