Small Businesses in Large Numbers

A little more than half of all Hoosiers employed in the private nonfarm sector work in business establishments with less than 100 employees. The largest size class is establishments with between 20 and 49 employees, employing 17 percent, or 432,100 people (see Figure 1).

Figure 1: Percent of All Employment by Size Class, 2004

Figure 1

These data come from the 2004 County Business Patterns, published by the U.S. Census Bureau. This data set includes only establishments with paid employees in the private nonfarm sector (thereby omitting government, farming and sole proprietorships). Note that these data are at the establishment-level, which is an individual place of work. For example, Wal-Mart is going to show up in the data with numerous individual establishments.

Figure 2 shows the breakdown of establishments by size class. In the United States, over half of all establishments have less than five workers (54.4 percent). That number is 49.7 percent in Indiana, a difference of 4.7 percentage points. Among Indiana's neighbors, Illinois has the highest percentage of small businesses as a percent of all establishments (54.2 percent), while Ohio has the lowest (49.2 percent).

Figure 2: Percent of All Establishments by Size Class

Figure 2

Small businesses make up at least 50 percent of all establishments in 72 of Indiana's 92 counties (see Figure 3). At 65 percent, Union and Warren counties have the highest percentage of small businesses. Meanwhile, less than 45 percent of establishments in Bartholomew, Elkhart and Vanderburgh counties have less than five employees.

Figure 3: Percent of Establishments with Less Than Five Employees

Figure 3

Size by Sector

Which industry sectors are more apt to have lots of small businesses? As seen in Figure 4, over 65 percent of all establishments in the following sectors have less than five employees: forestry, fishing and hunting (200 establishments); real estate, rental and leasing (3,981 establishments); and professional, scientific and technical services (8,299 establishments).

Figure 4: Small Businesses by Sector, 2004

Figure 4

At the other end of the spectrum, establishments with 1,000 employees or more make up less than 1 percent of all establishments across all sectors. Not surprisingly, manufacturing and health care had the most large establishments (see Figure 5). Manufacturing had 62 establishments with at least 1,000 employees, employing a total of almost 117,500—or 0.7 percent of the entire sector. Health care and social assistance followed with 41 establishments in the top size class, employing over 89,600 workers—or 0.3 percent of the entire sector.

Figure 5: Large Businesses by Sector, 2004

Figure 5

Recent Changes

Between 2003 and 2004, Indiana gained a total of 1,834 establishments—an increase of 1.2 percent. This was slightly less than the nation's 1.8 percent increase in establishments. Compared to its neighboring states, Indiana's percent change in establishments fell one tenth of a percentage point below Illinois and Kentucky, but was more than double that of Ohio and Michigan (see Table 1). When looking at employment, Indiana far outpaced its neighbors in the past year, adding almost 46,000 employees.

Table 1: Change in Establishments and Employment, 2003 to 2004

Table 1
Click for larger image

Rachel Justis, Managing Editor
Indiana Business Research Center, Kelley School of Business, Indiana University