Small businesses play a critical role in the U.S. economy by providing income, building wealth, and creating upward mobility across racial, ethnic, and gender lines. A robust small business ecosystem leads to higher incomes for owners, better outcomes for their families, strengthened local and regional communities, and significant advantages for the national economy. Small business wages are frequently higher than — even double — the federal minimum wage, and when these businesses grow and hire, they create resilience within their communities.1 AEO has even stated that small businesses “wield an inherently boundless power to resuscitate America’s employment and economic health.2
Microbusinesses make up approximately 92% of U.S. businesses and are responsible for more than 41 million U.S. jobs.3
Businesses that employ five or fewer people, known as microbusinesses, have an outsized presence within the small business community and in U.S. communities. Microbusinesses make up 92% of U.S. businesses and are responsible for more than 41 million U.S. jobs.3 GoDaddy research found that each new microbusiness that is added to the U.S. economy per 100 residents increases annual household median income by $485.4 In addition, GoDaddy Venture Forward research reports that two jobs are created for every entrepreneur, whether via direct hiring, supplying materials, or bringing money into the community. In 2011, AEO found that if one in three microbusinesses were to each hire a single employee, the U.S. would reach full employment.5
The path of self-employment provides autonomy, flexibility, and earning potential that can be of particular value to people from underserved communities, especially women and people of color. Research by AEO finds the median net worth of Latinx business owners is almost five times
higher than that of Latinx non-business owners. For African-American women, the difference is more than tenfold6 These types of advantages make small businesses an attractive career path for people from underrepresented communities. A survey by GoDaddy showed that business owners in marginalized communities were more interested than entrepreneurs from non-marginalized communities in transforming their businesses from supplemental to a main source of income: African American respondents were 250% more likely, women 68% more likely, and foreign-born business owners 150% more likely.
Photo: Mindi Breen, Wolf Howl Honey
Fortunately, it has never been easier to start a small business. In today’s digitized economy, there is a low barrier to entry to becoming self-employed, and the option offers an attractive path toward financial independence for those seeking a flexible alternative to traditional employment. Aspiring business owners can be any age, do not need a college degree, and can usually start a business with a small initial investment, often using personal assets. The small business community includes not only young professionals and established, middle-aged entrepreneurs — the median age of small business owners is 50 — but also older people seeking out second careers or more active retirement. The appeal and sustainability of everyday entrepreneurism lies not just in its affordability and accessibility, but also in an evolving
desire to feel financially empowered and autonomous. For some small business owners, those feelings stem from a changing economic ecosystem, while others feel a pressing drive toward localism and community.
As policymakers, community organizations, and others take a deeper interest in the future of work in a quickly changing economy, they should stay alert to the fact that small businesses can create impressive resilience, growth, and economic opportunity for communities around the country.
1 Association for Enterprise Opportunity, “Bigger than You Think: The Economic Impact of Microbusiness in the United States”; https://aeoworks.org/wp-content/uploads/2019/03/Bigger-than-You-Think- Report_FINAL_AEO_11.10.13.pdf
4 GoDaddy, “GoDaddy Venture Forward Report,” July 2021; https://www.godaddy.com/ventureforward/ wp-content/uploads/2021/07/GoDaddy-Venture-Forward-Report-July-2021.pdf
5 Association for Enterprise Opportunity, “The Power of One in Three: Creating Opportunities for All Americans to Bounce Back,” May 2011; https://www.aeoworks.org/wp-content/uploads/2019/03/One_ in_Three.pdf
The opinions expressed within this article is that of godaddy and not that of M&T Bank, nor does M&T Bank endorse the opinions.
This article is not intended to provide tax, legal, accounting, financial, or other professional advice. Always consult a qualified professional about your personal situation.