National Revenue Matrix – How Does Your Business Compare?
Business owners would be well-served to know where they fit in the realm of revenue size to other businesses in the U.S. Many of us have seen the statistic that there are around 25 million businesses in the U.S. This number is misleading. It includes every potential, small sole proprietor business in the country. A majority of these are tiny one person businesses that just make extra income for the owners – more like hobbies. Many of these individuals would be better served getting full time employment in their field if available.
The Internal Revenue Service has kept data on around 5.5 million plus active corporations (C and S corporations) that file with the IRS each year. These businesses are filing both cash basis and accrual basis but over 80% (weighted by revenues) file accrual basis. These 5.5 million plus companies have over 95% of the assets and produce over 95% of the revenues each year. These are the businesses in aggregate you want to compare with each year and are the ones detailed in the chart.
Why is it important to know where you stand in relation to other businesses? First, the revenue size of your business will factor significantly into your business value. The smaller the firm the larger the risk to operate it and hence the valuation is discounted significantly more. Second, your sources are more constrained the smaller your firm’s size by revenue. Third, the positioning will help you understand your competitive landscape in a general sense. Fourth, an overall perspective is good to have when making business decisions so as not to act out of visions of grandeur.