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30 Million SMBs: How Many Are Your Potential Customers?

This week is national small business week. In honor of that, here are a few statistics about small businesses and what they represent in the roughly $20 trillion US economy.

The Small Business Administration, which defines “small business” to include firms with up to 499 employees, now says there are 30.2 million SMBs as of the end of 2018. This constitutes 99% of all businesses in the country.

In 2010, the official number was 27.9 million. Slightly more businesses survive each year than fail or discontinue operating, hence the growth. For example, in Q3 2016 the government said that 240,000 new firms were started and 215,000 exited, for a net gain of 25,000.

Small businesses employ about 59 million people, representing about ~46% of the total US workforce. Most of those employees are concentrated in larger firms. However the vast majority of SMBs are at the low end of the headcount spectrum. Indeed, 24.3 million SMBs have no employees (this can include partnerships), leaving about 6 million that employee one or more people. Of that 6 million, 5.2 million have fewer than 20 employees.

SMB market segmentation by headcount

Source: US SBA (2018)

According to US data, the median income for self-employed individuals (the bulk of the market) at their own incorporated businesses was $50,347 (2016). Those self-employed in non-incorporated firms saw median incomes of $23,060. The latter category likely includes a bunch of “side hustle” and part-time efforts. These figures are relevant because they impact the B2B services and software buying decisions business owners make.

How many of these businesses are part of the “addressable market.” That has long been a topic of debate and the answer is “it depends” on what you’re selling. If you’re selling domains, email tools or possibly accounting software, then the 30 million number is relevant to you. If you’re selling CRM software your market is going to be at the other end of the spectrum.

Next month at LSA’s Engage conference, (6/3 – 4 in Washington, D.C.) there are multiple sessions about more effective selling to the SMB market. The session, “Selling to SMBs: A Better Way,” argues that most SaaS and marketing companies don’t understand which prospects are likely to buy. It introduces an alternative segmentation/prospecting and messaging approach for more efficient customer acquisition. 

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