Global Outlook Helping to Pad Profit and Loss Account

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We’ve all heard the statistics about how small businesses account for the lion’s share (99.7 percent) of employer firms in the United States. The idea that small businesses will save America’s listless economy is bandied about by television pundits and politicians from both sides of the political divide, but how well founded are those claims? Let’s take a closer look at the issue.

According to the Small Business Administration, small businesses:

  • Employ half of all private sector employees
  • Pay 44 percent of total U.S. private payroll
  • Generated 65 percent of net new jobs over the past 17 years
  • Hire 43 percent of high tech workers
  • 52 percent home-based and 2 percent franchise
  • Made up 97.5 percent of all identified exporters and produced 31 percent of export value
  • Produce 13 times more patents per employee than large patenting firms

Those statistics should be quite telling about just how dependent our economy is on small businesses. These businesses may be small, but the way that they contribute to the U.S. bottom line is anything but.

If accounting for half of all private sector employees and nearly half of private payroll is not convincing enough, consider this: in May, the White House hosted the 50th Annual E Awards, which recognize American companies that are bolstering the U.S. economy via exporting. Of the 41 firms recognized, 35 were small- or medium-sized businesses.

While much of the media coverage of the U.S. economy has focused on attrition, DSC Dredge crossed the threshold from a small- to medium-sized business over the last decade, nearly doubling its workforce from 80 to 140 employees. A look at Dredge’s profit and loss statement will show that overseas sales have increased steadily from $1.4 million in 2002 to $20 million last year.

Each of these companies has seen their profit and loss account achieve a healthy bottom line by employing workers in the United States and selling to a growing global middle class, a phenomenon that is bucking the trend of the last few decades when jobs were being exported to developing countries to create goods for the American middle class. OSIsoft, based in San Leandro, Calif., has epitomized this trend. Nearly all of the software company’s employees are located in the United States, while all of its customers are scattered across 110 countries that do not call the U.S. home.

This has been a growing trend because of the growing global middle class. American companies are discovering that because of rising wages in China, that country, once a hub of manufacturing is not providing the benefits it once did. Sleek Audio, a small business profiled on Wired.com in 2011, recently moved all of it’s manufacturing from China to Florida and experienced record profits after making the move. The wages in China have still not caught up to those of America, but as wages rise, the benefits of exporting those jobs contracts inversely.

Companies like Dredge and OSIsoft are taking note of the growing global market for their goods and are benefitting greatly from it. As these global markets begin to emerge, you should ask yourself if your companies marketing and advertising efforts could benefit from gaining a global scale. As more and more small businesses begin to recognize the growing global middle class and adjust their operations – everything from marketing to manufacturing – those gaudy numbers about small businesses will only grow more impressive.