Strategies quiz: How much do you know about small business?

— -- During this holiday season, it's time for a bit of fun.

So how about a quick quiz? How much do you really know about small businesses?

Once you've answered, I suggest giving the quiz to candidates running for office. Let's see how much they actually know about this critically important part of our country.

1. Everyone says small businesses are the backbone of the US economy. Just how many small businesses are there?

a. 5.8 millionb. 11.3 millionc. 27.5 million

d. 44.1 millione. no one really knows

2. How does that compare to big corporations? How many companies have MORE than 100 employees?

a. 18,311b. 108,855c. 2.15 milliond. 8.73 millione. 13.25 million

3. You'll commonly hear that 50% of all businesses fail within the first five years. Is this true or false?

4. People talk about business failure rate, but what about survival rate? What percent of companies are still in business 10 years after they've started?

a. 2%b. 5%c. 12%d. 34%e. 48%

5. There's no real consensus on the definition of a "small business." But what's the maximum number of employees a company can have to meet the definition of a small business as used by the federal Small Business Administration?

a. 10b. 25c. 100d. 500e. 1,000

6. How much money do the self-employed take in? What's the average gross revenue of companies with no employees other than the owner?

a. $12,333b. $39,723c. $78,299d. $135,895e. $263,127

7. Politicians warn that higher taxes on the rich hit small businesses particularly hard. How much money do small businesses actually make; what's the average profit of Subchapter S corporations, the most typical small business form?

a. $37,278b. $80,936c. $100,436d. $683,884e. $1,332,087

8. How many small business people make more than $1 million a year in profits?

a. 12,000b. 51,000c. 273,000d. 433,000

9. What percent of one-man shops — small businesses with no employees — started with less than $5,000?

a. Noneb. 5%c. 11%d. 20%e. 39%?

Answers:

1. e. You also get a point if you chose c. In 2009, there were about 27.5 million businesses, combining both "employer" and "non-employer" (sole-proprietor) businesses. This number is highly misleading, containing many "businesses" that aren't really businesses: holding companies, passive investors, hobbyists forming businesses for tax purposes.

2. b. Although big corporations claim most of the attention, only 108,855 have more than 100 employees.

3. False. Although this claim is repeated often, it's misleading. About 50% of entrepreneurs shut their doors or call it a day within five years, but they haven't necessarily failed. Many have decided to go into other lines of business or ended the business for personal reasons unrelated to business success.

4. d. 34%. A surprisingly large percent of entrepreneurs make it work. Think of it this way: If you start a business today, you've got a one-third chance your business will last at least 10 years. Not bad.

5. d. 500. But you also get half a point if you answered e. The SBA's definition is up to 500 employees, 1,000 in some industries.

6. b. $39,723 was the average of total receipts — not profits — in 2009 of non-employer businesses. After expenses, that number would be lower.

7. c. $100,436 was the average profit, not gross revenue, of Subchapter S corporations in 2007 before the recession. That number might be lower now, according to an analysis of IRS Statistics of Income by Scott Shane of The New York Times.

8. b. Only 51,000 tax returns with more than $1 million in income were from filers considered active small businesses. I'll give you half a point if you chose "c" because a total of 273,000 filers had at least $1 million in taxable income who received at least $1 in income from some entity formed as a small company.

9. e. Believe it or not, almost 40% of all small businesses with no employees — like independent consultants, self-employed contractors or personal-service providers such as hairdressers — report they started with less than $5,000.

Sources: U.S. Census Bureau, Small Business Administration, Treasury Department, and IRS data analysis by Scott Shane of The New York Times.

Rhonda Abrams is president of The Planning Shop and publisher of books for entrepreneurs. Her newest is the 5th edition of The Successful Business Plan: Secrets and Strategies. Register for Rhonda's free newsletter at www.PlanningShop.com and "like" The Planning Shop on Facebook for updates. For an index of her columns, go to smallbiz.usatoday.com. Twitter: twitter.com/RhondaAbrams. Copyright Rhonda Abrams 2011.