The Staying Power of Established Small Businesses
Small businesses create over 56 million jobs for American workers. But not all small businesses show the staying power to keep these jobs and further drive inclusive economic development. Mature, established small businesses are more likely to contribute positively to net job creation and pay higher wages, on average, than younger firms.
According to data from the Federal Reserve Bank of St. Louis, while startups create many jobs, the up-or-down of start-ups leads to low levels of net job creation after the initial year.
"Thus, while startups are very dynamic and have an important role in net job creation, in terms of total employment and earnings they tend to have a modest impact,” economists Maximiliano Dvorkin and Charles Gascon report (Startups Create Many Jobs, but They Often Don't Last). “Only the few firms that survive to the 11+ year age group have a lasting impact on employment.”
Interise’s data from over 7,000 established small businesses uncovers trends and insights into their staying power for inclusive economic development. Close to 70% of Interise businesses are minority-owned, and/or located in a low- or moderate-income area. On average, these businesses have been in operation for 9 years, with 16 employees, and $2M in annual revenue.
Interise businesses create jobs at an average annual rate of thirteen percent. This is notable, compared to the rate of two percent for the private sector as a whole. In 2017, the average annual salary of a new full-time job created by Interise alumni was $61,300 ($10,800 above the national average). These established small businesses are more likely to offer paid vacation, holidays, and sick leave, as well as health and dental insurance.
And taking a deeper look into our latest impact report, Interise research reveals further insights into the staying power of established small businesses to build a stronger, more inclusive economy.
- Interise businesses created jobs at an average rate of nine percent compared to rate of .3 percent for the private sector as a whole.
- Job creation rates for Interise businesses are higher for minority-owned, Latino-owned, and woman-owned companies.
- During the Great Recession, alumni retained and created jobs at a 21.4% growth rate while the private sector experienced job losses.
Interise’s research continues to look at the staying power of established small businesses to generate social and economic impact. Sign up for Interise’s Network Newsletter for more on what we’re learning about in building an inclusive economy.