NCPA - National Center for Policy Analysis

How Many Small Businesses Are There?

May 23, 2001

Small businesses are often touted as embodying the spirit of entrepreneurship in America. And they are hailed for creating new jobs and employing the majority of American workers. But exactly how many small businesses are there in the United States?

It depends on your definition of "small" and of "business," says Inc. magazine. Government agencies define those two terms in differing ways, and thus government statistics aren't consistent. In fact, the categories overlap:

  • In 1999, there were an estimated 5.7 million companies with fewer than 100 employees -- counting nonfarm companies with at least one employee in addition to the owner.
  • There were 12.8 million self-employed individuals in 2000, according to Census Bureau and Labor Department data, some of whom employ others as well -- so this category overlaps with that of nonfarm companies above.
  • There were 24.8 million business tax returns for 1999 -- but this includes people with part-time businesses.

The last category includes people who have home businesses -- who may be self-employed part-time or full time.

  • According to the research firm Cyber Dialogue, there were 21.4 million self-employed home workers in 1999.
  • The number of income generating home offices -- including full- and part-time self-employed workers, was 18.8 million, according to a September 2000 report by IDG.
  • But the number of self-employed people who were working at home full- or part-time in 1997 was only 4.1 million, according to the Bureau of Labor Statistics.

Because of all the possible ways of counting them, the number of small businesses can only be estimated. The best estimate, according to former Small Business Administration Research Director Bruce D. Phillips, is that there are 15 million to 17 million small businesses.

Source: John Case, "Counting Companies," State of Small Business 2001, Inc. magazine, May 15, 2001.


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