This is National Small Business Week when the nation recognizes the critical contributions of America’s entrepreneurs and small business owners.
While policymakers and the media focus on big businesses such as Big Banks, Big Tech, Big Ag(riculture), Big Tobacco, and Big Oil, small businesses are the nation’s economic backbone.
Just take a look at these 9 eye-popping statistics about the nation’s small businesses:
- 33.2 million small businesses in America
- 99.9% of U.S. businesses are small businesses
- 6.1 million small businesses (16%) employ workers
- 44% of U.S. economic activity ($5.9 trillion) is generated by small businesses
- 61.7 million workers are employed by small businesses representing 46.4% of all U.S. employees
- 12 million small businesses are women-owned (43.2%)
- $388.1 billion in revenue is generated by women-owned small businesses
- 10.1 million workers are employed by women-owned small businesses
- California is home to the most small businesses
While small-business formation may be strong today, the headwinds that small businesses face are strong.
COVID-19 may be in the rear-view mirror, but small businesses still struggle with the lingering impacts of the pandemic on labor and the stagflation that keep prices for inputs high.
In surveys, small business owners point to a number of challenges that they face today. Here are challenges that are persistent for entrepreneurs:
- Optimism declined for the 15th consecutive month – According to the latest NFIB Small Business Economic Trends report, the small business optimism index for March fell 0.8 to 90.1, which is below the series average of 98.2. This Index provides an indication of the overall health of small businesses in the country.
- Finding workers is still a huge headache – One out of three (35%) small business owners surveyed by Goldman Sachs’ 10,000 Voices initiative say that difficulty finding and retaining talent is their top concern.
- Credit is tight – Due to interest rate hikes, banks are lending to fewer small businesses. Just 14.2% of small business loan requests were granted in February of 2023 compared to 28.3% one year prior according to the latest Biz2Credit Small Business Lending Index.
- Inflation persists – Over half (52%) of small businesses surveyed by MetLife and the U.S. Chamber of Commerce say inflation remains the number one concern. This percentage is up a whopping 30 percentage points from early 2021, just before inflation took off.
- Commercial real estate is in trouble – A downturn in the commercial real estate market is driven by factors such as remote work, rising vacancy rates, and falling property values. Small businesses which depend on office workers for foot traffic–such as dry cleaners, coffee shops, cafes, and restaurants–may have survived pandemic closures, but are grappling with fewer customers for the long term.
- The economy is poor – Nearly half (47%) of small business owners surveyed by the National Federation of Independent Business describe the current state of the economy as “poor.”
The situation is not entirely gloom and doom for small businesses today. However, public policy plays a significant role in how small businesses can overcome economic challenges to grow and thrive.
Tomorrow, we’ll discuss policies that can help small businesses in today’s economy.