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Small Business Vital to Growth Says Study

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April 2004--When it comes to job growth, small businesses are a vital part of the U.S. economy.

According to a recent study by the Yankee Group, small businesses hire 54% of all U.S. workers. Of more than 120 million working people in America, 66 million are employed by small and medium businesses-companies with less than 1,000 employees.

Most of these companies are very small, the study found. Of the 5.6 million small businesses operating in the U.S., 89% have less than 20 employees. Of the remaining 11%, 9% employ less than 99 people, and just 2% employ between 100 and 1000.

Still, this makes the nearly 600,000 small to medium businesses formed each year an important consideration for the many U.S. residents currently in search of work. The Yankee Group study showed that construction, manufacturing and healthcare were the industry sectors currently experiencing the most growth. And interestingly enough, the study also showed that small and medium businesses make up 99.8% of all employer firms in the United States.

Small businesses aren't always a stable source of employment, however. Though half of all small businesses formed survive over four years, forming an entrepreneurial small business can take a great deal of risk, which means smaller companies are more likely to fail than larger, more traditional ones. There are almost as many small businesses are dissolved each year as there are formed.

The Information Technology Solution Providers Alliance (ITSPA) says high technology costs may be a factor in the failure rate of small businesses. The ITSPA says that getting a return on their technology investments is often decisive in whether or not a new, small company is successful.

"Small and medium business decision makers have learned they must be very economical when they invest in technology to run their businesses," said Mike Lauricella, program manager of the Yankee Group's Small and Medium Business Strategies Advisory Service, in a recent press release.





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