Essentials of Entrepreneurship: A Practical Approach

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Importance of Entrepreneurs and Small Businesses

Next Section: The Entrepreneurial Process

Entrepreneurs and small businesses are continuing to have a huge impact on the economy of the United States. Below are some examples of the impact of small firms:

• Represent more than 99.7% of all employers
• Employ more than half of all private sector employees
• Pay 44.5% of total U.S. payroll
• Generate 60% to 80% of  net new jobs annually
• Produce 13 to 14 times more patents per employee than large patenting firms. These patents are twice as likely as large firm patents to be among the one percent most cited.
• Are employers of 39% of the high tech workers (scientists, engineers, computer workers, etc.)¹⁰

Furthermore during 1999-2000, small businesses created three-quarters of U.S. net new jobs (2.5mm of 3.4mm total). During the 1990s, small business net job creation fluctuated between 60% and 80%. Start-ups in the first two years of operation accounted for virtually all of the net new jobs in the economy.¹¹

Further evidence is available that entrepreneurs are having a huge impact on the economy of the United States.  For example, as seen in Figure 1-2, the number of new company incorporations remained steady during the 1990s in the range from 151,000 to 188,000 with an average of 165,000 per years.

Business Starts

Figure 1-2.  New Business Startups and Resulting Employment in the United States

The number of new employment positions from the startups during the 1990s ranged from 800,000 to 927,000 with an average of 836,000 new positions initiated each year.

Of course, there are business failures every year.  Figure 1-3 includes the number of business failures each year in the period 1990 through 1998. Data for 1999 was not available at the time of this book’s writing.
 

Business Failures

Figure 1-3.  Business Failures

The number of business failures ranged from 60,000 to 97,000 and averaged 77,000 per year.  Note that this number is the total number of business failures and is a small percentage of the total number of companies that exist.

Next Section: The Entrepreneurial Process
 

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