The State of Small Businesses in 2015

Business.com / Strategy / Last Modified: February 22, 2017

Small businesses are the forefront of our economy. Business.com gives a brief look inside small businesses and the current state in 2015.

 

Small businesses are the forefront of our economy. In fact, every minute a new business in the U.S. is started and according to some people, more than 50% of all workers will be self-employed by 2020.

Surprising to many, even with all of the interest in entrepreneurialism in America, there has actually been a downward trend of business dynamism; a decline in the rate of new firm formations and in the job reallocation rate over the last couple of decades. 

Company birth rate exceeding exit rate

This trend, according to the Bureau of Labor Statistics, is starting to reverse showing firm entry equal or exceeding firm exit in 2012. In mid-2013, establishment births were about 20 percent greater than births in 2009. This positive thread weaves through all aspects of small business operation in 2015. With established company births exceeding the exit rate of companies, this is a trend we haven’t seen since 2007.

Related: HR Issues Affecting Small Businesses

Two recent reports by Capital One and The Hartford Financial Services also show optimism is up: 50 percent of small business owners say current business conditions are excellent or good (up six points from the same quarter in 2014) and 77 percent of small business owners feel their business’s operations are successful.

To See The Results of These Studies and More, Download Our                                                                                                               State of Small Business in America Report Now

Another positive thing to note is that small business bankruptcies are down significantly. In 2013, small business bankruptcies were at 33,212, a decline of about 7,000 over the previous year. All good news as we charge forward in 2015.

The Remaining Caution Factors

The one area that still seems unclear is the uptick in employment from small firms. Compared to 2007, there is an uptick, but we are still not at the same levels as we were pre-2007, and some might argue that we will never be. There are various theories here from generational changes to technological innovations replacing the need for certain positions.

Related: Small Business Funding in 2015

It’s too early to tell what these employment trends will mean for the long term. The data may very well suggest that the previous downward trend reflects a sustained difference in the way we conduct business today. Just like in marketing and media in the U.S., where there is tremendous disruption happening based on the introduction of new technologies creating a “new normal” for these industries, we may be witnessing similar disruptions playing out in small businesses. Many small businesses are also family-owned and operated, and are having difficulty surviving from one generation to another.

To See The Results of These Studies and More, Download Our                                                                                                               State of Small Business in America Report Now

The small business facts you need to know:

  • U.S. small businesses employ 56.1 million of the nation’s private workforce (2012), larger than enterprise sector (500+ employees) which employs 51.6 million (U.S. Census Bureau).
  • According to the U.S. Census Bureau, if we define small business as those with 250 employees or less, the number of U.S. establishments with payroll is 7,4377,559 which is 99 percent of all total U.S. establishments with payroll (2013). There is an estimated 22 million firms with no payroll (updated data to come June 2015). 
  • Firms with fewer than 100 employees have the largest share of small business employment. 

Employment by firm size

Source: Bureau of Labor Statistics

  • According to ADP employment records, small businesses created 108,000 jobs in March 2015.
  • Commercial banks have eased their lending conditions and terms, though it’s still relatively tight compared to pre-recession conditions. While only 29 percent of small business owners said they’ve applied for a business loan over the last two years, 90 percent of those who applied for a loan were approved. In addition, nearly a quarter (24%) of all small business owners surveyed plan to apply for a loan in 2015.
  • The U.S. federal government reached its goal of awarding 23% of contracts to small businesses in 2014 for the first time in seven years.

What we do know is that small businesses are starting to smile again, thanks to increased profits and spending as 2015 rolls along.

Over the next few days, in celebration of Small Business Week, we will be publishing various sections of our Small Business Report to show you the trends around purchasing and earning, hiring and other HR issues, marketing spend and concerns, cash flow and funding and business development.

We hope you find this useful and feel free to send any comments to editor@business.com

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