Small businesses across the United States face dire circumstances following the COVID-19 outbreak. While each individual small business might seem inconsequential to the broader economy, in aggregate, these firms are critical to the country’s financial well-being.
According to the most recent data from the U.S. Census Bureau, small businesses with fewer than 50 employees make up approximately 95 percent of American business establishments and employ 40 percent of private sector workers. These 7.4 million small businesses (or 2.27 per 100 residents) also account for roughly a third of total private sector payroll.
Unfortunately, research shows that small businesses and their workers are particularly vulnerable during recessions and other periods of economic hardship. A recent survey conducted by the New York Fed found that even prior to the pandemic, 64 percent of small businesses faced financial challenges in the preceding 12 months. The same survey reported that a two-month loss of revenue would cause 86 percent of firms to take a serious financial action, such as using the owner’s personal savings, taking out a loan, or cutting staff salaries.
Moreover, small businesses in some industries have a larger economic impact than others. Among small businesses with fewer than 50 employees, those in accommodation, food services, and retail trade—coincidentally, the sectors hit hardest by COVID-19—employ the most workers. These industries, combined, account for more than 16 million employees and $362 billion in annual payroll.
Like the businesses themselves, small business employees are also more financially vulnerable than their large-firm counterparts. Data from the Bureau of Labor Statistics shows that fewer small business employees have access to retirement benefits, healthcare benefits, paid sick leave, life insurance, or disability insurance. Troublingly, only half of employees in small businesses have health insurance through their company and only two-thirds have paid sick leave.
While small businesses are a critical component of the national economy, some parts of the country depend more on small businesses than others. To find the states with the most small businesses, researchers at Construction Coverage, a review website for workers’ compensation insurance and construction software, analyzed the latest data from the U.S. Census Bureau. The researchers ranked each location according to the number of small businesses per 100 residents. Researchers also included statistics on the total number of small businesses, the number of retail, accommodation, and food service businesses, and the share of workers who are self-employed. For the analysis, small businesses were defined as those employing fewer than 50 workers.
The analysis found that Ohio is home to 235,677 small businesses, which is 2.02 for every 100 residents. Out of all U.S. states, Ohio has the 9th fewest small businesses per capita. Here is a summary of the data for Ohio:
- Small businesses per 100 residents: 2.02
- Number of small businesses: 235,677
- Number of retail, accommodation and food service small businesses: 59,921
- Share of workers that are self-employed: 7.7%
- Population: 11,689,442
For reference, here are the statistics for the entire United States:
- Small businesses per 100 residents: 2.27
- Number of small businesses: 7,428,968
- Number of retail, accommodation and food service small businesses: 1,669,980
- Share of workers that are self-employed: 9.8%
- Population: 327,167,439
For more information, a detailed methodology, and complete results for all states, you can find the original report on Construction Coverage’s website: https://constructioncoverage.com/research/cities-with-the-most-small-businesses