Maybe some day. Right now what we've got are estimates of those data, not always accurate and not always up-to-date. When you start to count businesses, you quickly realize that you have entered a kind of Wonderland, where things aren't always what they seem. Consider some of the data -- and some of the complications:
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Counting companies. In 1992 more than 21 million "businesses" filed tax returns. That doesn't mean we have 21 million companies in the United States. I filed one of those returns because I made a little extra money that year as a freelance writer. My wife filed one, too -- she works for a health-maintenance organization, but she has a small psychotherapy practice on the side. Our returns and 15 million others were from proprietorships -- from shop owners, plumbers, part-time accountants, craftspeople, and everyone else who works mostly alone. (Three-fifths of those sole proprietors run their business on a full-time basis.) The other 6 million tax returns were from corporations and partnerships. Only 4% of the 21 million income-generating enterprises reported revenues of more than $1 million.
A second method of counting companies is to tally only those with employees. In 1992 the United States had 5.7 million companies with at least one employee, up from 4.7 million a decade earlier. Big companies are rare even in that crowd. More than 50% of the 5.7 million employ fewer than 5 people. Ninety percent employ fewer than 20. Only 70,000 companies have more than 100 people on the payroll, and only 14,000 have more than 500.
Researchers often try to distinguish between "real" businesses -- the ones with employees -- and "casual" businesses, meaning me and all those other Schedule C filers who run some kind of moneymaking operation on the side. That's a valid distinction in principle, but in this electronically networked age it's hard to separate the two categories. The reason: people who seem to be sole proprietors may in fact be at the node of a virtual company -- and may be responsible for as much wealth creation (and as many tax dollars) as any old-style small business.
Consider Paul Farrow, founder of Walden Paddlers, a kayak manufacturer. Farrow works out of a home office in suburban Boston, alone except for a few leased employees. His kayaks are made by a nearby plastics fabricator. His 250 dealers in the United States, Canada, and Japan distribute $1 million worth of the boats to some 40 customers ranging from Eastern Mountain Sports and Recreational Equipment Inc., which operate more than 100 stores combined, to the single water-ski shop. Walden Paddlers is a "real" business, just one with an exceptionally small payroll. Today many such companies dot the economic landscape.
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What's "small"? Even among companies with employees, figuring out what a small business is can be tricky. Does "small" mean fewer than 500 employees (the Small Business Administration's definition)? Fewer than 100? In fact, when politicians and their constituents think "small business," they're usually envisioning struggling shops with a payroll of 5 or 10, not well-?established (and often thriving) companies with 495 workers.
Like Farrow and his virtual peers, some companies seem small at first glance and considerably bigger at second. Consider Novellus Systems, a Silicon Valley manufacturer of chip-fabrication equipment. Novellus designs the products, farms out manufacture of subassemblies, and then does final assembly and marketing. In 1993 it did this with 371 employees, who generated $113.5 million in sales. Just 12 months later it had 531 employees generating nearly $225 million in sales.
Unlike buildings, businesses don't stay the same size for long. Some small companies grow at a seemingly impossible rate. In 1987 computer maker Gateway 2000 had 11 employees and $1.5 million in revenues, small by any standard. In 1994 it had 5,000 employees -- and $2.7 billion in revenues. Gateway is unusual, sure. But there are many such anomalies, and they generate both confusion and acrimony. In the months leading up to the June 1995 White House Conference on Small Business, heads of many fast-growing companies argued that their concerns were being swamped by those of tiny, slow-growth businesses. "Big business and small business are well represented in Washington," the CEO of a growth-oriented software company told the Wall Street Journal. "But companies like [ours] don't have a voice."
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Hybrids and networks. Not far from where I live is a Mail Boxes Etc. franchise, owned by a guy named Steve Ochi. Ochi is the quintessential small-scale entrepreneur: he has one store and four employees. Most of the time he's behind the counter himself. But Mail Boxes Etc. isn't exactly a small company. Worldwide it has more than 2,600 stores and more than $1 billion in revenues. Other franchise companies are as big or bigger, right up to giant McDonald's. Individual franchisees may be small operators, but their livelihood depends as much on the decisions of a big company as on their own business acumen.
Franchising is growing. (See chart, "The Growing Number of Franchised Establishments," page 8.) In 1990 franchised units accounted for 34% of retail trade, up from 26% in 1975. Franchising's share is expected to jump another six percentage points by 2000. Franchising is also growing in complexity. "Conversion" franchises, for example -- acquisition or affiliation of existing businesses by a national chain -- turn the conventional franchise relationship on its ear. Nor is "franchisee" synonymous with "small business." In 1990, reports the SBA, about 40% of franchise owners owned more than one unit. That group includes the likes of Marriott, which owns 78 franchises.
