Small businesses account for 99.9% of US businesses. The country is home to 31.7 million small businesses, which employ 60.6 million people or 47.1% of the US workforce. This research outlines the projected growth of small businesses in the United States over the last 1-3 years in terms of market size, the number of employees, and the number of firms. It also highlights the factors affecting small business growth, such as legislation and economic stimulus.
Table of Contents
Small Business Growth Over the Next 1-3 Years
Number of Employees
- In 2018, small businesses in the United States employed 58.9 million employees.
- By 2020, the number of employees increased to reach 60.6 million employees.
- To calculate the CAGR, we relied on this CAGR calculator. The starting value is 58,900,000 (2018), the ending value is 60,600,000 (2020), and the number of periods is 2 (years). Based on these figures, the calculator states that the CAGR would be around 1.43%.
- Assuming that the market in the United States will grow at the same CAGR of 1.43% between 2020 and 2023, the number of employees is anticipated to reach 63.24 million by 2023. This projected number was calculated by using this reverse CAGR calculator. The starting value is 60,600,000 (2020), the CAGR is 1.43%, and the number of periods is 3 (years). Based on these figures, we calculated the projected market size over the next five years:
- 2021: 61.47 million
- 2022: 62.35 million
- 2023: 63.24 million
- According to the NAICS, small businesses with less than 100 employees account for 99.18 of the total number of small businesses (less than 500 employees) in terms of the number of employees. The calculation is explained in the attached spreadsheet. It is important to note here that the data from the SBA takes into consideration the nonemployer firms as small businesses. Thus, the difference between the data from the SBA and the NAICS. We assumed that this figure would be the same over the next 1-3 years. Thus, we calculated the projected growth for small businesses with less than 100 employees:
- 2021: 61.47 million x 99.18% = 60.96 million
- 2022: 62.35 million x 99.18% = 61.84 million
- 2023: 63.24 million x 99.18% = 62.72 million
- The number of employees in small businesses with less than 100 employees is anticipated to reach 62.72 million by 2023.
Number of businesses
- In 2018, the number of small businesses in the United States was 30.2 million employees.
- By 2020, the number of small businesses increased to reach 31.7 million employees.
- To calculate the CAGR, we relied on this CAGR calculator. The starting value is 30,200,000 (2018), the ending value is 31,700,000 (2020), and the number of periods is 2 (years). Based on these figures, the calculator states that the CAGR would be around 2.45%.
- Assuming that the market in the United States will grow at the same CAGR of 2.45% between 2020 and 2023, the number of small businesses is anticipated to reach 34.09 million by 2023. This projected number was calculated by using this reverse CAGR calculator. The starting value is 31,700,000 (2020), the CAGR is 1.43%, and the number of periods is 3 (years). Based on these figures, we calculated the projected market size over the next five years:
- 2021: 32.45 million
- 2022: 33.27 million
- 2023: 34.09 million
- Small businesses with less than 100 employees account for 98.2% of the total number of small businesses. We assumed that this figure would be the same over the next 1-3 years. Thus, we calculated the projected growth for small businesses with less than 100 employees:
- 2021: 32.45 million x 98.2% = 31.87 million
- 2022: 33.27 million x 98.2% = 32.67 million
- 2023: 34.09 million x 98.2% = 33.47 million
- The number of small businesses with less than 100 employees is anticipated to reach 33.47 million by 2023.
Market size
- Small businesses account for 43.5% of the country’s GDP. Their “contribution to the GDP of the USA was around $5.9 trillion in 2014, the last year for which data is available.” Thus, we assumed that small businesses would account for 43.5% of the country’s GDP between 2020 and 2023.
- According to the CBO, the GDP in the United States would increase steadily to reach $24.809 trillion in 2023.
- 2020: $22.111 trillion
- 2021: $23.029 trillion
- 2022: $23.916 trillion
- 2023: $24.809 trillion
- We calculated the market size of small businesses in the United States as follows:
- 2020: $22.111 trillion x 43.5% = $9.62 trillion
- 2021: $23.029 trillion x 43.5% = $10.02 trillion
- 2022: $23.916 trillion x 43.5% = $10.4 trillion
- 2023: $24.809 trillion x 43.5% = $10.79 trillion
- The estimated market size of small businesses will reach $10.79 trillion. However, we were unable to find the breakdown by business size (less than 100 employees and more than 100 employees).
Factors affecting Small Business Growth
Legislation
- In February 2020, the US government signed the Small Business Reorganization Act (SBRA).
- The SBRA offers new options for small-business debtors to handle large debts. “According to Business West, the SBRA accelerates reorganization for these debtors by streamlining some of the requirements associated with Chapter 11 bankruptcy. As with Chapter 13 bankruptcies, a trustee is named by the bankruptcy court to assist the debtor in crafting a reorganization plan. On the plus side, under the new law, the debtor maintains control of their business during this reorganization cycle.”
2. Tax Relief for Small Businesses
- According to the SBA, there are three opportunities for small businesses to reduce the amount of taxes they pay:
- Individual income tax returns, which include the reduction of individual income tax rates.
- Growth incentives for small businesses, including the increase and extension of bonus depreciation.
- Reduction of taxes on dividends and capital gains
3. Government Economic Stimulus Packages
- To help small businesses cope with the COVID-19 pandemic, the US government offered new economic stimulus packages, including the CARES Act, which provides “$376 billion in relief for American workers and small businesses.”
- The SBA Express Bridge Loan “enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly.” They are intended to “bridge the gap while applying for a direct SBA Economic Injury Disaster Loan.”
- The SBA Debt Relief “will pay 6 months of principal, interest, and any associated fees that borrowers owe for all current 7(a), 504, and Microloans, in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020.”
- The Paycheck Protection Program (PPP) offers “loan forgiveness for retaining employees by temporarily expanding the traditional SBA 7(a) loan program.”
