- Small businesses are the engine of the US economy. The numbers tell the story.

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Across the country, there are more than 32 million small businesses, generally defined as any enterprise with fewer than 500 employees. That's compared with 20,000 large businesses, which, let's not forget, often started out small. It's easy to overlook how often we interact with small businesses, even when dealing with the biggest brands. Here's how Bill Dunkelberg of the National Federation of Independent Business explains it.

- When you buy a new Ford F-150, you don't buy it from Ford. You buy it from some small business owner. So small businesses are the interface between the production sector and the consumer.

SCARLET FU: And for those keeping track of the rise of the influencer culture, there are more than 25,000,000 one-person firms out there. That's up 9% since 2018. If you were to count US small businesses on their own, they would be equivalent to the world's third biggest economy, after the US and China.

And here's why. Small businesses contribute more than 2/5 of the US economy. They employ 40% of Americans and create more jobs than their bigger counterparts, making up almost 2/3 of net new jobs since 1995. In the past, economic downturns often led to more people striking it out on their own.

BILL DUNKELBERG: A lot of people lost their jobs in various recessions, but they left with a pot of money and severance pay, et cetera. And then they well, you know, I never planned on going into business, but now that I've been thrown out of the big business, maybe I'll start my small business. So that's been a major source of entrepreneurs for a long time.

SCARLET FU: But March 2020 was different. When COVID first reached the US, local governments ordered the shutdown of all nonessential businesses. So any company in the service industry reliant on foot traffic was hit hard, especially restaurants, hotels, and fitness clubs.

More than two years later, COVID infections are no longer spiking, restrictions have been loosened, and people are more comfortable with traveling and returning to the office. But the damage is pervasive. Only 30% of small businesses say that their sales have returned to prepandemic levels. In contrast, the stock market has more than recovered since its bottom in March 2020.

- For a lot of people, their retirement went out the window because their investment was not in stock market but in their company.

- And people continue to invest in their companies, paying up to deal with shortages caused by supply chain issues and also contending with higher prices for the cost of everything, from their inventory to employees.

BILL DUNKELBERG: Inflation is a problem, of course. Costs are coming in their back door, and then they have to pass it on through the front door. And so we see 65% or so of our firms reporting that they raised average selling prices, and almost many plan to continue to do that in future quarters.

- Which means controlling your cost becomes more critical than ever. Technology is a big part of the solution. Think of how businesses can connect directly with their customers through social media or open online stores rather than spending on expensive physical storefronts. But sometimes technology is more promising than practical, like with crypto. As innovative as the digital currency world is, until the government figures out regulations, most small businesses are still years away from being able to accept payment in crypto.

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