The new Small Business Index, published by Intuit QuickBooks and an academic team led by Prof. Ufuk Akchigit, is the latest entry in the small business data race. And impressive. But first…
Method!
If you visit the Methods section every time a new empirical analysis or data product is released, you are not alone. Otherwise, you are a complete cliché. Or both.
And it's great! The world of small business protection is devoid of hard data and full of investigations. Many of these surveys are covered here from time to time, and they provide some insight into where small businesses are. A common experience among consumers of such surveys is to read disturbing headlines and catchy quotes and then question the conclusions in the fine print in the methodology.
It's not just a small business problem, it's a problem that all surveys face. And every small business study has strengths and weaknesses. The diversity of survey samples is invaluable because of the wide coverage of small businesses in the country. Small business advocates regularly complain about the Small Business Administration's "standard size" and the absurdity of the threshold for calling a business with 450 employees "small." The diversity of survey samples allows them to account for other differences as well. A four-year-old restaurant with 20 employees may have little in common with a 40-year-old construction company with 20 employees.
Another strength of the current Small Business Survey is its consistency. A single survey of several hundred small businesses will tell you little. Repeat surveys of small businesses that are identical or similar are more effective when the sample size is small or limited in geographic or sectoral representation.
Administrative information on request
What small business analytics really lacks is reliable business data collection. The limitation of the survey is the dependence on the time, memory, patience and readiness of the respondent. It's hard to tell if the small business owner has taken the time to really think about their answers, even if they're rushing or asking multiple-choice questions or yes/no questions.
On the contrary, administrative data is based on the company's activities: wages, income, etc. However, for obvious reasons, the IRS does not make this information publicly available. Over the past two decades, the Census Bureau has made great strides in creating new databases—business dynamics statistics, business creation statistics—based on IRS data. He gives a good overview of the state of corporate America of all sizes and ages. (The US Business Dataset, as well as datasets many years before the Census, are truncated by company size.) You can only analyze individual companies if you are a licensed user of the Research Data Center (RDC). . The level of information and how it relates to specific individuals and families.
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Last week, Intuit QuickBooks released its new Small Business Index. The company has released data snapshots before, but this one is different. How? Of course, let's start with his method. Some observations from the first two paragraphs of the method page:
- "This index uses a specially designed economic model to normalize anonymous QuickBooks data against official government statistics to reflect the overall size of small businesses."
- This is "according to official statistics".
Promisingly, but not an example of common people's openness. So what does this mean? In essence, the research team took QuickBooks data from many small businesses (333,000 in the US) with fewer than 10 employees, compared ("calibrated") the data to official government statistics, and voila! Pretty accurate estimate of the entire population of small businesses. (The full methodological paper has yet to be released.) More reassuringly: "Unlike other small business indexes, this one is not based solely on survey data."
The index "does not reflect Intuit's business," the report notes. However, this is not a tool that tells you how the QuickBooks or Intuit clients work. Researchers value "calibration" with official government statistics because they are trying to create something that doesn't exist: near-real-time indicators of how small businesses are doing in terms of employment rates and job growth. .
The complexity of this task is difficult to assess. There are 4.7 million small businesses in the United States that employ fewer than 10 people. It is almost impossible to measure the effectiveness of each person. The research team tried to figure out how to evaluate this.
So… what's in it?
Sufficient procedural detail. What do indicators tell us?
Here's one that immediately jumps out: Monthly job growth for small businesses with fewer than 10 employees was negative for the seventh straight month through February 2023.
Job growth in these small businesses varied geographically, with positive (in February) in five of the eight regions and negative in three others. This varied widely across sectors, with a strong rise in utilities and a contraction in the information sector in February. (Further exploration of the results and conclusions will be given in subsequent columns.)
The study team also included Canada and the UK in the index. Canada exhibits the same geographical and industrial diversity as the United States. And in the UK (where the variables are not quite the same, jobs and job growth are quite close), small business jobs declined in February in all regions of the country. Growth was only in one sector.
The leads are impressive: people involved, analysis tasks, data collection The data set is from 2015 and will be published monthly according to the site. This should be an important tool for anyone interested in improving small business operations and the public policy environment.
