Small Business Profile: TENNESSEE 

Small businesses are the heart of Tennessee’s economy. Research by the Office of Advocacy shows that small businesses create most of the nation’s net new jobs, and they bring dynamic ideas, innovative services, and new products to the marketplace. They account for almost all of the nation’s employer firms and generate half of non-farm private output. New business creation is key to a state’s ability to increase its gross state product, state personal income, and total state employment. This small business profile uses the most recent data available to demonstrate the valuable contributions that small businesses make to Tennessee’s economic health.

Number of Businesses.  Tennessee had an estimated total of 531,200 small businesses. Employer firms totaled 113,900 in 2006, up 2.0 percent from the previous year. Of this total, an estimated 97.2 percent, or 110,700 were small. Self-employment (incorporated and unincorporated) totaled 317,000 in 2006, an increase from 300,800 in 2005. Non-employer firms totaled 422,800 in 2005, an increase of 4.5 percent since 2004. (Sources: U.S. Dept. of Labor, Employment and Training Administration; U.S. Dept. of Commerce, Census Bureau; U.S. Dept. of Labor, Bureau of Labor Statistics.)

Women-owned Firms. In 2002, businesses owned by women numbered 117,900, represented 26.0 percent of the state’s 454,400 businesses, and generated $17.6 billion in revenues. Employer firms owned by women totaled 14,200, a decrease of 7.2 percent since 1997. Women numbered 96,100 or 30.3 percent of the state’s self-employed persons in 2006, an increase of 3.6 percent from the previous year. (Sources: U.S. Dept. of Labor, Bureau of Labor Statistics; U.S. Dept. of Commerce, Census Bureau.)

Minority-owned Firms. In 2002, Asian-owned firms totaled 7,200, and 2,800 of them were employer firms; Black-owned firms numbered 26,800, and 2,100 were employer firms; Hispanic-owned firms totaled 4,300, and 900 were employer firms. American Indian and Alaska Native-owned firms numbered 3,600, and 400 of them were employer firms; while Native Hawaiian and other Pacific Islander-owned businesses numbered 90, and data on employer firms are unavailable. (Source: U.S. Dept. of Commerce, Census Bureau.)

Business Turnover. An estimated 17,207 new employer firms were created in 2006, which is 1.6 percent less than the number created in 2005. Business bankruptcies totaled 397 in 2006, down from 574 the previous year, while business terminations decreased from 17,100 in 2005 to 16,400 in 2006. (Sources: U.S. Dept. of Labor, Employment and Training Administration; Administrative Office of the U.S. Courts; U.S. Dept. of Commerce, Census Bureau.)

Employment. Small firms employed 46.1 percent of the state’s non-farm private labor force in 2004, which was below the national average of 50.9 percent. These 99,100 firms accounted for 97.2 percent of the state’s employer businesses, and they employed 1.1 million people (Table 1). Small businesses added a total of 40,900 net new jobs between 2003 and 2004 (Table 2). (Source: U.S. Dept. of Commerce, Census Bureau, Statistics of U.S. Businesses.)

Small Business Income. Non-farm proprietors’ income, which is a share of small business income, increased by 4.5 percent, from $22.3 billion in 2005 to $23.3 billion in 2006. (Source: U.S. Dept. of Commerce.)

Finance. Commercial banks and savings institutions continued to be important sources of small business financing. The number of lending institution branches in the state increased in 2006 (Table 3). For a list of financial institutions in the state that make the most loans to small businesses, visit www.sba.gov/advo/research/lending.html.

To learn more about the Office of Advocacy’s data and analyses of small business, visit www.sba.gov/advo/research, call (202) 205-6533, or email advocacy@sba.gov.

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