Foxtail Research

We are in an era of slow economic growth, roughly at the rate of 0.8% per annum. I had mentioned in one of my earlier blogs that Disruption and Innovation are paramount to propel growth and to generate opportunities for ourselves and for our next generation. I analyzed Venture Capital deals data to uncover regions which are showing promising Entrepreneurship ecosystems. While startups are blossoming and growing into bigger size businesses with Venture Capital funding, there is this other side of the business ecosystem where the Main Street is ensuring sustainability and growth in the economy through the small business ecosystem. Here in this blog, I share my analysis on the small businesses (Main Street) business ecosystem across the nation.

Small businesses account for half of US GDP. They employ half of US employees. Small business owners take the initiative and invest their time and money to provide services for the community and nearby areas. Almost 80% of the small businesses operate without hiring employees (self-employed). Gig-economy has provided opportunities to be self-employed and is preferred by flexibility-loving people who can put their skills to work for companies as contractors or freelancers on a pay-per-hour basis. As small businesses grow from no employees to 5 to 10 to 50 to100 and further, they become a major source of employment. Thus Small businesses are an indicator of future growth. In this article, I analyze small businesses with no employees and small businesses with less than 20 employees.

In one of my previous blogs (https://www.foxtail-research.org/analysis-of-venture-capital-deals-data-reveals-new-regions-with-promising-innovation-potential-apart-from-california-massachusetts-new-york/), I developed a metric “per-capita entrepreneurship” to measure and analyze the current entrepreneurship and investment scenario across all the states in the nation and how this metric can be used for analysis and comparisons. In a similar line of thinking, I analyze the Main Street ecosystem with Small business data with businesses having no employees and less than 20 employees. As with venture capital data, I rank the states on a per-capita basis to identify states with growth potential.

Methodology

I collected data on three sets of information:

• Small business establishments data from US census website¹. I collected information for the years 2012 to 2022. The latest available dataset is for the year 2022. The dataset has information on the number of firms, establishments, payroll, receipts (for years ending in 2 and 7) by state, establishment size and NAICS (North American Industry Classification System) for each of the years. I filtered data to get information on establishments with less than 20 employees for all the NAICS.

• Small business establishments with no employees data from US census website². I collected information for the years 2012 to 2023. The latest available dataset is for the year 2023. The dataset has information on the number of establishments and receipts in 1000s of dollars by state, and NAICS (North American Industry Classification System) for each of the years. I collected the dataset for all the NAICS.

• The 18-65 age population in each state. This is the population that will be actively engaged in higher education or will be in the workforce. I arrived at this information based on data available on the US Census data website³. The US Census bureau website had datasets of civilian population estimates for each age for each calendar year. I processed the datasets to get the population estimates for 18-65 population for the years 2012 to 2023.

From datasets in 1 and 3, I arrived at the number of firms and number of employees (with less than 20 employees size) for every 100 persons in the working age population of 18-65.  I summed up the number of firms or employees for all years from 2012 to 2022. I summed up all the populations from 2012 to 2022. Dividing the former over the latter gave the number of firms or employees for every 100 persons in the working age population. . The higher the number the more firms and employees are in small businesses in that state.

From datasets in 2 and 3, I arrived at the number of firms (for businesses with no employees) for every 100 persons in the working age population of 18-65 and at self-employed earnings (PCSE) .  PCSE is the amount of receipts earned in 1000s for every person in the working age population in that state. I summed up the number of firms or receipts for all years from 2012 to 2023. I summed up all the populations from 2012 to 2023. Dividing the former over the latter gave the number of firms for every 100 persons in the working age population and the per-capita self-employed earnings (PCSE).  The higher the number the more firms and employees are in small businesses in that state. The higher the PCSE, the higher is the state earning from firms with no employees.

Results, Analysis and Discussion

For Establishments with less than 20 employees

Below (Table 1) is the table of states with the average number of firms for every 100 people in the working age population. The rank is provided alongside in a separate column. From this table, Montana has on average 4.6 firms (with less than 20 employees) for every 100 persons in the working age population and is the state in the country which has the highest number of firms in this category and is ranked 1 the nation. Without this level of analyzing the data, the states of California, New York, Florida, Texas always come as the top 4 states with the highest number of small business firms due to their high populations.

Table 1: States along with average number of firms with less than 20 employees for the working age population

State	Average Number of <20 employee size firms (for every 100 persons in the working age 18-65 population)	Rank
Montana	4.6	1
Wyoming	4.5	2
Vermont	3.8	3
South Dakota	3.6	4
North Dakota	3.6	5
Maine	3.5	6
Colorado	3.4	7
Idaho	3.4	8
New York	3.3	9
Florida	3.3	10
Alaska	3.3	11
Nebraska	3.2	12
Oregon	3.2	13
Utah	3.1	14
New Jersey	3.0	15
Rhode Island	3.0	16
New Hampshire	2.9	17
Minnesota	2.9	18
Washington	2.9	19
Delaware	2.9	20
District of Columbia	2.8	21
Iowa	2.8	22
Massachusetts	2.8	23
Kansas	2.8	24
Illinois	2.8	25
California	2.7	26
Missouri	2.7	27
Connecticut	2.6	28
Oklahoma	2.6	29
Hawaii	2.5	30
Wisconsin	2.5	31
Virginia	2.5	32
Pennsylvania	2.5	33
Maryland	2.4	34
North Carolina	2.4	35
Georgia	2.4	36
Michigan	2.4	37
Nevada	2.4	38
Louisiana	2.4	39
Arkansas	2.4	40
South Carolina	2.3	41
New Mexico	2.3	42
Arizona	2.2	43
Indiana	2.2	44
Texas	2.2	45
Ohio	2.1	46
Mississippi	2.1	47
Kentucky	2.1	48
Alabama	2.1	49
West Virginia	2.0	50
Tennessee	2.0	51

The state of Indiana ranks 44th with an average of 2.2 firms (with less than 20 employees) for every 100 persons in the working age population.

Below (Table 2) is the table of states with the average number of employees working in firms with less than 20 employees for every 100 people in the working age population. The rank is provided alongside in a separate column. From this table we can infer that in Wyoming, out of every 100 persons  in the working age population, an average of 16.8 persons (17 persons) are employed in firms which employ less than 20 people. It is the state which has the maximum number of people employed in firms in this category and is ranked number 1. 

Table 2:  States along with average number of people in working age population employed in firms with less than 20 employees

State	Average Number of <20 employee size small business employees (for every 100 people in the population)	Rank
Wyoming	16.8	1
Montana	16.7	2
Vermont	15.2	3
North Dakota	14.7	4
South Dakota	14.6	5
Maine	13.2	6
Oregon	12.8	7
Idaho	12.7	8
Alaska	12.6	9
New Hampshire	12.5	10
Nebraska	12.5	11
District of Columbia	12.3	12
Colorado	12.0	13
Rhode Island	11.9	14
New York	11.9	15
New Jersey	11.7	16
Kansas	11.4	17
Iowa	11.4	18
Washington	11.3	19
Minnesota	11.3	20
Delaware	11.2	21
Massachusetts	11.2	22
Utah	11.2	23
Connecticut	11.1	24
Wisconsin	10.9	25
Florida	10.9	26
Hawaii	10.6	27
California	10.5	28
Pennsylvania	10.5	29
Oklahoma	10.4	30
Missouri	10.4	31
Louisiana	10.3	32
Illinois	10.2	33
Virginia	10.1	34
Michigan	10.0	35
Maryland	9.9	36
Arkansas	9.7	37
North Carolina	9.6	38
Ohio	9.6	39
Indiana	9.5	40
New Mexico	9.5	41
South Carolina	9.5	42
Nevada	9.2	43
Texas	9.0	44
Alabama	9.0	45
Georgia	9.0	46
Mississippi	8.9	47
West Virginia	8.8	48
Kentucky	8.8	49
Tennessee	8.7	50
Arizona	8.4	51

Indiana ranks 40th with average of 9.5 persons for every 100 persons in the working age population employed in firms with less than 20 employees

For Establishments with no employees

Below (Table 3) is the table of states with the average number of firms with no employees for every 100 people in the working age population. The rank is provided alongside in a separate column. From this table, Florida has on average 18.5 firms (with no employees) for every 100 persons in the working age population and is the state in the country which has the highest number of firms in this category and is ranked 1 the nation.

Table 3: States along with number of firms with no employees for the working age population

State	Average Number of no-employee firms (for every 100 persons in the working age 18-65 population)	Rank
Florida	18.5	1
Vermont	15.3	2
Wyoming	14.9	3
Georgia	14.7	4
Montana	14.5	5
Colorado	14.5	6
Texas	14.1	7
New York	14.0	8
Maine	13.9	9
Maryland	13.4	10
Louisiana	13.3	11
California	13.3	12
Hawaii	13.1	13
South Dakota	12.9	14
Utah	12.9	15
Idaho	12.9	16
New Jersey	12.9	17
Tennessee	12.9	18
Nevada	12.8	19
Connecticut	12.6	20
Alaska	12.5	21
Illinois	12.5	22
District Of Columbia	12.4	23
Massachusetts	12.4	24
New Hampshire	12.3	25
North Carolina	12.3	26
Mississippi	12.3	27
Oklahoma	12.2	28
Rhode Island	11.9	29
North Dakota	11.9	30
South Carolina	11.9	31
Minnesota	11.9	32
Delaware	11.9	33
Nebraska	11.9	34
Virginia	11.8	35
Michigan	11.8	36
Arizona	11.7	37
Arkansas	11.6	38
Kansas	11.5	39
Missouri	11.3	40
Oregon	11.3	41
Alabama	11.2	42
Ohio	11.1	43
Iowa	11.1	44
Kentucky	10.7	45
Pennsylvania	10.6	46
Indiana	10.3	47
Washington	10.2	48
New Mexico	10.0	49
Wisconsin	9.8	50
West Virginia	8.0	51

Indiana ranks 47th in the nation and has an average of 10.3 firms with no employees for every 100 persons in the working age population.

Below (Table 4) is the table of states with the average amount of receipts (in thousands) from firms with no employees from each person in the working age population which I refer to as Per-Capita Self-Employed Earnings PCSE. The rank is provided alongside in a separate column. From this table, every no-employee firm in working age population collected an average of $8,650 from receipts in Florida and is the state in the country which has the highest PCSE and earns the 1st rank in the nation..

Table 4: States along with PCSE for the working age population

State	PCSE (in 1000s of dollars)	Rank
Florida	$8.65	1
Wyoming	$8.54	2
Delaware	$8.23	3
New Jersey	$7.87	4
New York	$7.75	5
Connecticut	$7.72	6
New Hampshire	$7.46	7
California	$7.43	8
Colorado	$7.38	9
Texas	$7.26	10
Montana	$7.10	11
Vermont	$6.98	12
Nevada	$6.93	13
Massachusetts	$6.87	14
Maine	$6.65	15
Hawaii	$6.64	16
District Of Columbia	$6.54	17
South Dakota	$6.52	18
Utah	$6.48	19
North Dakota	$6.47	20
Tennessee	$6.46	21
Georgia	$6.25	22
Alaska	$6.20	23
Idaho	$6.16	24
Maryland	$6.12	25
Oklahoma	$5.98	26
Louisiana	$5.94	27
Minnesota	$5.83	28
Arizona	$5.72	29
Illinois	$5.71	30
Oregon	$5.65	31
Rhode Island	$5.65	32
Nebraska	$5.59	33
North Carolina	$5.49	34
Kansas	$5.49	35
Virginia	$5.42	36
Pennsylvania	$5.41	37
South Carolina	$5.40	38
Washington	$5.32	39
Michigan	$5.30	40
Missouri	$5.29	41
Arkansas	$5.25	42
Iowa	$5.23	43
Ohio	$5.20	44
Mississippi	$5.19	45
Alabama	$5.02	46
Kentucky	$4.91	47
Wisconsin	$4.87	48
Indiana	$4.50	49
New Mexico	$4.22	50
West Virginia	$3.19	51

Indiana ranks 49th in the nation with an average of $4,500 collected from receipts from each person in the working age population running a self-employed firm.

Conclusion

Small businesses are the backbone of the economy and they have the potential to grow larger and employ more people in the economy. Even if they are just functioning as self-employed businesses, they are still strengthening the economy as the business owners  are providing their services for the society and community. Our analysis of no-employee firms and <20- employee firms shows that states such as Montana, Wyoming, North Dakota, South Dakota have strong small business ecosystems. A straight-forward grouping and summarization would have shown California, New York, Texas, Florida as top states for small businesses. However, with this analysis methodology of considering the working age population and removing the effects of population sizes, we are able to uncover states having active small business communities that are promising economic growth centers.

Bibiliography

1, https://www.census.gov/programs-surveys/susb/data/datasets.html

2. https://www.census.gov/programs-surveys/nonemployer-statistics.html

3. US Census data – https://www.census.gov/data/datasets/time-series/demo/popest/2020s-state-detail.html

Image courtesy: https://pixabay.com/illustrations/jobs-unemployment-main-street-1446885/