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Entrepreneurship

Small business and entrepreneurship underpin American democracy. The freedom and opportunity to create a personal destiny represents a seminal value in the nation’s economy and society. In America today, it is estimated that just over 10 percent of the workforce owns a business and 3.5 percent of the adult population starts a business each year. The image of a young Michael Dell tinkering with computers in his university dorm room resonates in the American psyche. The entrepreneurial drive fuels the innovation and job creation that secures our country’s economic future.

Discussions about economic growth often revolve around big companies and major industries. Yet the small business sector keeps our economic base diversified, generates risk-taking innovation, and accounts for much of the employment in America. Today 99.9 percent of U.S. businesses are considered small, defined as having fewer than 500 employees, and those small businesses employ 50.7 percent of the private-sector workforce.

Small business in America remains true to its nature. The average small business has only one location and 10 employees. In fact, less than three percent of firms employ more than 50 people. These ventures also manage relatively small financial operations. More than 70 percent of firms have annual sales of less than $500,000, and 80 percent have assets valued at less than $500,000. Not surprisingly, 45 percent of small firms are sole proprietorships. Small size, however, has translated into large economic contributions. From 1990 to 2003, firms with fewer than 20 employees accounted for almost 80 percent of net new jobs in the United States.

The entrepreneurial spirit continues to be strong. Self-employment rose 12.2 percent from 1995 to 2004. This drive to own a business exists across race, gender, and ethnic lines. For the past two decades, women-owned firms have grown at approximately double the rate of all firms. Minority women have particularly high rates of entrepreneurship. While 28 percent of white business owners are women, 31 percent of Asian American business owners and 46 percent of African American business owners are women.

This is an excerpt from The NEXT American Opportunity.