The Small Business Administration just published a report on the extraordinary importance of small business to the overall national economy. The Office of Advocacy defines a small business for research purposes as an independent business having fewer than 500 employees.
In terms of results, small firms:
• Represent 99.7 percent of all employer firms.
• Employ about half of all private sector employees.
• Pay more than 45 percent of total U.S. private payroll.
• Have generated 60 to 80 percent of net new jobs annually over the last decade.
• Create more than half of non-farm private gross domestic product (GDP).
• Supplied 22.8 percent of the total value of federal prime contracts in FY 2005.
• Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).
• Are 52 percent home-based and 2 percent franchises.
• Made up 97 percent of all identified exporters and produced 28.6 percent of the known export value in FY 2004.
• Small innovative firms produce 13 times more patents per employee than large patenting firms, and their patents are twice as likely as large firm patents to be among the one percent most cited.
In 2006, there were 26.8 million businesses in the United States, according to Office of Advocacy estimates. Census data show that there were 5.9 million firms with employees and 19.5 million without employees in 2004. Small firms with fewer than 500 employees represent 99.9 percent of the 26.8 million businesses (including both employers and nonemployers), as the most recent data show there were more than 17,000 large businesses in 2004.
Over the past decade, small businesses created 60 to 80 percent of the net new jobs. In the most recent year with data (2004), small firms accounted for all of the net new jobs. Firms with fewer than 500 employees had a net gain of 1.86 million new jobs. Large firms with 500 or more employees lost more jobs than they created, for a net loss of 181,122 jobs.
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