Small Business Is Big Business
By Frank F Islam & Ed Crego, May 9, 2023 (Image credits: Tom de Boor, Dreamstime, Wallpapers.com, et al)
This past week (April 30 — May 6) was National Small Business Week (NSBW).
In 2023, the U.S. Small Business Administration (SBA), as in past years, sponsored and promoted NSBW as a time to recognize and celebrate the essential contribution that small business makes to the American economy. One of the online events the SBA convened to do this was a Virtual Summit held on May 2–3.
On those days, the Virtual Summit featured “educational workshops presented by event co-sponsors, access to federal resources, and networking.” Reviewing who these event co-sponsors were suggests that small business is big business for the big business sector.
Following, in order of the educational workshops on the summit agenda, is a list of those co-sponsors: Visa; T-Mobile; SCORE; Microsoft; Constant Contact; Meta; Grow with Google; Visa; T-Mobile; Worldplay by FIS; Pie Insurance; Square; Amazon; Zebra; and Tri-Net. (As indicated, Visa and T-Mobile sponsored 2 sessions.)
With the exception of congressionally-supported SCORE (Service Corps of Retired Executives) whose mission is “To foster vibrant small business communities through mentoring and education,” all of the co-sponsors are big businesses. And, in general, the “educational workshops” which they delivered at the Summit were paid advertisements to secure more small businesses as new customers.
As examples, consider the following:
Given the number of small businesses and the pivotal role that they play in job creation in the United States, it is completely understandable why these big businesses would reach out to them in order to grow their revenue. At the same it is a bit ironic, that in 2022 and the first quarter of 2023, some of these NSBW co-sponsors eliminated many jobs through layoffs.
According to the Economic Policy Institute, the layoffs at four of these big business behemoths in that time period were as follows:
Without a doubt, some of those employees who have been laid off will respond by starting up small businesses. By doing so, they will become contributors to a big business for the American economy.
That will be the case because small business is not just big business because it as a target of opportunity for the big business sector but because small businesses are the big business for the United States of America. They are its backbone.
As we wrote in our book, Renewing the American Dream, A Citizen’s Guide for Restoring Our Competitive Advantage:
Small businesses are located in every nook and cranny across this nation; they come in all shapes and sizes. Small businesses are job creators. Small businesses are the lubricants for society. Like grains of sand, they look insignificant standing alone next to a big business. But when you multiply their numbers by millions, small businesses become a larger contributor to our society than all big businesses put together.
Translating that rhetoric into a statistical reality, here are some facts regarding small businesses in the United States issued by the U.S. Small Business Administration Office of Advocacy in March of this year. In the U.S., small businesses comprise
- 99.9% of all firms
- 99.7% of businesses with paid employees
- 97.3% of exporters
- 46.4% of private sector employees (61.7 million workers)
- 43.5% of GDP
Drilling down deeper, from 1995 to 2021, small businesses created 17.3 million net new jobs, compared to 10.3 million net new jobs for large businesses. This means that small businesses accounted for 62.7% of the job creation during those years.
A question that the SBA frequently gets is why, if this was the case, does the small business share of employment remain at less than 50%. Their reasonable response is that “As small firms grow, their growth counts toward small firm job gains; if they pass the 500-employee mark, their employment gains are classified as large firm employment.”
The importance of those small businesses that become big businesses was highlighted in a study released in 2010 by the Kauffman Foundation titled “High Growth Firms and the Future of the American Economy.”
That study found that in any given year, the top 1 percent of firms account for 40 percent of jobs created. Within that category fast growing “gazelle” companies (three to five years old) account for approximately 10 percent of the net new jobs. The average company in the top 1 percent creates 88 new jobs annually, compared to two to three new jobs for the average firm in the economy as a whole. The track record of these high and fast-growing firms adds to the reasons to say that small business is big business.
Another reason is to say this is what entrepreneurs of business start-ups did during and have done since the pandemic years.
As we noted in an earlier blog, the U.S. Census Bureau’s Business Formation Statistics show that there were almost 5.4 million applications filed in 2021. This was 1.9 million more applications (a 53% increase) than in 2019.
A Hamilton project analysis found that the new business applications after the onset of COVID-19 through 2021 “had translated to near record levels of job creation.” Those new businesses ran the gamut from sectors “where existing businesses experienced severe declines & elevated exits in 2020, including restaurants and personal services” to startups in “online retail and data services.”
Small business applications continued to be strong in 2022. As Melissa Angell of Inc. reports, “Americans submitted 5 million new business applications in 2022, a notch behind the 5.4 million applications filed in 2021, the most popular year on record according to the data released by the U.S. Census Bureau.”
This brings us to the final reason for labeling small business big business. That is the accelerating trend toward more individuals becoming entrepreneurs and going into business for themselves.
The SBA Office of Advocacy, in the most recent data it published in March 2023, states that, “The number of non-employer firms has gradually increased from 15.4 million in 1997 to 27.1 million in 2019.”
While that increase may seem gradual, the growth of more than 75% between 1997 and 2019 is significant. It becomes even more significant when it is realized that the increase accelerated somewhat between 2014 to 2019.
And although the official data is not yet available for 2020–2022, based upon the new business applications, the national trend in growth for non-employer firms (those with no employees other than the business owner) will continue to increase. Individual entrepreneurship is becoming a way of life for Americans.
In conclusion, millions of entrepreneurs create jobs for themselves, millions more create jobs for themselves and others, some create small businesses and build them into big businesses. All those small businesses create opportunities for big business.
As we stated at the outset, small business is big business. That is why America and Americans need to think small to win big.
We will address what can be done to maximize the results from that process is our next blog. Till then, please go out and support a small business in your community. They are there for you and you should be there for them.