Small Businesses: How Important Are They To The American Economy?

Excerpted from Office of Small Business Administration Office of Advocacy’s FAQ

How important are small businesses to
the U.S. economy?
Small firms:
• Represent 99.7 percent of all employer fi rms.
• Employ about half of all private sector employees.
• Pay more than 45 percent of total U.S. private payroll.
• Have generated 60 to 80 percent of net new jobs annually
over the last decade.
• Create more than half of nonfarm private gross domestic
product (GDP).
• Supplied 22.8 percent of the total value of federal prime
contracts in FY 2005.
• Hire 40 percent of high tech workers (such as scientists,
engineers, and computer workers).
• Are 52 percent home-based and 2 percent franchises.
• Made up 97 percent of all identifi ed exporters and produced
28.6 percent of the known export value in FY 2004.
• Small innovative fi rms produce 13 times more patents
per employee than large patenting fi rms, and their patents
are twice as likely as large fi rm patents to be among the one
percent most cited.
Source: U.S. Dept. of Commerce, Bureau of the Census; Advocacy-funded
research by Kathryn Kobe, 2007 (
pdf); Federal Procurement Data System; Advocacy-funded research by CHI
Research, 2003 (; U.S. Dept. of
Labor, Bureau of Labor Statistics, Current Population Survey; U.S. Dept. of
Commerce, International Trade Administration.

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