These data reveal that there were more than 24 million nonfarm business tax returns filed in the United States in 1999. More than 99 percent of these returns were for small businesses, that is, firms with fewer than 500 employees. Based on SBA estimates, small businesses employ more than half of the private work force and are responsible for around 50 percent of all sales and private gross domestic product, a share of output that has remained fairly stable over time. With half of our nation's private, nonfarm output coming from small businesses, obviously our economic well-being depends greatly on this sector. But small businesses do more for us than can be captured in these statistics.
Small businesses are a source of new ideas and products.
The list of innovations developed by these enterprises in fields such as software, computer technology, aerospace, and pharmaceuticals is quite impressive. The possibility that an idea or new product will eventually transform a small business into a large corporation is a great motivator of change and risk taking. Beyond that, small enterprises make a huge contribution in the form of the support and synergies they provide operating side by side with large businesses. They provide services and inputs to the production process, train workers, and are a primary means of marketing and distributing retail products and services. An essential feature of a thriving small business sector is the ability of firms to start up, to grow, and to change ownership.