Let's play 20 Questions about small business

Each year the Small Business Administration compiles the top 20 most frequently asked questions and answers, ranging from what the SBA considers to be a small business to what the small business survival rate is during the first year.

Here’s the latest.

1. What is a small business?

The Office of Advocacy defines a small business as an independent business having fewer than 500 employees.

2. How many small businesses are there in the U.S.?

Reports released 2016-2017 showed 30.2 million small businesses. Eighty percent, or 24.3 million, had no employees (termed “nonemployers”), and 20 percent, or 5.9 million, had paid employees. The number of small employers has increased after a decline during the recession. The number of nonemployers has gradually increased, from 15.4 million in 1997 to 24.3 million in 2015 — the most recent statistics available from government sources.

3. What is the role of small businesses in the economy?

Small businesses comprise:

- 99.9 percent of all firms

- 99.7 percent of firms with paid employees

- 97.6 percent of exporting firms (287,835 small exporters)

- 32.9 percent of known export value ($440 billion out of $1.3 trillion)

- 47.5 percent of private sector employees (59 million out of 124 million employees)

- 40.8 percent of private-sector payroll

4. What percent of new jobs do small businesses create?

From 2000 to 2017, small businesses created 8.4 million new jobs while large businesses created 4.4 million. That equates to 65.9 percent of net new job creation.

5. How can small businesses generate two-thirds of net new jobs, but their share of employment is less than 50 percent?

As firms grow, they change employment size classes. So as small firms grow, their growth counts toward small firm job gains; but if they pass the 500-employee mark, their employment gains are classified as large firm employment.

6. What is the new business survival rate?

Four out of five establishments that started in 2016 survived until 2017 (79.8 percent). From 2005 to 2017, an average of 78.6 percent of new establishments survived one year.

About half of all establishments survive five years or longer. In the past decade, this ranged from a low of 45.4 percent for establishments started in 2006, and a high of 51.0 percent for those started in 2011. About one-third of establishments survive 10 years or longer.

7. How many businesses open and close each year?

In 2015, there were about 414,000 startups (firms less than one year old) and 396,000 firm closures. The share of businesses that were startups has hovered around 8 percent since 2010.

8. How many businesses do minorities own?

In 2012, 8 million businesses were minority-owned, or 29.3 percent of U.S. firms. Of these, 12 percent were Hispanic-owned, 10 percent were Black- or African American-owned, 7 percent were Asian-owned, 1 percent were owned by American Indians and Alaska Natives, and 0.2 percent were owned by Native Hawaiians and other Pacific Islanders.

9. How many businesses do women own?

In 2012, there were 9.9 million women-owned firms, and 2.5 million firms owned equally by men and women. This means that 12.3 million firms, or 45 percent of all classifiable firms, were at least 50 percent women-owned.

10. How many businesses do veterans own?

In 2012, veterans owned 2.5 million businesses, or 9.3 percent of U.S. firms. About one-fifth of these firms, or 440,000, had paid employees.

11. What percent of entrepreneurs are immigrants? In which industries are immigrant-owned firms more common?

In 2012, about one-seventh, or 14.4 percent, of business owners were immigrants. The industries with the greatest share of immigrant owners were accommodation and food services (29.1 percent of owners were foreign-born), and transportation and warehousing (27.5 percent).

12. Is millennial entrepreneurship increasing?

SBA Office of Advocacy research shows that in 2014, millennials were less likely to be self-employed than older individuals. This research also shows that the rate of self-employment among individuals age 15 to 34 has been gradually declining since 1990.

13. What percent of firms are family-owned? How does this compare to the percent of equally-owned firms?

About one in five firms (19.3 percent) are family-owned. Of these family-owned firms, about half are “equally-owned,” that is, 50 percent owned by one or more men, and 50 percent owned by one or more women. Hence, about one in 10 firms is both family-owned and equally-owned.

14. How are most small businesses legally organized?

The majority of nonemployer establishments are sole proprietorships (86.4 percent), while only 14.1 percent of establishments at small employer firms are sole proprietorships. Nearly half of the establishments at small employer firms are S-corporations.

15. What percent of firms are home-based?

A home-based business is operated primarily out of one’s home, but business activities may take place at other locations as well. The share of businesses that are home-based has remained relatively constant over the past decade, at about 50 percent of all firms. More specifically, 60.1 percent of all firms without paid employees are home-based, as are 23.3 percent of small employer firms and 0.3 percent of large employer firms. The industries in which businesses are most likely to be home-based are information (70.0 percent), construction (68.2 percent), and professional, scientific, and technical services (65.3 percent).

16. What percent of firms are franchises?

Overall, 2.9 percent of firms are franchises. More specifically, 2.3 percent of nonemployer firms are franchises, as are 5.3 percent of small employers and 9.6 percent of large employers.

17. What is the status of business startups?

The size of startups has fluctuated over the past decade. In 2015, startup employment averaged 6.0 employees per firm, slightly higher than the average for 2005—2015 of 5.9 employees. Average employment at firms of all ages has increased slightly during this period, from 22.4 employees per firm in 2005 to 23.8 employees per firm in 2015.

18. How are small businesses financed?

The most common source of capital to finance business expansion is personal and family savings (21.9 percent of small firms), followed by business profits and assets (5.7 percent), business loans from financial institutions (4.5 percent), and business credit cards from banks (3.3 percent).

19. What is the small business share of federal procurement?

In fiscal year 2017, 23.9 percent of contracting dollars went to small business, down from 24.3 percent in FY 2016 and 25.8 percent in FY 2015. Of agencies with at least $1 billion in eligible contract dollars, the ones that awarded the highest share of contracting dollars to small businesses were the Departments of Agriculture (59.5 percent), Interior (57.0 percent), and Commerce (42.9 percent).

20. How many small businesses are in high-tech industries?

In 2015, there were 250,865 small employer firms in high-tech industries, representing 98.1 percent of all employer firms in these industries. The majority of these small firms provide services in either computer systems design or architecture and engineering. Among small firms, the industries with the highest growth from 2013 to 2015 were software publishers and pharmaceutical and medicine manufacturing.

For more data see SBA.gov and the Survey of Business Owners at: Census.gov

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Sholeh Patrick is a Business Journal of North Idaho columnist. Email: [email protected]