Small businesses are the lifeblood of many communities and a critical driver of production, employment, and economic growth. They account for 99 percent of all business establishments in the United States, employ 48 percent of all US workers, are responsible for over 41 percent of net job creation, account for 45 percent of GDP, and produce 34 percent of all US exports.

So it’s no surprise that many policymakers, economists, and government officials have a laser focus on how the sector is faring. Concern among these groups has increased as the shares of GDP and employment in this sector have fallen in recent years.

While there is no shortage of surveys on how small businesses are feeling or the decisions they’re making, publicly available data offer an incomplete view of the small business sector.

The Institute hopes to change that by leveraging a new JPMorgan Chase Institute small business data asset constructed from over 470 million anonymized and aggregated transactions conducted by 597,000 small businesses from February to October 2015.

In our inaugural report on the small business sector, “Cash is King: Flows, Balances, and Buffer Days”, we explore the financial lives of small business by taking a comprehensive look at their cash inflows, outflows, and account balances. In doing so, we gleaned that cash buffers are a valuable benchmark of small business financial health and that the median small business is essentially living month to month with enough cash to withstand 27 days without cash inflows to their business.

Following are the key findings from our report on cash flow for small businesses.

  • Finding One: The median small business has average daily cash outflows of $374 and average daily cash inflows of $381, with wide variation across and within industries.
  • Finding Two: The median small business holds an average daily cash balance of $12,100, with wide variation across and within industries.
  • Finding Three: The median small business holds 27 cash buffer days in reserve.
  • Finding Four: Small businesses in labor-intensive or low-wage industries hold fewer cash buffer days than those in capital-intensive or high-wage industries.
  • Finding Five: Small business cash buffer days vary across metropolitan areas, but no clear pattern emerges from this variance.

Based on these findings, there are a few steps that policy makers and industry leaders can take to help small businesses. First, increase access to credit. This can provide a lifeline to small businesses in the face of economic and/or idiosyncratic shocks. Diversifying the set of available credit offerings is also critical to matching the needs of the smallest and most financially vulnerable small businesses

Second, help small business owners manage their cash flows, build up their cash buffer days, and incorporate the cash buffer benchmark into educational programs.

For the full findings of this report and the implications for small businesses, please visit: Cash is King: Flows, Balances, and Buffer Days.

The goal of the JPMorgan Chase Institute is to help decision-makers use better facts, timely data, and thoughtful analysis to make smart decisions to advance global prosperity. Our hope is that the insights in this new report can inform policymakers, business leaders, and others as they confront challenges including inequality, climate change, and transportation infrastructure.

Diana Farrell is the founding President and Chief Executive Officer of the JPMorgan Chase Institute. Previously, Diana was the Global Head of the McKinsey Center for Government and the McKinsey Global Institute. She served in the White House as Deputy Director of the National Economic Council and Deputy Assistant to the President on Economic Policy.


Diana Farrell

Founding and Former President & CEO