Small businesses play an important part in the United States economy.  There are about 22.4 million non-farm firms in the U.S, according to 2001 data.  Small businesses represent more than 99 percent of all employers.  They also employ 51 percent of private-sector workers, 51 percent of workers on public assistance, and 38 percent of workers in high-tech jobs.  Small businesses account for nearly all of the self-employed, which comprise of 7 percent of the work force. 

In addition, small businesses produce two-thirds to three-quarters of all the net new jobs.  They also produce 51 percent of private sector output as well as represent 96 percent of all exporters of goods.  Small businesses play a role in federal contracting as well.  Small businesses obtain 33.3 percent of federal prime and subcontract dollars. 

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Women & Minority-Owned Enterprises

Women were full or part owners of 9.1 million businesses and the primary owners of 5.4 million of these.  In between 1992-1997, there was a 16 percent increase in the number of woman-owned businesses.  1997 was the latest year that comparable data was available. 

In 1997-the latest data available for minority-owned figures-Native American-owned firms had experienced an 84 percent increase in number to a total of 197,300 firms.  Over the same period of time, Asian-owned firms increased 30 percent to a total of 913,000 firms.  Hispanic owned firms also rose 30 percent to a total of 1.2 million firms, while African-American firms rose 26 percent to a total of 820,000 firms. 

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Employment

Small businesses create two-thirds to three-quarters of net new jobs.  However, the small firm's share of employment is about 50 percent.  The reason it stays at 50 percent, even though small businesses create more than half of the new jobs, is because in creating jobs, some small business, or firms, become large firms.  Of 110.7 million non-farm private sector workers in 1999, small firms with fewer than 500 workers employed 55.7 million and large firms employed 55 million.  Smaller firms with fewer than 100 employees employed 40.1 of the 55.7 million that fell within the fewer than five hundred category.

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Small Business Share In GDP

The private non-farm sector share of the GDP (Gross Domestic Product) fell slightly to 50 percent from 51 percent from 1992 to 1997.  This is not unusual though, because it has been fairly stable over the past two decades while only fluctuating slightly.  Also, preliminary data shows an increase of that 50 percent share to 52 percent in 1998 and 1999.  This is only a preliminary estimate however, as not all data has been compiled in the latest available reports. 

The two main factors that affect the share of small businesses in the GDP are the importance of small businesses within each sector as well as how much the economy shifts towards the sectors where small businesses are providing the highest share of the output.

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Small Business Roll In Federal Funding

In 1982, the Small Business Innovation Act created small business innovative research programs within federal research and development programs.  Since its inception in 1983 through 2000, there have been almost $11 billion in awards granted for over 59,500 projects.  This allows small business research firms to have the financial capabilities to perform research and development with commercial potential.  The funds are comprised in part from federal companies with a research and development budget of at least $100 million.  These companies are required to give a part of the funding to small businesses.  

During FY 2001, there were over five million individual government purchases from small businesses   according to the Federal Procurement Data System's Report on Annual Procurement Preference Goaling Achievements.  These acts were worth a total of over $50 billion.  This equaled 22.81 percent of all federal procurement, which is very close to the goal of 23 percent.  According to this same report, there were nearly 260,000 individual government purchases from small disadvantaged businesses, which were worth a total of over $15.6 billion, or 7.12 percent of all federal procurement.  In addition, there were over 62,700 individual government purchases from minority owned small businesses, which were worth a total of almost $6.28 billion, or 2.86 percent of all federal procurement.  Individual government purchases from women owned small businesses accounted for 2.49 percent of all federal procurement, which amounted to over $5.46 billion from over 394,000 acts.  Individual government purchases from veteran owned small businesses accounted for a mere 0.25 percent of all federal procurement.  This amounted to over $558 million from over 88,800 acts.  

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Bibliography

**Information has been compiled from the following publications**.

1. Small Business by the Numbers: 2001. http://www.sba.gov/advo/stats/sbfaq.pdf (Office of Advocacy)

2. Federal Procurement Report: FY 2001.  http://www.fpdc.gov/fpdc/fpr2001.asp (FPDC)

3. SBA Technology-SBIR/STTR http://www.sba.gov/sbir/

4. In broad terms, a small business is defined as any type of business that does not dominate its field of business. In the manufacturing field, small businesses are usually defined as businesses that employ less than 500 persons. In the services, small businesses are usually defined as businesses that generate less than $5 million in gross annual receipts.

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