According to the California Association for Micro Enterprise Opportunity (CAMEO), micro-businesses (businesses with one to four employees) are the real job creators. From 2004 to 2010, micro-businesses created far more jobs than large firms. Micro-businesses created a net of 5.5 million jobs. Large businesses (more than 500 employees) lost 1.8 million jobs during this same period.
Micro-businesses have generally created more jobs than any other firm size. The only exception to this was in 2006 when micro-businesses created 1,000,960 jobs, and large businesses created 1,072,710 jobs.
Between 2009 and 2010, micro-sized firms were the only size of company that actually created any jobs at all.
California had the most jobs created by micro-businesses. Out of the ten states below, five were negative in total new jobs created.
|State||Net Jobs Created by Micro-Businesses|
Between 2009 and 2010, micro-businesses were net jobs creators in all 50 states. This is the only firm size that enjoys that distinction.
- Firms with 5-9 employees were net jobs creators in 41 states.
- Firms with 10-19 employees were net jobs creators in 11 states.
- Firms with 20-99 employees were net jobs creators in 6 states.
- Firms with 100-499 employees were net job creators in 10 states.
- Firms with more than 500 employees were net jobs creators in 17 states.
The smaller the business the more jobs were created during this time period. Firms with 20-99 employees suffered extreme job losses; losing 1.5 million. Firms with 100-499 employees suffered a loss of 1.0 million. The recession years were very hard for businesses of these sizes.
There were only 13 states that had a total positive net job creation that exceeded the net job creation by micro-businesses. If micro-businesses did not create so many jobs, 16 states would have had worse job losses than experienced and 31 states would have had net job losses instead of positive job creation.
Nevada Small Businesses
According to the Small Business Administration (SBA), which defines a small business as having fewer than 500 employees, 41.7% of all Nevada private sector jobs are with small businesses. Most of Nevada’s small businesses are very small as 78.9% of all businesses have no employees and most have fewer than 20 employees. This is probably due to the fact that Nevada is a very popular place to form businesses entities (corporations and limited liability companies). Many of the entities formed in Nevada do not have employees in the State and many are used as passive holding companies and have no employees at all.
Apparently the SBA does not provide statistics on micro-businesses. For more information on Nevada small businesses, please see the SBA’s report on the State.
Micro-Businesses and Innovation
It would be interesting to look at how innovative micro-businesses are compared to other firm sizes. Although I suspect that micro-businesses are very innovative, it would probably be difficult to objectively measure this. The Patent Office’s new micro entity status (which qualifies applicants for lower fees) may be one source of data in the future. One interesting fact is that California is the most innovative state in the union and it leads in the number of jobs created by micro-businesses.
We have seen a growing trend of start-up businesses being based on a virtual model with location independence and low investment in infrastructure as key features. Many solo entrepreneurs do not want the management headaches and overhead of hiring employees and choose to outsource or use independent contractors rather than hire employees. Yet these businesses can be very innovative. It does not take a lot of employees to develop new products and services or to improve old ones.