Facts About Small Business
General
There are about 15 million small
businesses in the I nited States,
by size standards set by the U.S.
Small Business Administration.
About half of small businesses
operate full time, the rest part
time.
th e number of small businesses
has increased steadily during the
past .VI years. In 19X5, new
business incorporations (one
measure of new businesses) total
ed about 66X.904, a new record.
The previous record of 6.M .99I
new business incorporations was
set in 19X4.
Fiscal T ear 19X5 was a good year
for small business. Small business
income, as measured by sole pro
prietorship and partnership in
come, increased 12.J percent
during the first si* months of the
year compared with the similar
Employment
During I9XI-K2, small business
emplovment proved a moderating
force in the recession. Ih ir.n g
these years, small businesses pro
duced a total of 2.65 million new
jobs, while large businesses were
cutting their employment by 1.7
million. Thus all the 9X4,000 new
jobs generated in I9XI-X2 came
from small firms.
Small firms also have led employ
ment gains during the economic
recovery and expansion. From
October 19X4 through September
19X5, employment in industries
dominated by small businesses
(industries in which firms with
fewer than 500 employees ac
count for 60 percent or more of
sales or employment) rose 5.9
percrnt; employment in in
dustries dominated by large
businesses rose six-tenths of one
percent.
19X4 period.
Small businesses employ about
h alf of the private work force,
contribute 42 percrnt of all sales
in the country and are responsi
ble for .Mt percrnt of the gross
national product.
One out of every two new small
businesses will fail within (hr
first four years of operation,
studies show. O verall, a firm 's
chances of survival increase with
size; firms with 20 or more
workers have a 20 percent
grrater chance of survival than
firms with fewer than 20
Jobs generated by small firms
are more likely to be filled by
younger workers, older workers
and women. Many of these
workers prefer or are only able
to work on a part-tim e basis, and
thus can be more easily accom
modated by small employers.
Small businesses create two out
of every three jobs, and thus are
responsible for the m ajor cost in
initial on-the job training in basic-
skills.
Innovation
Studies show that the incidence
of innovation among small
business workers Ls signiflc antlv
higher than among workers in
large businesses. Small firms priv-
duce 2-*A times as many innova
tions as large firms relative to
the number of [versons employed.
Innovation coming from small hi-
tech firm s is expec ted to increase
in the coming years as a result of
the Small Business Innovation
Research Act. Under (he Act,
signed by President Reagan in
19X2, 12 federal agencies with
large research and development
budgets must direct an increasing
amount of R A D contracts Io
small firms
the source of most
innovations and new technologies
During the first three vears of
the Act, small firms received
$400 million in R A D contracts;
small firms are expected Io
rrceive another $400 million in
Fiscal 19X6.
Small businesses have been
responsible for more than half of
the new product and services in
novations developed since W orld
W ar II.
Almost every energy related in
novation of the past century has
come front small business
for
example, the air conditioner, (he
gasoline engine, the electric light,
the electric auto, and petroleum
cracking
workers.
February 4. 1987, JO BS, Page 11