A new state report highlights the outsized role of the New York small business sector — and the growing challenges holding it back — as policymakers face increasing pressure to address barriers to entrepreneurship and growth.
There were 422,137 small businesses operating in New York in 2023, accounting for 98.9% of all businesses statewide. Those firms employed 3.7 million people, or roughly 45% of the state’s workforce, and generated nearly $1 trillion in economic activity.
Despite that footprint, New York is underperforming compared to the rest of the country in key measures tied to business creation, job growth, and entrepreneurial activity.
Growth trails national trends
Over the long term, New York small business growth has lagged the nation, with the number of firms increasing 9.5% between 2001 and 2023, compared to 14.2% nationally.
The pandemic amplified those challenges. New York saw a net loss of small businesses in both 2020 and 2021, driven largely by a sharp drop in new business formation rather than a spike in closures.
Between 2018 and 2023, the gap widened further:
- New York: -0.5% change in small businesses
- United States: +6.4% growth
That divergence has translated directly into employment trends, with small business jobs declining in New York while growing nationwide.
Key industries and economic impact
Small businesses in New York are concentrated in several core sectors.
According to the report, the largest shares of firms are in:
- Professional and administrative services (19%)
- Retail and wholesale trade (17.5%)
- Leisure and hospitality (14%)
Meanwhile, health care and leisure sectors account for more than one-third of small business employment statewide.
The average small business employs 8 to 9 workers, below the national average, placing New York among the lowest-ranked states in firm size.
New York small business owners face higher costs
While many challenges are shared nationally, several stand out more sharply in New York.
According to survey data cited in the report, the top concerns for small business owners include:
- Cost of health insurance
- Cost of supplies and inventory
- State taxes on business income
- Government regulations
- Energy and electricity costs
Notably, state taxes, regulatory burdens, and electricity costs ranked as more significant issues in New York than in other states.
More than one in four employers surveyed said reducing regulations would be the single most helpful action the state could take.
Regulatory hurdles and delays remain a major barrier
The report underscores how regulatory complexity continues to slow business formation and expansion.
In some parts of the state, businesses can face:
- Multiple permitting layers across agencies
- Lengthy approval timelines
- Accumulated compliance costs and fees
In New York City, for example, some businesses report waiting six months or longer to open, navigating approvals from as many as 15 agencies.
Access to capital is another persistent issue, particularly for minority-, women-, and veteran-owned businesses.
Rise of gig economy reshaping the landscape
At the same time, the structure of entrepreneurship in New York is shifting.
The report notes a rise in “nonemployer businesses”, particularly sole proprietorships — often tied to gig economy work such as:
- Freelance services
- Content creation
- Ride-share and delivery platforms
- Short-term rentals
While these businesses expand participation in the economy, they do not contribute to traditional job growth in the same way as employer firms.
New York lags national benchmarks
Even with its large economy, New York falls short on several national benchmarks:
- 44.7% of jobs tied to small businesses (below 47.5% national average)
- Among the lowest average employees per firm in the country
- Slower growth in business applications compared to national trends
States with higher shares of small business employment tend to have smaller firms but stronger entrepreneurial ecosystems overall.
State efforts underway, but challenges persist
State officials have launched several initiatives aimed at improving conditions for small businesses, including:
- More than $1 billion in grant and loan programs
- Expansion of alternative lending networks
- A regulatory review initiative known as EXPRESS NY, designed to identify burdensome rules
Still, the report concludes that more needs to be done to reduce barriers, improve access to capital, and provide technical support to entrepreneurs.
Bottom line
The data paints a clear picture: New York small business is central to the state’s economy, but structurally disadvantaged compared to national peers.
Without targeted policy changes — particularly around costs, regulation, and access to capital — the state risks falling further behind in business formation, job creation, and long-term economic growth.
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