- There are 31.7 million small businesses in America, which combined account for 99.9% of all U.S. businesses.
- Small businesses are credited with just under two-thirds of the net new jobs created since 2000, and employ roughly half of America's private sector workforce.
- The health of small businesses impacts the health of large corporations and financial institutions.
In terms of their impact on the economy, small businesses aren’t actually that small.
Small businesses is generally defined by the U.S. Small Business Association (SBA) as independent businesses having fewer than 500 employees. Based on SBA's definition, there are 31.7 million small businesses in America, which account for 99.9% of all U.S. firms.
Small businesses are credited with just under two-thirds of the net new jobs created since 2000, representing 97.5% of exporters, and employ just under half of America's private sector workforce. But, amid the labor shortage resulting in equal parts from the pandemic and the lack of properly skilled workers, small businesses are finding it hard to hire and retain workers. According to a U.S. Chamber of Commerce and MetLife poll taken in early October, 44% of small businesses that are actively hiring say they are finding harder to fill open positions. That comes despite the fact that there are more than 10 million job openings across the country.
For the economy to thrive, small businesses need to be in a position where they can grow. Their success drives up the economy and national spending, while their downfall can have an incredibly negative impact on the economy and inflation. Generally speaking, if small businesses are not doing well, corporations and financial institutions are also suffering.
COVID-19 had a drastic effect on small businesses. While some small businesses were able to successfully pivot, others either were unable to adapt or could not change their business model and went under.
Here’s the latest on how COVID-19 is impacting small businesses, the state of technology and small business, and more.
Pandemic aid for small businesses
In the Spring of 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security (CARES) Act to help small businesses recover from the pandemic. The CARES Act earmarked $2 trillion in financial relief for small businesses, individuals, and state local governments. Components of this law included the Paycheck Protection Program (PPP), stimulus packages, and changes to the business tax policy. This relief, combined with vaccines becoming widely available early in 2021, led small business owners to say they felt more optimistic about the potential for their businesses and the economy to eventually return to normal.
But, with the emergence of the delta variant, many small business owners now believe the path to recovery will take longer than they initially anticipated. According to the U.S. Chamber of Commerce MetLife poll, as of early October, 56% of small business owners don't expect a return to normal for at least another 6 months to a year.
As a result, to hasten the pace of recovery, many companies are considering mandating vaccinations. To be sure, 64% of small business owners support businesses in their area requiring vaccines for their employees, poll data shows.
How a higher corporate tax rate could impact small businesses
In the wake of the economic crisis brought on by the pandemic, small businesses are understandably concerned about any tax policies that might place an additional burden on their already-strained resources, such as the potential for a corporate income tax increase.
Congress is considering raising the corporate tax rate, which would impact the 1.4 million small businesses that are organized as C corporations. The vast majority of these small C corps have less than 20 employees, and a higher tax rate would significantly affect their profits. Some businesses have prepared by implementing a hiring freeze, which could have larger ramifications for the American job market.
The impact of technology on small businesses
During the past 10 years, the digital landscape has changed dramatically. The rise of social media, smartphones, artificial intelligence, and other new technologies has changed how business gets done. Through the internet, small businesses can now reach a bigger customer base than ever before. But implementing and installing these new technologies can be expensive for small businesses as well.
Today, the majority of small businesses use at least one major digital platform to reach their customers. This can be through listing their location and hours online or creating a chat box that lets them support their customers at any time of the day. Business-to-business (B2B) companies are increasingly using new tech platforms and applications instead of relying on cold-calling and emailing to generate sales leads.
Small business owners need to implement new technology into their operations to stay relevant and competitive. Because there are so many different types of technology that service businesses in different ways, small business owners should assess their needs and how their company can run more efficiently. Once they know what services to target, they should look for technology that solves those issues.
Support for small businesses
In the aftermath of the pandemic, consumers are increasingly looking to support businesses in their local communities. Now more than ever, these small business owners need the support of their local communities to not only stay afloat but also to grow and thrive.
For the latest on what's going on with small businesses, check out the U.S. Chamber’s Small Business Council activity.