(This is my first diary.)
The promise "To help or protect small business." is standard fare during political campaigns. Have you ever wondered what defines a "small business"? If your thoughts run to images of small Mom & Pop operations, you may be surprised.
The Small Business Administration (SBA) is the arbiter of what makes a business "small" and the definition varies by industry and trade. As noted in the SBA Table of Small Business Size Standards, business size is determined by either yearly sales or the number of employees. From the table: "A size standard is the largest that a concern can be and still qualify as a small business for Federal Government programs. For the most part, size standards are the average annual receipts or the average employment of a firm."
The average standards by occurrence in the table are 500 employees or $7 million a year in sales. A very general rule-of-thumb is most manufacturers and wholesalers are judged by number of employees while other businesses are judged by yearly receipts.
Now that we‘ve established some average size perimeters, let’s see at how they fit...
Census Bureau data indicates there were 25,409,525 firms in the US in 2004. These firms are broken down into nonemployer firms (no payroll) and employer firms (with payroll).
Nonemployer firms comprised approx. 76.8% (19,523,741) of US firms in 2004 and generated approx. $887 billion in receipts. This works out to an average of about $45.4K per firm. Using our average size perimeters, 100% of these businesses would fall into the small business category. (I know there will be exceptions but this is an imperfect world.)
In our chosen year of 2004, there were 5,885,784 firms with employees and they broke down as follows:
- Firms with no employees as of 03/12, but with payroll during the year: 802,034 (3.2%)
- Firms with 1 to 4 employees: 2,777,680 (10.9%)
- Firms with 5 to 9 employees: 1,043,448 (4.1%)
- Firms with 10 to 19 employees: 632,682 (2.5%)
- Firms with 20 to 99 employees: 526,355 (2.1%)
- Firms with 100 to 499 employees: 86,538 ( .34%)
- Firms with 500 employees or more: 17,047 ( .07%)
Using our size average of 500 employees,
99% of employer businesses would be small businesses.
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Try as I might, I couldn’t find a breakdown of employer firm receipts for 2004 but I did find a breakdown for 2002. Of the 5,697,759 employer firms in 2002, approx. 95% had receipts of less than $5 million dollars.
By averaging our three percentages and employing the SWAG (Scientific Wild Ass Guess) method, I think we can safely say the small business designation would fit somewhere between 90% to 98% of ALL businesses in the US.
Now you know.
A few curious standards that caught my eye:
- Most farm related activities, including poultry production, have a dollar limit of $750,000... Except
"Chicken Egg Production" which has a limit of $12.5 million.
- While most Food Manufacturing classifications have employee limits of 500... Breakfast Cereal Manufacturers are allowed 1000 employees.
- The Beverage and Tobacco Product Manufacturing classification averages 500 employees... Except Cigarette Manufacturing which is allowed 1000.
- Most Fabricated Metal Product Manufacturers are limited to 500 employees, Small Arm and Ammunition Manufacturers are limited to 1000 and 1500.
Remember Mom & Pop? If Mom & Pop own a gift and novelty store, they can sell $7,000,000 worth of stuff a year. (Unless they have an Internet store too... then their sales can total $25 million.)
Resources
US Census Bureau - Statistics about Business Size
2002 Economic Census- Nonemployer Statistics United States
Non-employer Firms and Receipts by Industry, 2002 - 2006
SBA Table of Small Business Size Standards