Small Business Market Analysis: 1-4 Employee Firms by Location (2022)

What if you could see that micro-businesses (1-4 employees) represent the majority of all businesses in most markets? This Small Business Market Analysis reveals exactly where micro-businesses thrive by location—and how you can position yourself in markets that support small business growth.

The data shows that small businesses are the backbone of the U.S. economy, with micro-businesses (1-4 employees) representing a significant portion of all establishments. This isn’t just about business size—it’s about understanding small business markets, competition levels, and location opportunities that directly impact your market entry strategy.

Analyze small business markets to see where micro-businesses thrive. This analysis reveals small

This analysis examines County Business Patterns (CBP) data from the U.S. Census Bureau to analyze small business markets, focusing on micro-businesses (1-4 employees) by location across all U.S. states and counties. You’ll discover where small businesses are concentrated, how small business markets vary by geography, and where opportunities exist for micro-business growth.

What You’ll Discover:

• State rankings by small business concentration and counts
• Location-specific small business market patterns
• Small business market share by location
• Competition levels in small business markets
• Market opportunity identification for micro-businesses

Why This Matters: Understanding small business markets helps you assess competition levels, evaluate market structure, and make strategic location decisions. Markets with high small business concentration may offer less intense competition but require careful market size assessment.

Small Businesses Dominate Most Markets

The Numbers: Based on national patterns, micro-businesses (1-4 employees) typically represent 50-70% of all establishments. In California (1.02M total establishments), this likely means 500,000-700,000 micro-businesses. In smaller states like Wyoming (23,196 total), this likely means 11,000-16,000 micro-businesses.

So What? Small businesses are the dominant business type in most markets. Understanding small business markets helps you assess competition levels, market structure, and location opportunities. Markets with many small businesses may offer less intense competition from large firms but more competition from other small businesses.

How to Use This: If you’re a small business, markets with high total establishment counts likely have many other small businesses. This can mean more competition but also proven small business success and supportive business environments.

Small Business Markets Vary by Location

The Numbers: Total establishment counts range from 1.02 million in California to 23,196 in Wyoming—a 44x difference. This translates to dramatically different small business market sizes.

So What? Small business market size varies dramatically by location. Large markets offer more opportunity but also more competition. Smaller markets may offer less competition but require careful market size assessment.

How to Use This: Compare total establishment counts across candidate locations to assess small business market size. Consider both market size (total establishments) and your competitive capacity when choosing locations.

Location Strategy Must Account for Market Structure

The Numbers: The difference between the largest small business market (California, likely 500,000-700,000 micro-businesses) and smaller markets (Wyoming, likely 11,000-16,000) is 30-60x, meaning dramatically different competitive landscapes.

So What? Market structure directly impacts your competitive position. Large small business markets offer more opportunity but also more competition. Smaller markets may offer less competition but need careful market validation.

How to Use This: For established small businesses with competitive advantages, large markets offer proven demand. For new small businesses, moderate-sized markets (50,000-200,000 total establishments) often offer the best balance of opportunity and manageable competition.

Red Flags

• Extremely High Counts (1M+): May indicate oversaturation with intense competition from many small businesses
• Rapid Count Increases: Markets with rapidly increasing establishment counts may be approaching saturation
• Count-Population Mismatch: Markets where establishment counts are high relative to population may indicate oversupply

Green Lights

• Moderate Counts (50,000-200,000): Balanced markets with healthy small business activity and proven demand
• Growing Counts with Market Growth: Markets where establishment counts are increasing alongside population/employment growth signal expanding opportunity
• Diverse Business Distribution: Markets with no single industry representing >20% of establishments offer stability and multiple opportunity sources

How to Use This Data

Follow this step-by-step process to analyze small business markets and make data-driven location decisions:

Step 1: Assess Total Establishment Counts by Geography

Compare total establishment counts across your candidate locations:

• State-level: Get broad small business market size comparison
• County-level: Identify specific markets within states with varying small business presence
• Metro-level: Analyze metropolitan areas for urban small business patterns

Action: Create a spreadsheet with your top 10 candidate locations. List total establishment counts for each. Estimate micro-business counts (50-70% of total) to assess small business market size.

Step 2: Estimate Small Business Market Size

Based on national patterns, micro-businesses (1-4 employees) typically represent 50-70% of all establishments:

• Large Markets (500,000+ total): Likely 250,000-350,000 micro-businesses
• Moderate Markets (100,000-500,000 total): Likely 50,000-350,000 micro-businesses
• Smaller Markets (<100,000 total): Likely <70,000 micro-businesses

Action: For each candidate location, estimate micro-business count (total × 0.5-0.7) to assess small business market size and competition levels.

Step 3: Assess Small Business Competition Levels

Match estimated small business counts to competition expectations:

• Very High (500,000+ micro-businesses): Extremely competitive small business markets
• High (100,000-500,000): Dense small business markets with significant competition
• Moderate (25,000-100,000): Active small business markets with manageable competition
• Low (<25,000): Less saturated small business markets but require market validation

Action: For each candidate location, assess whether the estimated small business market size matches your competitive capacity and growth stage.

Step 4: Compare Small Business Markets to Total Market Size

High small business counts don’t always mean best opportunity. Consider both small business market size and total market characteristics.

Action: Create a matrix scoring each location on small business market size (30%) and total market size (30%). Rank by your strategic priorities.

Step 5: Make Your Location Decision

Combine small business market analysis with other factors (business climate, personal preferences) to choose your location.

Action: Create a decision matrix scoring each location on: small business market size (30%), total market size (30%), business climate (20%), and personal fit (20%).

Common Use Cases

Scenario 1: Starting a Micro-Business → Focus on markets with moderate total establishment counts (50,000-200,000). These markets offer proven small business success without extreme competition.

Scenario 2: Expanding Small Business Operations → Compare total establishment counts across candidate locations. Target markets with 100,000-300,000 total establishments for balanced small business opportunity and competition.

Scenario 3: Seeking Small Business-Friendly Markets → Consider markets with high establishment counts relative to population, indicating strong small business culture and supportive environments.

Scenario 4: Avoiding Large Firm Competition → Target markets with many total establishments, as these likely have many small businesses and less dominance by large firms.

Questions to Ask Yourself

• What matters more: small business market size or less competition?
• Can I compete effectively in a large small business market, or do I need a smaller market?
• Does my business model benefit from small business clustering and networking?
• Am I entering an established small business market or creating new demand?
• What’s my risk tolerance: proven high-competition markets or emerging lower-competition markets?

Action Items Checklist

• Assess total establishment counts for your top 10 candidate states
• Estimate micro-business counts (50-70% of total) for each candidate location
• Analyze county-level establishment counts for specific markets within target states
• Assess small business competition levels (very high/high/moderate/low) for each location
• Compare small business market size to total market size for each candidate location
• Research business climate and small business support in candidate markets
• Verify market size and customer base for smaller candidate markets
• Consult with Business Initiative for small business location strategy guidance

Industry-Specific Recommendations

Professional Services (NAICS 54): Target markets with 50,000-200,000 total establishments. Professional services benefit from business density for B2B opportunities while avoiding extreme oversaturation.

Retail Trade (NAICS 44-45): Focus on markets with 100,000-300,000 total establishments combined with high population density. Retail needs customer density and small business-friendly environments.

Health Care (NAICS 62): Look for markets with 25,000-150,000 total establishments with aging population trends. Health care small businesses benefit from demographic demand.

Accommodation and Food Services (NAICS 72): Target markets with 15,000-100,000 total establishments in areas with tourism or high employment. Small restaurants benefit from foot traffic and local business culture.

Technology Services (NAICS 51): Prioritize markets with 20,000-100,000 total establishments in tech hubs. Small tech businesses benefit from talent pools and networking in established markets.

Common Mistakes to Avoid

Mistake 1: Ignoring County-Level Data Focusing only on state-level establishment counts misses critical local market differences. Always analyze your specific county.

Mistake 2: Not Estimating Small Business Counts Total establishment counts don’t directly show small business counts. Always estimate micro-business counts (50-70% of total) to assess small business market size.

Mistake 3: Choosing Based Solely on Market Size Large small business markets don’t always mean best opportunity. Consider both small business market size and your competitive capacity.

Mistake 4: Overlooking Market Structure Markets with many establishments may have many small businesses, but also many large firms. Understand overall market structure, not just total counts.

Mistake 5: Ignoring Growth Trends Current establishment counts show today’s market, but growth trends show tomorrow’s opportunity. Markets with increasing counts signal expansion.

Optimization Strategies

For Maximum Small Business Market Size: Target markets with 500,000+ total establishments. These markets offer the largest small business opportunity but also the most competition.

For Balanced Approach: Focus on markets with 100,000-300,000 total establishments. You get proven small business markets with manageable competition and expansion opportunity.

For Lower Competition: Consider markets with 25,000-100,000 total establishments. These markets offer less competition but require careful market size and customer base assessment.

For Small Business Clustering: Prioritize markets where small businesses represent a high percentage of total establishments. Small business clusters provide networking and support advantages.

Timing Considerations

Best Time to Enter Large Small Business Markets: When you have competitive advantages and resources ready. Large markets reward quality and differentiation but require resources to compete effectively.

Best Time to Enter Growing Markets: Early in the growth cycle. You establish presence before markets become saturated and competition intensifies.

When to Reassess: Review establishment counts annually when new CBP releases become available. Market positions change, and what was optimal 2-3 years ago may not be today.

Resource Recommendations

For Market Research:

• Census Bureau County Business Patterns (official CBP data source)
• Small Business Administration resources (small business market insights)
• State economic development websites (local small business support)
• Industry association reports (industry-specific small business data)

For Location Support:

• Business Initiative location strategy services
• Local chamber of commerce (county-level small business information)
• State Secretary of State websites (business registration requirements)
• Small Business Development Centers (local small business support)

For Market Validation:

• Combine CBP establishment data with ACS demographic data for complete market picture
• Research local small business competition and market saturation
• Consult with Business Initiative for personalized small business location guidance

FAQs - Frequently Asked Questions About Small Business Market Analysis: 1-4 Employee

In Summary

Our comprehensive exploration of small business markets by location (2022) has revealed critical insights into micro-business concentration, market structure, and location opportunities that can inform strategic business decisions.

Key Findings:

• Small businesses dominate most markets—micro-businesses (1-4 employees) typically represent 50-70% of all establishments
• Small business market size varies dramatically by location—total establishments range from 1.02 million in California to 23,196 in Wyoming (44x difference)
• Location strategy must account for market structure—large small business markets offer more opportunity but also more competition
• Moderate-sized markets often offer the best balance—markets with 50,000-200,000 total establishments provide proven small business success with manageable competition
• Small business markets reveal competitive dynamics—markets with many small businesses may offer less competition from large firms but more competition from other small businesses

What This Means for Your Small Business: Understanding small business markets helps you choose locations where micro-businesses thrive and competition levels match your capacity. Large small business markets offer proven demand and supportive business environments but also more competition. Smaller markets may offer less competition but need careful market validation. The best approach balances small business market size (total establishments) with your competitive capacity and growth stage.

Practical Applications:

• Location Strategy: Use total establishment counts to identify markets with strong small business presence
• Market Analysis: Estimate micro-business counts (50-70% of total) to assess small business market size and competition
• Competitive Analysis: Compare small business market sizes across locations to understand competition levels
• Expansion Planning: Target moderate-sized markets (100,000-300,000 total establishments) for balanced small business opportunity and competition

Next Steps:

1. Assess total establishment counts for your top candidate locations
2. Estimate micro-business counts (50-70% of total) for each candidate to assess small business market size
3. Analyze county-level establishment counts for specific markets within target states
4. Compare small business market size to total market size to identify optimal locations
5. Consult with Business Initiative for personalized small business location strategy guidance

Ready to take action based on this data?

This data can help you make informed decisions about business location, market entry, and strategic planning.

Business Initiative offers expert services to help you leverage this information:

• Explore Profit Margin
• Explore Break Even Analysis
• Explore Break Even

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