Small businesses are often hailed as a vital segment of our national and local economies and a primary driver of U.S. financial growth.
But just what is a small business?
Is it based on a company’s number of employees or sales? Is it defined by the size of individual business locations (“establishment”) or the size of the company (“firm”) that owns those locations?
No matter how we define “small businesses,” there’s no question they drive economic growth and are created the way most businesses are: as small start-ups.
Firm Size
To many, a small business is based on the amount of money it makes and number of employees at all (rather than at each) of its business locations.
This definition of “size” aligns with the U.S. Small Business Administration’s (SBA) definition of a small business. SBA’s Table of Size Standards provides definitions for North American Industry Classification System (NAICS) codes, that vary widely by industry, revenue and employment.
It defines small business by firm revenue (ranging from $1 million to over $40 million) and by employment (from 100 to over 1,500 employees).
For example, according to the SBA definition, a roofing contractor is defined as a small business if it has annual revenues of $16.5 million or less. But an Asphalt Shingle and Coating Material manufacturer is defined as a small business if it has fewer than 750 employees.
These statistics help users understand how individual businesses that are part of a larger company or firm may be able to withstand economic shocks better than businesses with only one location.
For example, the nation’s 37,513 Limited-Service Restaurant (NAICS 722513) firms with fewer than five employees in 2017 accounted for 23.7% of the 157,214 firms in this industry but only 4.0% ($10.2 billion) of the total sales in this industry.
So, if our practical definition of “small” aims to capture 50% of the revenue of all firms in this industry, firms with fewer than 250 employees may be a good cutoff to use for “small” in this industry, as these firms accounted for 51.7% ($131.1 billion) of the total revenue of $253.3 billion in 2017.
Similar firm size data are also available by revenue size.
While there were only 236 Truck Transportation (NAICS 484) firms (of a total of 112,134 firms in the industry) with more than $100 million in revenue in the United States. in 2017, these firms accounted for 41.1% or $119.3 billion of the $290.5 billion in revenue for the entire industry.
So, in this case, a practical definition of “small” could be firms with less than $5 million in revenue.
While the Economic Census provides insight into the performance of businesses with more than one location, it also provides data tabulated for “Single-Unit” and “Multi-Unit” firms that make this comparison even easier.
For example, only 1,524 (of all 106,579) firms in the Offices of Real Estate Agents and Brokers industry (NAICS 5312) had more than one establishment but they accounted for nearly half ( $48.2 billion) of the industry’s $112.9 billion total revenue in 2017.
Among those multi-unit firms, those with 25 or more establishments accounted for more than half of the multi-unit firm’s total.
Establishment Size
To many, a small business is simply based on the number of employees at an individual business location rather than the total number of employees of a company that may own those businesses.
According to the Census Bureau 2018 County Business Patterns survey, more than half (54%) of all employer businesses in 2018 had fewer than five employees but they s only accounted for 5.5% of total employment in all industries.
There were only 8,155 establishments with more than 1,000 employees in the United States in 2018 and these large businesses employed 20 million or 15.3% of the total 130 million U.S. workforce.
The biggest businesses also accounted for more than 20% of the total annual payroll in 2018, paying their employees an average $73,590 a year compared to $52,743 for establishments with fewer than five employees.
In this case, if our own working definition of small businesses aims to reflect businesses that employ fewer than 25% of the workforce, an establishment employment size of fewer than 20 employees might work.
Differences by Sector
The Economic Census not only includes data on the number of establishments, employment, and payroll (as shown in CBP), but also business output measures such as sales, shipments and revenue
For example, 14,051 (49.3%) of the 28,460 U.S. Convenience Stores (NAICS 445120) in the had fewer than five employees and accounted for 33.4% of all sales in this industry in 2017.
In comparison, the 4,965 establishments with fewer than five employees in the Computer and Electronic Product Manufacturing industry (NAICS 3341) accounted for only 1.2% ($3.6 billion) of the industry total in 2017. The 639 establishments with more than 250 employees accounted for 67.7% of the industry’s shipments.
Sales, Shipment or Revenue
Data on the sales, shipments or revenue of an establishment provide a different perspective on the definition of “small business.”
For example, establishments with more than $5 million in annual revenue in the Ambulatory Health Care Services industry (NAICS 621) accounted for 59.3% of the revenue in this industry in 2017. That indicates that establishments with less than $5 million in revenue might be an appropriate definition of “small” for this industry.
Other Definitions of a “Small Business”
The way a business is legally structured (Legal Form of Organization or LFO) also signals importance of small businesses. Businesses organized as a corporation are often considered larger businesses while those that are sole proprietorships or partnerships are often thought of as “small”.
For example, if we compare the LFO Economic Census data for Janitorial Services (NAICS 561720) and Offices of Certified Public Accountants (NAICS 541211), we see that the majority of revenue in the Janitorial Services industry in 2012 was from C- and S-Corporations.
“C-Corps” business owners are taxed separately from their business. “S-Corps” business owners have a special tax status and typically don’t have to pay federal income taxes.
The vast majority of the revenue from accounting firms was from partnerships.
No matter how we define “small businesses,” there’s no question they drive economic growth and are created the way most businesses are: as small start-ups.
The Economic Census and other Census Bureau business s can help economic development organizations, chambers of commerce, and other groups tailor their resources to reach the businesses that need their assistance the most.
The quality of these data are key and the Census Bureau thanks all the businesses who completed their 2017 Economic Census survey.
Andrew W. Hait is an economist at the U.S. Census Bureau.
Story Ideas and Statistics
More stories
America Counts Home
Subscribe
Our email newsletter is sent out on the day we publish a story. Get an alert directly in your inbox to read, share and blog about our newest stories.
About
America Counts tells the stories behind the numbers in a new inviting way. We feature stories on various topics such as families, housing, employment, business, education, the economy, emergency management, health, population, income and poverty.
Contact our Public Information Office for media inquiries or interviews.
This story was filed under:
Business and Economy
Small Business
FAQs
How many businesses in the US have less than 500 employees? ›
The latest statistics show that there are 32.5 million small businesses in the US, which account for 99.9 percent of all US businesses (SBA, 2021). The Small Business Administration (SBA) defines a small business as a firm that has fewer than 500 employees.
What percent of businesses have less than 500 employees? ›According to the U.S. Small Business Association (SBA), small businesses of 500 employees or fewer make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees.
What percent of US businesses have less than 50 employees? ›| Size of establishment (number of employees) | Construction | Professional and business services |
|---|---|---|
| Total | 100.0% | 100.0% |
| Fewer than 50 | 60.4 | 39.3 |
| 50–99 | 14.0 | 12.2 |
| 100–249 | 13.7 | 16.8 |
| Total Employees | Number of Businesses |
|---|---|
| 5 - 9 employees | 1,913,721 |
| 10 - 19 employees | 817,604 |
| 20 - 49 employees | 414,381 |
| 50 - 99 employees | 154,255 |
Corporations Make Up 5 Percent of Businesses but Earn 62 Percent of Revenues | Tax Foundation.
How many small businesses in the US have employees? ›Nearly half of all U.S. employees are employed by a small business. Yet, despite the fact that over 80% of small businesses have no employees, small businesses employ 61.7 million workers. That's 46.4% of all US employees —a large percentage of employees when less than 20% of small businesses even have employees at all ...
What is a business with less than 5 employees called? ›The Small Business Administration (SBA) defines microbusinesses as those that have 1-9 employees. 2 You may see other definitions for different states or localities. For example, Vermont defines a microbusiness as one that employs fewer than five people and generates less than $25,000 in annual revenue.
Is 500 employees considered a small business? ›It defines small business by firm revenue (ranging from $1 million to over $40 million) and by employment (from 100 to over 1,500 employees). For example, according to the SBA definition, a roofing contractor is defined as a small business if it has annual revenues of $16.5 million or less.
What percentage of US businesses are small? ›Business ownership statistics
However, remember that small businesses compose 99.9 percent of all U.S. businesses.
81 percent, or 26,485,532 firms, have no employees (termed “nonemployer firms”) and 19 percent, or 6,055,421 firms, have paid employees (termed “employer firms”). There are 20,516 large businesses. 3. What is the role of small businesses in the economy?
Is 50 employees a small company? ›
The Small Business Administration defines a small business as businesses with 500 or less employees. The SBA has a number of size standards — including employee size and revenue size — depending on the industry. For the ACA (Affordable Care Act), it defines a small business as having fewer than 50 full-time employees.
Is 50 people a small company? ›Add your total FTEs to your total standard full-time employees to calculate the total number of employees. If your business has 50 or fewer employees, you are a small business according to the ACA.
How many companies in the US have over 5000 employees? ›Employer firms with five thousand employees or more made up 2,230 of the 6.1 million total firms in the United States in 2019.
Do most companies in the US have over 100 employees? ›Based on data from the U.S. Census Bureau, there were 6.1 million employer firms in the United States in 2019 (latest data). Firms with fewer than 500 employees accounted for 99.7% of those businesses. Firms with fewer than 100 employees accounted for 98.1%. Firms with fewer than 20 employees made up 89.0%.
How many employees does the US have? ›| Employment status, sex, and age | Not seasonally adjusted | Seasonally adjusted(1) |
|---|---|---|
| Nov. 2021 | Aug. 2022 | |
| Civilian labor force | 162,099 | 164,746 |
| Participation rate | 61.9 | 62.4 |
| Employed | 155,797 | 158,732 |
With small businesses accounting for 99.9% of all businesses in the United States, it's no surprise that 59.9 million Americans work at small businesses across the nation. Today, there are an estimated 33.2 million small businesses in the United States, 88.1% of which have fewer than 20 employees.
What type of business is formed by at least five but not more than fifteen persons? ›Domestic corporations are required to be formed by at least five (5) but not more than fifteen (15) incorporators who must have individual subscriptions of at least one (1) share in the company; incorporators are stockholders or members mentioned in the Articles of Incorporation as originally forming and composing the ...
What type of business organization makes up about 70% of all American businesses but only 6% of the total national revenue? ›According to the Internal Revenue Service (IRS), about 75% of all business are sole proprietorships. Most sole proprietorships are small, however. All together they generate only about 6 percent of all United States sales.
How many employees do most small businesses have? ›Note: A small business in this chart is defined as a business with fewer than 500 employees. Over 99 percent of America's 28.7 million firms are small businesses. The vast majority (88 percent) of employer firms have fewer than 20 employees, and nearly 40 percent of all enterprises have under $100k in revenue.
How many employees is small business? ›How Many Employees Does a Small Business Have? According to the US Small Business Administration, “small businesses” are defined as companies that hire fewer than 500 employees.
How many employees does a small sized business have? ›
SMEs are further subdivided into micro enterprises (fewer than 10 employees), small enterprises (10 to 49 employees), medium-sized enterprises (50 to 249 employees). Large enterprises employ 250 or more people.
What are the 5 types of small business? ›- Sole proprietorship. A sole proprietorship is easy to form and gives you complete control of your business. ...
- Partnership. Partnerships are the simplest structure for two or more people to own a business together. ...
- Limited liability company (LLC) ...
- Corporation. ...
- Cooperative.
The federal government generally defines a small business as one with fewer than 500 employees. Companies that fit the definition employ roughly half of the private-sector workforce.
What are the 5 types of employees? ›- Part-time employees.
- Full-time employees.
- Seasonal employees.
- Temporary employees.
- Leased employees.
The attribute used most often is number of employees; small businesses are usually defined as organizations with fewer than 100 employees; midsize enterprises are those organizations with 100 to 999 employees.
Is 300 employees a small company? ›A small business is a privately owned company like a corporation, sole proprietorship, or partnership. According to the U.S. Small Business Administration (SBA), a small business has no more than 1,500 employees and less than $38.5 million in average annual revenue, depending on your industry.
Is 300 people a small company? ›A company with fewer than 100 employees is generally considered a small-sized business, while one with between 100 and 1,500 employees is a medium-sized business.
Are most businesses in the US small business? ›There are 30.2 million small businesses in the United States, according to the Small Business Administration's (SBA) Office of Advocacy. Small businesses comprise 99.9 percent of all U.S. businesses.
What percentage of people in the United States work for small firms quizlet? ›10) Approximately one-third of people working in the U.S. are employed by small firms. 11) In most cases, when a company has at least 100 employees, it can afford to hire an HR specialist to handle recruiting, training, and compensating employees.
What percentage of all US businesses are classified as small businesses quizlet? ›More than 99 percent of all U.S. firms are classified as small businesses.
What percentage of Americans are not employed? ›
The unemployment rate in the US dropped to 3.5 percent in December 2022, falling below market expectations of 3.7 percent and matching the rates seen in September and July, which were the lowest since February 2020.
Why are there fewer employees? ›The pandemic caused a major disruption in America's labor force—something many have referred to as The Great Resignation. In 2021, more than 47 million workers quit their jobs, many of whom were in search of an improved work-life balance and flexibility, increased compensation, and a strong company culture.
What percentage of the population are employees? ›Overall, 63.3 percent of the population worked in 2021, little different from 63.5 percent in 2020.
Why stay under 50 employees? ›As companies grow and hire more employees, additional compliance burdens often accompany that growth. For example, many employers fear the dreaded 50 employee threshold – for good reason! 50 employees is the magic number that triggers an additional compliance burden for employers.
Is 30 employees a small business? ›What Is the Definition of a Small Business? The answer varies by industry, but a small business is one that has fewer than 1,500 employees and a maximum of $38.5 million in average annual receipts, according to the SBA.
Is 15 employees a small business? ›A “Small Business Employer” is defined in the Act as an employer with fewer than 15 employees.
What is a rule of 50 business? ›The Rule of 50 is a simple yet powerful equation that can go a long way in determining future company direction and success. Rule of 50: (Percentage of annual revenue growth) + (EBITDA as a percentage of revenue) should be ≥ 50.
What is the small business size standard? ›Federal contracts set aside for small businesses a concern that supplies a product it did not manufacture (which is what a retailer would do) is a “nonmanufacturer.” To qualify as small for Federal government contracting, a nonmanufacturer must: 1) have 500 or fewer employees; 2) be primarily in the wholesale or retail ...
How many employees does a big business have? ›Generally, large businesses are those in most mining and manufacturing industries that employ 500 or more individuals, or those that do not manufacture goods and have an average of $7 million in annual receipts. There are exceptions to these standards in some industries.
How many businesses in the U.S. have less than 500 employees? ›The latest statistics show that there are 32.5 million small businesses in the US, which account for 99.9 percent of all US businesses (SBA, 2021). The Small Business Administration (SBA) defines a small business as a firm that has fewer than 500 employees.
What is the largest number of U.S. business employees? ›
Walmart had about 2.3 million employees in 2022, the highest of all companies worldwide that year. Walmart also led ranking of companies by revenue in 2022, with a total revenue of about 600 billion U.S. dollars.
How many Americans have less than 5000 in savings? ›58% of Americans have less than $5,000 in savings.
More specifically, 42% have less than $1,000 in savings, while another 20% have more than $50,000 in savings.
| Total Employees | Number of Businesses |
|---|---|
| 50 - 99 employees | 154,255 |
| 100 - 249 employees | 89,365 |
| 250 - 499 employees | 33,467 |
| 500 - 999 employees | 19,058 |
According to data from the U.S. Census Bureau, a total of 98.1 percent of companies in the U.S. employ fewer than 100 people, with companies with less than than 10 employees accounting for 78.4 percent.
How many employees does the US have in 2022? ›The U.S. labor force is projected to reach 163.5 million in 2022. (See table 1.) The labor force is anticipated to grow by 8.5 million, an annual growth rate of 0.5 percent, over the 2012–2022 period.
What percentage of Americans are employees? ›(See table A-12.) The employment-population ratio increased by 0.2 percentage point over the month to 60.1 percent. The labor force participation rate was little changed at 62.3 percent. Both measures have shown little net change since early 2022.
How many workers does the US need? ›Related. We have a lot of jobs, but not enough workers to fill them. If every unemployed person in the country found a job, we would still have 4 million open jobs.
What is a company with under 500 staff called? ›In a press release from 2 October 2022, it was announced that businesses with under 500 employees will be classed as Small and Medium Enterprises (SMEs) for certain business regulation exemptions.
How many small businesses in the US have no employees? ›There are 32,540,953 million small businesses in the U.S. 81 percent, or 26,485,532 firms, have no employees (termed “nonemployer firms”) and 19 percent, or 6,055,421 firms, have paid employees (termed “employer firms”). There are 20,516 large businesses.
What percentage of businesses are under 100 employees? ›General Small Business Statistics
Statistics show that 5% of the U.S. workforce is employed at small businesses with one to four employees, 12.6% work at companies with five to 10 employees, 16.7% are employed at businesses with 20 to 99 employees and 14% work for organizations with 100 to 499 employees.
Is 400 employees a small business? ›
The federal government generally defines a small business as one with fewer than 500 employees. Companies that fit the definition employ roughly half of the private-sector workforce. They're eligible for many government aid programs.
What do you call a business with less than 10 employees? ›SMEs are further subdivided into micro enterprises (fewer than 10 employees), small enterprises (10 to 49 employees), medium-sized enterprises (50 to 249 employees).
What is a business with 10 employees called? ›Small-sized enterprises are companies with fewer than 50 employees and a medium-sized enterprise as one with less than 250 employees. In addition to small and mid-size companies, there are micro-companies, which employ up to 10 employees.
How many companies in the US have more than 5000 employees? ›Employer firms with five thousand employees or more made up 2,230 of the 6.1 million total firms in the United States in 2019.
How many employees are there in the US? ›| Employment status, sex, and age | Not seasonally adjusted | Seasonally adjusted(1) |
|---|---|---|
| Dec. 2021 | Dec. 2022 | |
| Civilian labor force | 161,696 | 164,966 |
| Participation rate | 61.7 | 62.3 |
| Employed | 155,732 | 159,244 |
According to data from the U.S. Census Bureau, a total of 98.1 percent of companies in the U.S. employ fewer than 100 people, with companies with less than than 10 employees accounting for 78.4 percent.
Which percentage of all businesses employ 20 or fewer people? ›18 percent of all US employees work for businesses with fewer than 20 employees.