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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鈥檚 workforce and produced $191.4 billion in annual economic activity, almost half the annual state GDP, the report shows. 

鈥淚鈥檝e been studying the economy in Arizona for two, two-and-a-half decades at this point, and I didn鈥檛 really appreciate the extent of small businesses鈥� impact on the economy until we got into these numbers. It was very impressive,鈥� 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聽
• Approximately 486,000 of these small companies are self-employed operators聽
• Small companies employ about 1.6 million of Arizona鈥檚 2.9 million workers聽
• Small businesses create $71.3 billion in annual wages and income聽聽聽
• 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鈥檚 overall business ecosystem, including supporting large business attraction and expansion. 

New 鈥楢rizona Speaks鈥� 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鈥檚 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鈥檚 small business recovery into a state of small business report.  

More than 70 percent of state鈥檚 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鈥檚 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鈥檚 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鈥檚 best 

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

鈥淚f we can identity and work with groups like ASBA and their connections with other organizations as well, I think we鈥檒l 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.鈥�