Small Businesses in America are Big

Monday, May 20th, 2013 By

small business in America considerably affect business growths.

Small business in America considerably affect business growths.

Small businesses in America represent 99.7 percentĀ  of businesses in the United States and employ more than 55 million American citizens. So think of a collection of people that you know. Roughly nine out of every 10 people you know, or simply meet on a typical day, work for a small business in the United States. Some may even work for a company that provides short term loans for bad credit. Furthermore, knowing whether the majority of small businesses in America are doing well is a near accurate barometer of how most of your family and friends are doing economically.

Small businesses in America showing no signs of current incentives to expand and grow

The National Federation of Independent Business (NFIB) compiles monthly and quarterly statistics on small businesses in the United States. Some of the areas covered in their “Small Business Economic Survey” include projected business expansion, earnings changes, sales changes and expectations, price estimates and changes, just to name a few.

The NFIB states that its federation includes some 350,000 members. Conducted among member businesses, the federation’s May 2010 “NFIB Small Business Economic Trends” survey discovered the following very interesting facts.

Small businesses report higher earnings

Small business earnings for the first quarter of 2010 have increased 9 percent, and up 12 percent from the end of the first quarter of 2009. The reason small businesses are experiencing higher earnings for April 2010 may be due to a rebound in the economy, but it still is too early to say whether this is the case.

Small business sales are rebounding

Small business sales peaked in late 2005, before the U.S. housing bubble burst. At this peak, sales for small businesses were at 15 percent. By early 2007, sales dropped to 5 percent. In January of 2008 that number dropped to -8 percent, and later dropped to -31 percent in mid 2009.

Since hitting that bottom, small business sales in the United States have risen. At last, sales were reported at -15 percent as of the first quarter of 2010, which is 30 percent below the 2005 peak of 15 percent. This 2005 number was taken before the beginning of the fallout of the housing bubble during that same year, and before the corporate banking derivatives in the autumn of 2008. Sales expectations have been in negative territory for 23 of the last 28 months, from January of 2008 to April of 2010.

In June of 2008, small business prices peaked at 32 percent. During the first quarter of 2009, small business prices reached a bottom of -25 percent. These prices declined for more than six months until early 2009. These statistics show that many small businesses, due to low sales, have had to lower prices to move inventory, which means that price deflation is occurring for many small businesses in the U.S. economy for over part of the past two years.

Small businesses borrowing less

The number of small business owners borrowing at least every three months hit its peak in April of 2006 at 40 percent. One year later, that number had dropped three percentage points to 37 percent. By the end of the first quarter of 2009, the percentage borrowing every three months had dropped seven points to 33 percent, and by April 2010, it had dropped a total of nine percentage points from its peak of 40 percent in 2006. This shows that small businesses, which are over 95 percent of the companies in the United States, are cutting back on expansion plans and, therefore, are not hiring as many new employees.

The ‘Citizen Consumers’ are the key

Capital expenditures by small businesses hit its peak in March of 2005 at 36 percent of the businesses surveyed, with capital expenditures hitting a low of 17 percent twice in December of 2008 and June of 2009. In April of 2010, it climbed just above the low at 19 percent. This shows that banks are lending less, partially due to the current banking crisis.

Also included is the fact that citizen consumers are significantly cutting back on discretionary spending and buying expensive new durable goods, if absolutely necessary. This is partially due to fears of the weak economy and losing their jobs. Many are using installment loans online to fund some purchases. And it is the U.S. consumer economy (which is over 75% of our nations GDP) that drives small business growth and expansion. It is the central factor that is contributing to the weakness in the current U.S. economy, which is clearly shown in the survey conducted by the National Federation of Independent Business.

Sources:

  • Wikipedia NFIB entry: http://en.wikipedia.org/wiki/National_Federation_of_Independent_Businesses
  • National Federation of Independent Business (NFIB): http://www.nfib.com/Portals/0/PDF/sbet/sbet201005.pdf
  • US Small Business Administration: Office of Advocacy: http://www.sba.gov/advo/press/06-17.html
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