Wednesday, November 26, 2008

Small Business Stats

These are some facts I received from the SBA's Office of Advocacy, which is sort of a BLS for small businesses, gathering lots of useful statistics: [PDF file]

1. "Since the mid-1990s, small businesses have created 60 to 80% of the net new jobs."

For more, go to

2. "Small businesses employ about half of U.S. workers."

3. "Two-thirds of new employer establishments survive at least two years, 44 percent survive at least four years, and 31 percent survive at least seven years, according to a recent study."

Well, so far, I'm in the top 44% so far.

4. "Very small firms with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with federal regulations."

I have advocated that small businesses with fewer than five employees and a gross income of less than $550,000 annually should have no regulations other than those guaranteeing payment of wages to workers. (I still haven't figured out what the best number is for the gross annual income cutoff and chose 550K because if a company hired five employees and paid them 50K each and had gross receipts of 550K, it would probably net around $200K-$250K, which is not unreasonable.) Criminal laws are sufficient to keep small businesses in check. Beyond that, onerous civil regulations are a form of corporate welfare to larger corporations, who have the capital to hire in-house counsel to advise them, to keep up with ever-changing laws, and to have a litigation defense budget. Small businesses, on the other hand, sometimes don't even know a law until they get sued, because they've been too busy trying to survive in the real world instead of reading regulations and cases.

5. "Commercial banks and other depository institutions are the largest lenders of debt capital to small businesses. They accounted for almost 65 percent of total traditional credit to small businesses in 2003. (This includes credit lines and loans for nonresidential mortgages, vehicles, equipment, and leases.) Credit cards account for much of the growth in small business lending over the past few years."

This might be one factor in the credit crunch--the more small businesses fail, the more bad loans on the banks' books.

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