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Small Businesses and Their Impact on Texas

Small Businesses and Their Impact on Texas

The Office of the Governor contracted with CCBR to investigate the economic impact of Texas businesses with fewer than 100 employees and to identify factors that contribute to their success or failure. In order to achieve this goal, a multi-prong approach was taken that includes:

  • Economic analyses estimating the impacts of small business based on region, industry and size
  • Exploring and analyzing issues of small business ownership, birth and death rates of small businesses and their impacts on job creation and destruction
  • Examining processes associated with export opportunities for small businesses in Texas, as well as providing input from a sample of city managers and economic development directors
  • Compiling a summary of relevant literature identifying potential indicators that may impact small business activity


Key Takeaways

  • In 2012, small firms, defined by the Small Business Administration as those with fewer than 500 employees, represented 98.6% of Texas employers. A more useful definition may be SBF100 firms (those employing less than 100 workers) by putting more emphasis on the most entre preneurial sector of the economy.
  • In 2012, SBF100 firms hired roughly 3 million workers and had an estimated total economic impact of $844 billion in gross output.
  • Of these firms, the construction ($68.8 billion), professional-scientific & technical services ($68.1 billion), retail trade ($62.4 billion) and health & social services ($53.6 billion) sectors had the most impact.
  • SBF 100 firms in 2012 generated $13.866 billion in state revenue and $14.965 billion in federal revenue.
  • Studies have shown that SBF 100 firms provided experience and on-the-job training to a broader segment of the population, on average, than larger firms do.
  • Studies have also shown that children of small business owners are more likely to start small businesses of their own.
  • A growing portion of the workforce, known as “giggers”, have found autonomy and increased income by putting their higher skillsets to work in multiple temporary work assignments. This portion is projected to rise, placing growing importance on the need to understand the issues associated with it.
  • Recent studies have shown that job creation does not depend on firm size, but rather on firm age. In other words, newer small firms likely create more jobs (on their way to becoming large firms) than older small firms.
  • Rural areas in Texas, as well as the entire US, are transitioning from an agricultural and manufacturing-dominated economy to a more sustainable and diverse urban-rural interdependence model.
  • Cities with a higher concentration of creative class workers are more resilient in turbulent economic times, but studies point to the lack of focus on negative impacts this has on low-income workers dealing with higher costs of living.
  • Small business development is greatly discouraged by the lack of capital, assets, information, and proper management.


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