To say small is big sounds pretty ridiculous, but it’s true when it comes to small business. When we think about small businesses many examples come to mind - examples like lawn care services, clothing boutiques, food trucks, tutoring services and many, many others.

In this blog post, I will begin with a high level view by examining some information about small business in the United States. Then I will dive deeper into the data, first by industry sector and then by state. I will finish with some concluding remarks about small business in the United States. The scope of this blog post focuses on the private sector. In other words, this post does not include any statistics or data about the public sector, which includes various government organizations.

Small business in the United States is big and probably much larger than you would suspect. As I began to research the statistics for small business I quickly came across some shocking numbers. Statistics for the United States reveal the following surprising facts about the private sector (Note: As mentioned above, data about the public or government sector is not included.) I was very surprised when I discovered that 99.9% of all businesses are classified as small businesses. Let that sink in for a moment. That excludes government organizations, but it includes all businesses in the private sector. So this statistic includes all the companies that you are familiar with like Apple, Google, Microsoft, Walmart, Target, Ford, GM, Wells Fargo, Chase, plus all other companies you can think of in every sector of the economy. There are more than 31 million small businesses in the United States. Another interesting statistic is 81% of small businesses, or 25 million firms, have no paid employees. They operate as self-employed sole proprietors and are referred to as solopreneurs. Of this group, 5.2 million are self-employed minorities. And there are more than 60 million employees working in small businesses which is 47.3% of all private-sector employees and 40.7% of private-sector payroll. The small business community also creates about 1.6 million net new jobs per year. The Small Business Administration did a multi-year study for the years 2000 through 2018 and found that 9.6 million net new jobs were created during that period by small businesses. By comparison during that same period large businesses created 5.2 million net new jobs. From this data you can see that the small business community has a significant impact on the U.S. economy.

How Is Small Business Defined

Before we dig into this topic deeper, we must answer the question, how is small business defined. The answer is, it all depends. I hate it whenever I hear that type of answer, but it’s true in this case, because it depends upon the industry sector that you are talking about. Consider the following examples.

Manufacturing

Construction

Retail

Transportation and Warehousing

For the industry sectors shown above here are the specific small business definitions. Notice how they have been tailored by industry sector.

Manufacturing: Maximum number of employees ranges from 500 to 1,500
Construction: Maximum of $36.5 million in annual receipts
Retail: 500 employee maximum
Transportation and Warehousing: Maximum number of employees ranges from 500 to 1,500

As a guideline, the Small Business Administration generally considers fewer than 500 employees to be a small business. You might wonder why there are different definitions by industry sector. One of the primary reasons is when companies are competing for government contracts as there are opportunities that the government provides for firms that qualify as a small business. The industry specific guidelines also come into play with offers to help small businesses secure SBA loans. However, to put these differing definitions in perspective, firms with less than 20 employees make up nearly 90% of all small business firms.

Alphabetical List Of The SBA Industry Sectors

The Small Business Administration classifies all small businesses into one of the 20 industry sector categories listed below and they report business data using these industry sectors.

pexels-rachel-claire-5865304.j_restaurant.jpg — **Industry Sectors 1 - 10**
01 - Accommodation and Food Services *(The image of a restaurant is an example of this sector)*
02 - Administrative , Support, and Waste Management
03 - Agriculture, Forestry, and Fishing and Hunting
04 - Arts, Entertainment, and Recreation
05 - Construction
06 - Educational Services
07 - Finance and Insurance
08 - Health Care and Social Assistance
09 - Industries Not Classified
10 - Information

**Industry Sectors 11 - 20**
11 - Management of Companies and Enterprises
12 - Manufacturing
13 - Mining, Quarrying, and Oil and Gas Extraction
14 - Other Services (except Public Administration)
15 - Professional, Scientific, and Technical Services
16 - Real Estate and Rental and Leasing
17 - Retail Trade *(The image of a clothing boutique is an example of this sector)*
18 - Transportation and Warehousing
19 - Utilities
20 - Wholesale Trade

The Top 10 Small Business Industry Sectors by Number of Employees

Now we are going to explore some key data about these industry sectors. The data was first sorted in descending order by number of small business employees and shown below is the detail for the top 10 industry sectors. For each small business sector the following employment data is provided:

Small Business Employment - This is the total number of small business employees in the specific sector. It does not include any employees from large businesses.
Total Private Employment - This represents the total number of employees in the given sector from both small and large firms.
Small Business Employment Share - This is a calculation of the percentage of small business employees in the given sector compared to the total private employment in the sector.
Note that I also included the data for the number of firms. Here is the specific data about firms included for each industry sector:
Number of Small Business Firms - This is the number of small business firms in the specific industry sector.
Solopreneur Firms - This represents the number of firms that operate as sole proprietors with no paid employees working in the firm.

As you scan through each sector, notice the magnitude of the numbers. You will start to really appreciate the significance of small business on the United States economy. At the end of the data section you will find a few key observations.

**1. Healthcare and Social Assistance**

Small Business Employment: **8,984,159**
Total Private Employment: **20,241,438**
Small Business Employment Share: **44.4%**
Number of Small Business firms: **2,591,786**
Number of Solopreneur Firms (i.e. no employees): **1,941,097**

**2. Accommodation and Food Services**

Small Business Employment: **8,542,661**
Total Private Employment: **14,088,211**
Small Business Employment Share: **60.6%**
Number of Small Business firms: **940,215**
Number of Solopreneur Firms (i.e. no employees): **402,772**

pexels-jopwell-1325735_golf shop.jpg — **3. Retail Trade**

Small Business Employment: **5,526,296**
Total Private Employment: **15,705,808**
Small Business Employment Share: **35.2%**
Number of Small Business firms: **2,739,144**
Number of Solopreneur Firms (i.e. no employees): **2,093,459**

**4. Construction**

Small Business Employment: **5,373,702**
Total Private Employment: **6,533,061**
Small Business Employment Share: **82.3%**
Number of Small Business firms: **3,194,482**
Number of Solopreneur Firms (i.e. no employees): **2,494,089**

pexels-andrea-piacquadio-845451_tech services.jpg — **5. Professional, Scientific, and Technical Services**

Small Business Employment: **5,190,980**
Total Private Employment: **8,905,549**
Small Business Employment Share: **58.3%**
Number of Small Business firms: **4,343,003**
Number of Solopreneur Firms (i.e. no employees): **3,535,071**

**6. Manufacturing**

Small Business Employment: **5,039,772**
Total Private Employment: **11,721,785**
Small Business Employment Share: **43.0%**
Number of Small Business firms: **592,574**
Number of Solopreneur Firms (i.e. no employees): **348,476**

**7. Other Services (Excludes Services in the Public Sector)**

Small Business Employment: **4,697,878**
Total Private Employment: **5,534,978**
Small Business Employment Share: **84.9%**
Number of Small Business firms: **4,435,573**
Number of Solopreneur Firms (i.e. no employees): **3,740,305**

**8. Administrative, Support, and Waste Management**

Small Business Employment: **3,754,463**
Total Private Employment: **11,897,056**
Small Business Employment Share: **31.6%**
Number of Small Business firms: **2,487,228**
Number of Solopreneur Firms (i.e. no employees): **2,143,437**

**9. Wholesale Trade**

Small Business Employment: **3,413,157**
Total Private Employment: **6,115,476**
Small Business Employment Share: **55.8%**
Number of Small Business firms: **694,170**
Number of Solopreneur Firms (i.e. no employees): **399,261**

**10. Finance and Insurance**

Small Business Employment: **1,909,993**
Total Private Employment: **6,408,168**
Small Business Employment Share: **29.8%**
Number of Small Business firms: **968,853**
Number of Solopreneur Firms (i.e. no employees): **732,196**

Interesting Observations about the Industry Sector Data

The top 5 industry sectors by employment account for 33.6 million employees which is 56% of the total of all employees in all sectors.
The top 10 industry sectors by employment account for 52 million employees which is 87% of the total of all employees in all sectors.

Top 10 States by Small Business Employment

Now we are going turn our attention to the data through the lens of the states. The following data is included:

Number of small business employees - This represents the total number of small business employees working in the given state.
Small business employment share - This is a calculation of the percentage of small business employees in the given state compared to total number of employees in the private sector for the given state.
Net new jobs created - This is the number of new small business jobs created (Note: as reported in the 2020 small business profile) less any closures or job eliminations.
Number of small business firms - This is the total number of small business firms across all sectors within the given state.
Number of Solopreneur Firms - This represents the number of firms in the given state that operate as sole proprietors with no employees working in the firm.

After the data section I have provided a few observations about the data by state.

**1. California**

Number of small business employees: **7,224,945**
Small business employment share: **48.5%**
Net new jobs created: **214,569**
Number of Small Business firms: **4,131,508**
Number of Solopreneur Firms (i.e. no employees): **3,374,050**

**2. Texas**

Number of small business employees: **4,768,938**
Small business employment share: **45.1%**
Net new jobs created: **227,487**
Number of Small Business firms: **2,835,813**
Number of Solopreneur Firms (i.e. no employees): **2,399,267**

shutterstock_93305092_new york.jpg — **3. New York**

Number of small business employees: **4,110,264**
Small business employment share: **49.8%**
Net new jobs created: **69,042**
Number of Small Business firms: **2,212,167**
Number of Solopreneur Firms (i.e. no employees): **1,751,378**

**4. Florida**

Number of small business employees: **3,494,174**
Small business employment share: **41.7%**
Net new jobs created: **133,441**
Number of Small Business firms: **2,693,524**
Number of Solopreneur Firms (i.e. no employees): **2,245,127**

welcome to pennsylvania._optjpg.jpg — **5. Pennsylvania**

Number of small business employees: **2,512,633**
Small business employment share: **46.2%**
Net new jobs created: **55,377**
Number of Small Business firms: **1,074,787**
Number of Solopreneur Firms (i.e. no employees): **849,036**

**6. Illinois**

Number of small business employees: **2,476,958**
Small business employment share: **45.1%**
Net new jobs created: **20,410**
Number of Small Business firms: **1,236,927**
Number of Solopreneur Firms (i.e. no employees): **985,260**

**7. Ohio**

Number of small business employees: **2,180,337**
Small business employment share: **45.3%**
Net new jobs created: **20,410**
Number of Small Business firms: **965,576**
Number of Solopreneur Firms (i.e. no employees): **785,833**

**8. Michigan**

Number of small business employees: **1,892,394**
Small business employment share: **49.0%**
Net new jobs created: **26,199**
Number of Small Business firms: **886,557**
Number of Solopreneur Firms (i.e. no employees): **715,824**

istockphoto-531315252-612x612_new jersey.jpg — **9. New Jersey**

Number of small business employees: **1,836,164**
Small business employment share: **49.9%**
Net new jobs created: **48,114**
Number of Small Business firms: **908,209**
Number of Solopreneur Firms (i.e. no employees): **716,918**

**10. North Carolina**

Number of small business employees: **1,710,890**
Small business employment share: **45.3%**
Net new jobs created: **62,614**
Number of Small Business firms: **934,604**
Number of Solopreneur Firms (i.e. no employees): **760,638**

Interesting Observations about the State Data

Analysis by Number of Small Business Employees

To analyze the state data for all states, I sorted the data in 2 different ways. The first sort is by the number of small business employees by state, from largest to smallest. Then I grouped the sorted data into groups of 10 states. For example, the top 10 states are first, followed by states 11-20, etc. Here is what the data reveals:

The total number of small business employees in these states: 32,207,697
Percentage of small business employees in this group of states across all states: 53.2%

The total number of small business employees in these states: 13,366,684
Percentage of small business employees in this group of states across all states: 22.1%

The total number of small business employees in these states: 8,396,535
Percentage of small business employees in this group of states across all states: 13.9%

The total number of small business employees in these states: 4,298,742
Percentage of small business employees in this group of states across all states: 7.1%

The total number of small business employees in these states: 2,286,424
Percentage of small business employees in this group of states across all states 3.8%

Analysis by Number of Small Business Firms

For this analysis the sort is by the number of small business firms by state, from largest to smallest. In a similar manner to the analysis by employee, I grouped the data into groups of 10 states. For example, the top 10 states are first, followed by states 11-20, etc. Here is what the data reveals:

The total number of small business firms in these states: 18,058,154
Percentage of small business firms across all states: 56.9%

The total number of small business firms in these states: 6,560,050
Percentage of small business firms across all states: 20.7%

The total number of small business firms in these states: 4,023,833
Percentage of small business firms across all states: 12.7%

The total number of small business firms in these states: 2,121,660
Percentage of small business firms across all states: 6.7%

The total number of small business firms in these states: 953,550
Percentage of small business firms across all states: 3.0%

Other Observations About the Analysis by State

States in Groups 1 and 2 have 45,574,381 employees which accounts for 75% of small business employees across all states.
States in Groups 1 and 2 have 24,618,204 firms which accounts for 78% of small business firms across all states.

Concluding Remarks

Nonprofits

So far in this blog I have not discussed nonprofits, but they are included in the data. These are organizations that exist to further a specific mission that is not directed at making a profit. Surprising to me, these organizations actually represent about 10% of the small business community. A 501(c)(3) is a specific type of nonprofit. This type has been recognized by the IRS by virtue of its charitable programs and its donors may deduct their donations to these firms from their federal taxes.

Most nonprofits are small as over 99% have fewer than 500 employees. To illustrate this further, the median employment of a nonprofit is 4 employees. This number seems unrealistically small until you realize that most nonprofits rely heavily on volunteers.

While the total business share of nonprofits and their employment has remained relatively stable over the last ten years, there is growth in charitable nonprofits that qualify as a 501(c)(3). Examples of these types of firms are religious, charitable, scientific, testing for public safety, literary, educational, fostering amateur sports, and prevention of animal cruelty. An interesting fact about these 501(c)(3) nonprofits is that employee pay is similar to that of employees at for-profit firms.

Why Do People Launch Their Own Business?

We have seen that there are about 31 million small businesses in the United States and these firms employ over 60 million people. So a very logical question is what are the primary motivations driving people to launch their own businesses? There are many reasons, but in a recent survey by Guidant Financial, the most prominent reason was they wanted to be their own boss as 55% of respondents selected that choice. This was followed by 17% that said they were dissatisfied with corporate USA, 16% who wanted to follow their own passion, and 12% who said because the opportunity presented itself. While small business owners tend to work harder they gain flexibility and 92% don’t regret starting their business.

Final Words

pexels-olya-kobruseva-7818105_big dreams_opt.jpg

Hopefully, after seeing the data about small businesses you agree that small business is actually big. Here are a few key takeaways:

Small business plays a significant role in the United States economy.
- Small business make up 99.9% of all U.S. businesses (over 31 million firms).
- The sheer number of employees (over 60 million).
- The on-going job creation (1.6 million net new jobs created per year and 9.6 million net new jobs in the 2000-2018 time period vs. 5.2 million for large businesses.).
- A significant number of self-employed minorities (5.2 million).
There is huge number of different types of businesses that are classified as small businesses.
- All the varied types of small businesses can be classified into one of the 20 industry sectors highlighted in this post.
- Examples of specific business types include ones such as landscaping and lawncare, hair salons, handyman services, fitness centers and gyms, day care, cleaning services, property management, realtors, graphic design, digital marketing, website design, event management, tutoring, catering, restaurants, wedding planners, bakeries, accounting services, photography, clothing stores, business consulting, IT services, auto repair, car detailing, bed & breakfasts, coffee shops, custom t-shirt makers, day spas, resume writing, personal training, carpet and upholstery cleaning, freelance copy writing, food trucks, painting, flower shops, electrician services, gift shops, commercial cleaning, courier services, career coaching, home inspectors, massage therapists, interior designers, home staging, dry cleaning, dog grooming, software development, legal services, tax preparation, small manufacturing firms, engineering services, elder care, construction services, and so on with a myriad of others.

If you are a small business owner, **congratulations** for being a part of the **small business community**! While your business may be small, together we make a big impact!

Data Source: Small Business Administration

Small Business Is Actually Big

How Is Small Business Defined

Alphabetical List Of The SBA Industry Sectors

Industry Sectors 1 - 10

Industry Sectors 11 - 20

The Top 10 Small Business Industry Sectors by Number of Employees

1. Healthcare and Social Assistance

2. Accommodation and Food Services

3. Retail Trade

4. Construction

5. Professional, Scientific, and Technical Services

6. Manufacturing

7. Other Services (Excludes Services in the Public Sector)

8. Administrative, Support, and Waste Management

9. Wholesale Trade

10. Finance and Insurance

Interesting Observations about the Industry Sector Data

Top 10 States by Small Business Employment

1. California

2. Texas

3. New York

4. Florida

5. Pennsylvania

6. Illinois

7. Ohio

8. Michigan

9. New Jersey

10. North Carolina