Small Business Employment Statistics: Importance of SMB

Small Business Employment Statistics: Importance of SMB

Many people want to start their own company to break free from the workplace rules and fulfill their dreams. The best chance to do that is to open a small business. However, many aspects of a business, including employment itself, can be overwhelming at first.

The following statistics demonstrate that more and more employees work for small firms. This is quite understandable since small firms constitute the vast majority of businesses out there.

Top Small Business Employment Statistics: Editor’s Choice

General Small Business Employment Statistics


Starting a business and dealing with employment can be a challenging task. So, it’s important to know every step of the process.

Here are some general numbers about small businesses and employment.

1. A whopping 30.7 million small businesses are in the US.

The percentage of small businesses in the US constitutes 99.9% of the total companies, according to the Small Business Administration statistics.

Keep in mind that a small business has less than 500 employees. Outside the US, this definition can differ—while the EU counts less than 50 employees, Australia has less than 20 workers for small businesses.

2. Small businesses account for 1.5 million new jobs every year.

It’s no wonder that small businesses produce the highest job creation, especially in the US. The Small Business Administration reveals that the jobs created by small companies make up a staggering 64% of the total opportunities in the US.

Thanks to elevated job opportunities, small businesses contribute to the economic growth of the country.

3. According to a CNBC/SurveyMonkey Small Business Survey, 52% of the respondents say that labor quality is the top challenge for small businesses.

Working for a small company is not as easy as it may seem. A recent CNBC and Survey Monkey survey reported that most business owners judge finding qualified employees as their top challenge.

To be successful, small companies need to recruit the right professionals and competent employees.

4. The number of small businesses with no employees stands at 24.8 million.

The most common small business generally includes self-employed individuals who work as sole proprietors.

The percentage accounts for nearly 76% of the total number of small businesses. While around 5 million small businesses have from 1–19 workers, the remaining 630,000 have 20–499 employees.

5. 37% of small businesses offer higher salaries to their employees than larger companies.

More than one-third of small business employees receive higher wages compared to big companies.

Furthermore, they offer additional benefits like more paid time off, an open PTO policy, and generous vacation policies. Small firms adopt this strategy to win their employees over.

Employment Demographics for Small Businesses


After scratching the surface of small businesses, let’s dive into some demographics including different countries, race, and gender.

6. 47.3% of the private US workforce is a part of a small business.

Notably, this is the percentage calculated on the total of all employed workers. The most recent United States workforce demographics prove that this rate varies depending on the industry. Surprisingly, the top three US industries for small business employment involve health care and social assistance, food services, and retail.

7. In Australia, small businesses with 5–19 employees have a survival rate of 77.6%.

Surprisingly, the small business survival rate increased as the number of employees got higher. Microbusinesses with 1–4 employees have a 69.3% survival rate, while medium-sized firms with 20–199 employees reach 82.2%. On top of that, large companies with over 200 workers have the highest survival rate of 85.6%.

8. Microbusinesses constitute 92% of all US businesses.

First of all, it’s important to mention that employment is determined by firm size. A micro company generally employs less than nine people, and it seems to be the most popular kind of private-sector business in the US.

The company size suggests that micro businesses generate the smallest amount of jobs in the private sector.

9. 56% of startups have at least one female owner.

Male vs female employment statistics for 2020 show that women have more jobs and ruling positions in businesses than the previous years.

Although women have made a lot of progress over the last years, there’s still a long way to go to achieve gender equality in the workplace.

10. 46% of small businesses owned by African Americans do not employ other people.

Small business demographics reveal that nearly half of African Americans owning a firm do not have any employees besides themselves. In addition, around 41% of them hire between two and five workers, and only 13% have more than six employees.

So, why do these small business employment facts claim that small firms hire less? The reason behind this is quite simple—most of these companies don’t have the capital or cash flow to recruit new people.

11. Veterans-owned small businesses account for 6.1% of all US firms.

According to the Department of Labor employment statistics, the most alarming issue is veterans who own these businesses are over 55. Since many veterans will soon retire, it is essential to find a way to fill the gap.

The most common industries in which veterans own small companies are the technical and construction sectors.

Small Business Owners Statistics


Since small businesses continue to be the drivers of innovation and employment growth, it’s crucial to know some valuable information about small business owners and their income.

Let’s check them out.

12. More than 86% of small business owners earn less than $100,000 per year.

It’s evident that the average small business income is way less than CEOs of larger companies. While most small company owners have a relatively modest annual salary, around 30% do not gain anything from their business. This shocking figure might frighten many people that want to venture into the entrepreneurship journey.

13. On average, a small business owner makes $67,919 per year.

The average income of small business owners mostly ranges between $30,000—$156,000 annually.

A significant factor influencing the yearly income is the geographical location. For example, a person who lives in low-income areas will gain much less than a person living in a high-income country.

14. The average age of successful small business owners is 45.

Some of the most successful young entrepreneurs like Mark Zuckerberg and Steve Jobs are considered an exception to the rule.

It’s not a secret that entrepreneurs need experience in the business field before founding their company. With that said, these small business owner demographics conclude that the most flourishing age to run a business is in the mid-40s.

Small Business Employment Statistics: The Takeaway

Finding the right people to employ in your business is not an easy task at all—a lot of job seekers probably want to be a part of your team, but not everyone is the right fit. Business owners find it challenging to hire new people since employees are the key to success or failure.

We hope that these small business employment facts will help you get familiar with how small companies work, how they influence the economy and survive in the market. Moreover, if you are planning to start your own business, these stats can help you understand what’s new and what you should expect from a small business.

Frequently Asked Questions

How many employees work for small businesses?


Small businesses make up the vast majority of firms in the US, providing many job opportunities and positively affecting the local economic growth.

These companies employ 59.9 million people, making up 47.3% of the total US private workforce. Note that this percentage doesn’t include public workers hired from government and federal institutions.

The Small Business Administration report indicates that the employment share varies from industry to industry, with most workers employed in the agriculture and construction sectors.

What percent of US businesses have less than 50 employees?


According to the Small Business Administration, businesses with less than 500 employees account for 99.9% of the companies in the country. In this case, the definition of small business equals firms with less than 500 employees. However, that is not true for the EU countries and Australia.

When it comes to small businesses, US companies with less than 100 workers account for 98.2% while those with less than 20 workers constitute 89%. Finally, we can conclude that companies with less than 50 employees would make up about 95%.

Why are small businesses important to the US economy?


Small businesses are an essential part of the US economy. They produce about two-thirds of new jobs and generate about 50% of the gross domestic product (GDP). Apart from contributing to the overall economic well-being, small businesses bring innovation and competitiveness to the market.

In addition, small companies constitute 44% of the overall US economic activity, so it’s no wonder they are crucial to the country’s economy. However, over the last years, this rate has decreased progressively.

How to hire employees for a small business?


One of the best things about having your own business is that you have more freedom and independence. However, hiring additional employees can affect that dynamic. Recruiting the right person for your business can be quite challenging —that’s why it’s important to be clear about who you want to hire and the skills required for the job.

Qualified skills and excellent communication are crucial factors that define a good hire for your company. The right employee should have professional skills, motivation, and the ability to learn, so you will want an employee with those qualities. 

How to manage employees in a small business?


As a first thing, business owners need to find the right person for the job position. When it comes to building and managing a solid team of employees, proprietors need to follow some simple steps. They need to communicate clearly and set expectations, provide training and support and make sure that the employee’s strengths apply to the position.

Moreover,  they need to allow employees to participate in decision-making and the possibility to grow in the company. And the most important thing is to always thank your team for the job done. 

What percentage of employees are working for small businesses compared to large businesses?


The most common misunderstanding about employment is that the larger companies are more successful and, therefore, they create the most job opportunities. However, that’s not the case at all—and here’s why. 

It’s no doubt that large corporations hire many American workers. Still, small businesses are the top job creators and the backbone of the country’s economy. With many growing small businesses, it’s only normal that 64% of the jobs created in the country belong to these companies.

What percentage of jobs do small businesses create?


Small businesses create the majority of jobs in the U.S. In fact, small businesses account for 64% of new jobs created in the U.S between 1993–2011. This translates to 1.5 million jobs annually. Moreover, new companies account for all new jobs in the U.S and almost 20% of gross job creation.

These small business employment statistics indicate that creating jobs doesn’t depend on the business’ success and size—small firms are the primary source of employment in the U.S economy.

Sources

AARP, AEO Works, ASBFEO, Ballotpedia, Census, CNBC, Fundera, Fundera, Indeed, PayScale, Small Business Administration, Small Business Administration, SVB, Wharton