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Small Businesses - The backbone of the U.S. Economy
Small businesses play a crucial role in the economy by providing jobs, fostering innovation, and contributing to local communities. These small businesses could be anything from a local restaruant, retail shop, small tech startups, consulting firms and a wide range of service providers.
What is a small business?
So what is considered a small business? When you hear the word small you might think of a small mom and pop shop which is for sure a small business. In general, small businesses employ fewer than 500 employees and in some cases have fewer than 100 or even 50 depending on the industry. In fact, according to the census bureau the majority of U.S. businesses have fewer than five employees. The annual revenue for small businesses typically falls below a certain threshold and can vary based on industry. For example, in the U.S., small businesses in retail might have revenue under $7 million annually, while those in manufacturing may have a higher threshold.
Whether a business has 5 employees or 100 employees small businesses are an essential part of the global economy.
Reasons Why Small Businesses Are So Essential
Job Creation: Small businesses are major job creators, especially in the United States. They employ a significant portion of the workforce. Even though large corporations tend to dominate in terms of revenue, small businesses employ millions of people, helping reduce unemployment and support local community engagement.
Competition and Innovation: Small businesses are often at the forefront of innovation. Their agility allows them to quickly adapt to market changes and introduce new products and services. Many groundbreaking innovations start in small companies or startups before expanding to larger scales.
Economic Growth: When small businessess thrive, they generate revenue through the sales of their goods and services. This revenue circulates within the economy, benefiting consumers, and employees.
Local Impact: Small businesses are deeply rooted in their local communities. They contribute significantly to the local economy, support other local businesses, and often play a vital role in preserving the unique character of neighborhoods.
Flexibility in times of change: Small businesses are often more flexible and resilient in times of economic change. While larger corporations may struggle to pivot or downsize quickly, small businesses can often make decisions and implement changes much faster.
Let's look at the numbers
There are roughly 33 million small businesses in the U.S. which makes up more than half the American workforce.
On average, 70% of small businesses make it past their first two years and 50% make it beyond year five.
The average salary for a small business owner/operator is $67, 456. payscale
California, Massachusetts, and Louisiana have the highest success rates in the U.S., whereas Washington, Kansas, and Michigan have the three worst rates. Zippia
Conclusion
Small businesses are indeed a crucial part of the global economy, and especially in the U.S., they contribute significantly to both local and national economic health. Running a small business can be very challenging especially in those first two years let alone running your business on a day to day basis thereafter.
Things can be challenging and I am here to help you with those challenges. Book a call today!
Darrin Brownlee
CFO Advisor & Consultant
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