Arizona small businesses pump $191 billion into annual economy

Small businesses in Arizona, those with 500 or fewer employees, are not so small when it comes to economic output, according to a new report commissioned by the Arizona Small Business Association (ASBA). 

In fact, before the pandemic, they employed more than half the state’s workforce and produced $191.4 billion in annual economic activity, almost half the annual state GDP, the report shows. 

“I’ve been studying the economy in Arizona for two, two-and-a-half decades at this point, and I didn’t really appreciate the extent of small businesses’ impact on the economy until we got into these numbers. It was very impressive,” said economist Jim Rounds, president of Rounds Consulting Group, Inc., which conducted the analysis for ASBA. 

Report illustrates how important small companies are to state

ASBA commissioned the report to illustrate how important small companies and sole-proprietor businesses are to Arizona and how important it is to help them survive the final throes of the pandemic.

Among the findings:

• Small companies account for 99.4 percent of all businesses in the state. Of the 595,764 businesses, 592,485 are small companies 
• Approximately 486,000 of these small companies are self-employed operators 
• Small companies employ about 1.6 million of Arizona’s 2.9 million workers 
• Small businesses create $71.3 billion in annual wages and income   
• Small companies generate $10 billion in tax revenues for state and local governments annually

Rounds, who analyzed U.S. Census Bureau business data from 2017 for the study, said the figures illustrate the important role small businesses play in the state’s overall business ecosystem, including supporting large business attraction and expansion. 

New ‘Arizona Speaks’ to advocate for business recovery policies  

ASBA released the report at the kickoff of its new effort, Arizona Speaks: The State of Small Business, to find ways to advocate for and help struggling companies make it through the next several months as COVID-19 vaccines are rolled out worldwide. 

The effort is supported by Arizona Gov. Doug Ducey’s Office, and ASBA will continue to work with Rounds Consulting Group to quantify the full impact that small businesses have on the economy and recommend policies that will be beneficial to Arizona’s small business recovery into a state of small business report.  

More than 70 percent of state’s small businesses hurt 

Former Gilbert mayor Jenn Daniels, who moderated the event where the report was released, said state policy decisions made now can have a significant impact on the ability of Arizona small businesses to recover from the COVID-19 pandemic and again lead the state’s economic well-being.

According to the study, a majority of Arizona small businesses reported being negatively affected by COVID-19. U.S. Census survey data identified that nearly 42 percent of small businesses believe it will take more than six months to return to the previous year’s business level. 

Some of the issues short- and long-term that need to be addressed are workforce training, affordable housing, increasing the average wage amount, and assistance for small businesses hurt by the new Proposition 208 income tax hike, Rounds said. Rural areas also have a much higher percentage of small businesses than urban, posing challenges for lawmakers representing these areas.

Next decade could be Arizona’s best 

With hard work on everyone’s part, Rounds predicts a bright future moving forward. 

“If we can identity and work with groups like ASBA and their connections with other organizations as well, I think we’ll be able to identify good public policy moving forward to not only deal with COVID-19 recovery, which we will be out of soon, but also over the next decade so we can we make this one of the biggest expansions in the state history.”