Nevada State Bank recently issued the 10th edition of its Nevada Small Business Survey. Businesses surveyed expressed tempered optimism about Nevada’s economy, expecting growth but citing labor supply challenges and consumer spending sustainability as potential headwinds over the next 12 to 24 months.
During the past decade, Applied Analysis has surveyed more than 4,000 businesses across the state on behalf of the bank, and what has always struck me as remarkable is just how accurate small business owners and operators have been in predicting the ups and downs of economic cycles and identifying the key factors driving or limiting growth.
Perhaps this should be no surprise given the role small businesses play in our economy. According to the U.S. Small Business Administration, small businesses account for 99.9 percent of all businesses and 47.1 percent of private-sector employment nationwide. In fact, small businesses have generated 12.9 million net new jobs over the past 25 years, accounting for two out of every three jobs added to our nation’s economy.
Small businesses are also a vital source of innovation, driving growth and economic development. A study by the National Bureau of Economic Research indicates that small businesses are 13 times more likely to create a patent than large corporations, underscoring their significance in the development of new products and services that benefit society. Agility and creativity, coupled with entrepreneurs’ natural penchant for risk, enables small businesses to respond quickly to changing conditions and adapt to customer needs.
Importantly, small businesses add value to communities socially and culturally as well as economically. Locally owned businesses create 2.6 times more jobs and have a 4.8 times greater economic impact than non-local businesses according to the American Independent Business Alliance. They also are more likely to purchase goods and services locally, leading to increased spending and economic activity within the community, and they play a critical role in building community identity by supporting local events and organizations that create a sense of place.
According to the Small Business Administration, minority-owned small businesses represent 18 percent of all U.S. businesses, while women-owned small businesses account for 42 percent of all U.S. businesses. These businesses not only create opportunities for a diverse group of owners, they also create opportunities for a diverse group of employees. The National Minority Supplier Development Council reports that minority-owned small businesses are more likely to hire other minority workers, promoting economic mobility in historically underrepresented communities.
In Nevada alone, there are approximately 289,000 small businesses, accounting for 99.1 percent of all businesses in the state. These businesses employ more than 45 percent of the state’s private sector workforce, creating nearly 540,000 jobs. Notably, Nevada ranks 10th nationwide for the number of women-owned businesses, with approximately 58,800 women-owned small businesses in the state, and minority-owned small businesses represent more than one in five Nevada small businesses, employing more than 90,000 workers.
Small businesses are not only vital, they can be an economic harbinger. Small businesses tend to be more vulnerable to economic shocks and downturns compared to larger businesses, and they can also be particularly sensitive to changes in consumer spending, interest rates and other economic factors. As a result, small businesses are among the first to feel the impact of broader economic trends. When they speak, we ought to pay attention.
Members of the editorial and news staff of the Las Vegas Review-Journal were not involved in the creation of this content.