SMALL BUSINESS, BIG IMPACT

Collectively, small businesses are anything but small

Small businesses employ more than half of all employees in the United States (64.4 percent), accounting for 61.7 million jobs. They are the lifeblood of the economy and in many ways still represent the American dream of taking an idea and growing that idea into a successful venture.

According to the US Small Business Administration, “small businesses” are defined as firms with fewer than 500 employees. While the upward end of that definition feels much bigger than “small,” 27 million small businesses do not hire any employees and 5.4 million have fewer than 20 employees.

During the pandemic across the U.S.

1,314,026 small businesses temporarily closed a location (21.7%)

Pandemic fallout

Unsurprisingly, small businesses were hit hard by the effects of the pandemic. From October 2020 to October 2021, one in five U.S. businesses shut down.

Despite the lingering effects of the pandemic, small business growth is ticking up — a 2.2% increase in 2022 over 2021 and an overall growth rate of 12.2 % from 2017-2022.

In metro Milwaukee, the trend in the total number of small businesses (defined for our purposes as having fewer than 100 employees) is down slightly over the long-term from a high of 39,157 in 2006 to 36,477 in 2011, a slide in large part due to the Great Recession. Since that time, the small business establishment number has recovered slowly, reaching 37,257 in 2020, the latest data available from County Business PatternsU.S. Census Bureau.

Metro Milwaukee top five categories of small business:

• Health care & social assistance

• Retail trade

423,879 small businesses reopened after closing down (7%)

1,017,31 1 small businesses permanently closed (16.8%)

• Professional, scientific, and technical services

• Other services (public administration, for example)

• Accommodation & food service

• Construction

Local breakdown

The importance of small business can also be seen in the percentages of total in employment and payroll. By enterprise, 31% of private sector employment in the metro area is at firms with fewer than 100 employees (246,143 employees).

Conversely, 69% (546,941 employees) is at firms with 100 or more employees.

Comparatively, metro Milwaukee ranks in the middle of the pack on small business establishments per 1,000 population in 2020 at 23.7, ranking 28th among the 50 largest metro areas in the U.S. Miami registered the highest per capita figure of the 50 at 33.2 while Riverside, CA had the smallest ratio at 16.9.

Small businesses experiencing the greatest contraction

Between 2010-2020, several business categories in metro Milwaukee experienced declines, including:

Small businesses at a glance

Source: U.S. Census Bureau

20% of small businesses are owned by women

30% of small business owners have a bachelor’s degree

$73 BILLION in small business loans have been funded since 2020

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Startups important to net new job creation

Research has suggested that dynamic metro area growth is most evident in startup activity. The number of startup businesses (with employment) per year has averaged 1,813 in the Milwaukee metro area since 2000. These startups account for net job creation averaging 11,250 per year. Net job creation for all other firm ages is negative on average, so startup activity is important to the job creation process.

The metro area has not ranked well in this regard. In a 2020 ranking of the 50 largest metro areas in startups per 1,000 population, the metro area ranked 41st per 1,000 population and 37th in net job creation per 1,000 in startup firms. Read more in this issue of Commerce for efforts underway to spur and support startup growth.

1.2 million jobs were supported by small business loans since the pandemic

98% of each industry is comprised of small businesses

18.7% of small businesses are MINORITY-OWNED

The highest percentage of owners fall in the 55-TO-64 AGE RANGE

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