Wednesday, May 18, 2011

Small (business) is beautiful

In honor of National Small Business week...

Most U.S. companies are small businesses.

The smallest of the small businesses are known as "non-employers" meaning that the business is run by a single individual. "Most are self-employed persons operating unincorporated businesses, and may or may not be the owner's principal source of income," according to the U.S. Census Bureau. There are 21.7 million of these small businesses, contributing just under one trillion dollars to the U.S. economy.

In the next group are the traditional small businesses, with fewer than 5 employees. These account for 3.6 million firms, and with about 1.6 employees on average, employ 6.1 million workers.

However, most American workers work for very large companies. Nearly 40 million workers work for the fewer than 2,000 American firms that could be considered the nation's giants - with 5,000 or more employees.

(On the chart, the number of companies is shown in red, number of employees in grey, and average payroll per employee in green.)

Of all states, Florida seems to be the home of small business. Less than 10 percent of Florida companies have 20 or more employees, and nearly 70 percent have less than 5 employees. Delaware and D.C. have the largest concentrations of large (500+ workers) companies.

The largest firms tend to pay more, on average, to their employees. The largest companies have payroll per employee of $48,000 while the smallest are closer to $38,000. However, those payroll statistics are skewed greatly by the multi-million dollar salaries paid to the executives of the nation's largest companies. According to a study conducted for the New York Times, the median executive pay was $7.7 million in 2009 and $9.6 million in 2010. The Wall Street Journal, using their own survey, reports similar trends.

While executive pay has shown rapid growth since the 1980s, the trends in business size have remained relatively constant over the past decade.

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