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Small Businesses Are Part of the 99%

Rhonda Abrams
Monday, 7 Nov 2011 | 9:56 AM ET
99 percent
Adam Jeffery | CNBC.com
99 percent

What started as a protest against financial industry excesses has spread to cities across the country, focusing attention on the growing income disparity in the United States: More and more of our nation's wealth is going to the top 1 percent.

What does all this have to do with small business? What does Occupy Wall Street mean for Main Street?

No one likes seeing protesters in the streets. Extreme elements easily can take over populist movements, whether they're Occupy Wall Street or the Tea Party. But someone has to speak up for those of us not on the streets — the small business owner who had to lay off employees, the construction company that had to close up shop, the consultant who can't find clients.

Small businesses are the 99%. Our customers are the 99%.

Sure, a few may sell yachts or charter private jets to the super wealthy, but the overwhelming majority of us who run small companies depend on middle-class customers. As income and wealth for the 99% shrinks, our income and wealth shrinks.

Let's look at some facts:

Small businesses are part of the 99%: Others with their own agenda may say that small-business owners are part of the 1%. They're wrong; I'm guessing that you aren't.

No offense, I hope you're doing incredibly well, but small business and the top 1% have a big gap between them.

Digging into the numbers

The top 1% have average incomes of $717,000, according to research from The New York Times.

Even $386,000 can get you to the top 1% of annual earners. But remember, that's income after all expenses, not gross revenues. And that's income, not wealth.

Estimates vary, but only 1% of Americans own from 35% to 42% of all of this country's assets.

Now let's see what small businesses make:

The self-employed averaged $39,723 in total receipts, not profits, in 2009, according statistics from to U.S. Census Bureau. After expenses, that number would be lower.

Subchapter S corporations, the most typical small business form, averaged a little more than $100,000 in income after expenses in 2007, said Scott Shane, an author and professor of entrepreneural studies at Case Western Reserve University in Cleveland, who looked at IRS statistics of income. That's before the recession and probably lower now.

Neither are close to the top 1%.

Keep in mind these numbers skew high because they include many investors, not real businesses.

For example, S corporation holding companies, basically investment groups, had average incomes of $691,916 in 2007. That's more than 10 times an average retail small business and more than six times a small construction business.

The 99% are our customers. Or, at least they used to be.

Middle-class customers

You've already experienced what a new study by the federal Bureau of Labor Statisticsconfirms: Shrinking incomes mean Americans spend a higher percentage on basics just to survive. They eat out less in your restaurant, shop for fewer clothes in your store, buy less of the insurance you sell.

Even if your clients are large companies, their customers are likely to be middle class. When the middle class suffers, you suffer.

The 99% provide social order critical for small businesses.

I've traveled all over the world the past couple of years, and I've seen countries with a weak middle class. They have the very rich, the struggling, and the very poor. When that happens, more of a country's — and a company's — resources must go toward keeping social order instead of growth and investment.

A small shop owner on the largest shopping street in Buenos Aires complained to me about how much he had to spend on security guards because of theft. He envied American businesses their safety.

How much longer will we have that safety if average Americans don't have a meaningful stake in their future?

In case you don't think it can happen here, it already has.

As several songs say, "The rich get richer, and the poor get poorer." What's the answer? Certainly not cutting the middle class any further with reductions in education, public services or Social Security.

I'm not sure where the Occupy Wall Street movement is going — whether it will turn into a national movement, be taken over by those who thrive on destruction or fizzle out.

One thing I do know is the protesters' basic message must be heeded: Income inequality is threatening American life, threatening the future of small business. We are the 99%.

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