What role do small businesses play in the economy?
By June 2025, there were 36.2 million small businesses in the US, making up nearly all businesses in the country—99.9%.
Small business development had been declining nationwide during the four decades before the pandemic. However, since 2020, this portion of the private sector has been driving the bulk of US job growth.
What’s considered a small business?
The Small Business Administration (SBA) generally defines a “small business” as any independent business with fewer than 500 employees.
How many small businesses are there in the US?
Small businesses are 99.9% of all businesses nationwide. According to an SBA report from June 2025, the US had 36.2 million small businesses.
These small firms employed 62.3 million people, or 45.9% of all private-sector employees. They were responsible for 88.9% of overall job growth from 2023 to 2024.
Small businesses make up nearly all businesses and the majority of job growth.
Share of the private sector by business size, June 2025
Since small businesses account for almost all of the businesses in the US, the demographics of small businessowners will essentially match those of all businessowners.
The latest data shows that men owned 53.7% of all businesses, including 64.3% of firms with employees and women owned 43.8% of all businesses, including 23.2% of firms with employees. Some organizations were owned equally between men and women: 2.5% of all businesses and 12.5% among those with employees.
White, non-Hispanic entrepreneurs owned 61.8% of businesses, while Black entrepreneurs owned 13.1%. Hispanic entrepreneurs were 16.2% of owners, and Asian entrepreneurs owned 9.8%.
How has entrepreneurship grown?
New business applications spiked after the start of the pandemic. Applications rose from 3.5 million in 2019 to 4.4 million in 2020, up nearly 25%. Total applications were at a high since at least 2005.
And the applications kept coming: applications have been above 5.0 million annually since 2021. A record high of 5.5 million was set in 2023. Potential businesspeople submitted 5.1 million applications in the first 11 months of 2025.
High-propensity applications reached a new high in September 2025
Monthly business applications, seasonally adjusted
A subcategory of business applications, called “high-propensity” applications, refers to businesses with a high likelihood of having a payroll, meaning the business plans to hire employees and pay wages.
According to Census Bureau data, applications for high-propensity businesses hit a cumulative high as of November 2025 with 1.8 million applications, about 16.1% greater than the year-to-date total in November 2024. The previous high was in 2023 at just under 1.8 million.
Economic forces like heightened inflation have introduced some post-pandemic volatility to the small business landscape. But in 2025, the numbers of both general and high-propensity applications were higher than pre-COVID levels.
How do small businesses impact the economy?
Despite the size and impact of the small business sector, the Bureau of Economic Analysis (BEA) says that data collection on small business activity is limited, particularly as it relates to gross domestic product (GDP).
The SBA did publish a summary of research, however, on small businesses and GDP in 2018. It showed that small businesses accounted for 43.5% of US economic activity in 2014, down from 48.0% in 1998.
The Congressional Budget Office notes that small businesses contribute to the economy by driving productivity and generating competitive pressure that forces larger businesses to innovate.
By business revenue, small businesses generated nearly $18 trillion in 2022, according to data by the Census Bureau, and they climbed 30.6% between 1997 and 2022. Revenue among large businesses, however, were nearly double the value ($33.1 trillion) and 25-year growth rate (68.3%) of small businesses.
Small business revenue has grown 30.6% since 1997 vs. 68.3% for large businesses.
Business revenue by size of business, 1997–2022
How does small business employment differ by industry?
Employment in some industries is more likely to come from small business than others. Small businesses accounted for the majority of employment in eight industries, the largest of which is a catch-all industry called “other services” at 85.0% of industry employment. Agriculture, forestry, fishing and hunting (83.2%) was second-highest and construction (80.7%) was third.
Small businesses accounted for less than half of employment in 11 industries. Management of companies and enterprises had the lowest share at 10.3%. Utilities (18.8%) was second-lowest and information (26.8%) was third.
Small businesses account for the majority of employment in eight industries.
Small businesses share of total employment by industry, 2022
How does small business employment differ by state?
Montana, Wyoming, and Vermont had the highest shares of small business employment, each with more than 60% of jobs coming from small businesses. The lowest share of small business jobs were in Florida (39.6%), Tennessee (41.5%) and Georgia (42.5%).
Montana had the largest share of jobs from small businesses — Florida had the lowest.
Share of total employment from small businesses by state, 2022
How does the government support small businesses?
The federal government has a history of supporting entrepreneurs to stimulate the small business economy. The SBA is a cabinet-level agency that provides support for small businesses through programs like the Microloan and State Trade Expansion (STEP) programs, which provide a government-funded seed pool for small businesses and startups.
Other agencies, such as the departments of Agriculture and Treasury, fund programs that small businesses can apply for either directly or through state agencies.
Dig in to more economic data and get the latest stats delivered to your inbox weekly by signing up for our newsletter.
