Estimated and Potential Savings from AI for Small Businesses

By SBE Council at 30 October, 2023, 9:32 pm

How the Estimated Savings are Calculated

Investments by small businesses have meant significant time savings and/or time being used more effectively by both small business owners and small business employees. In fact, our very conservative estimate derived from SBE Council’s SMALL BUSINESS AI ADOPTION SURVEY 2023, “points to 6.33 billion hours saved or better utilized annually by U.S. small businesses, which translates into estimated savings of $273.5 billion annually.

How did we arrive at these estimates?

First, based on the latest (2020) U.S. Census Bureau data, there are 6,024,657 employer firms in the US with fewer than 100 employees.

Second, based on this SBE Council survey, 75% of small businesses with fewer than 100 employees use AI. Therefore, an estimated 4,518,493 small employer firms are using AI.

Third, the SBE Council survey points to 14.97 hours saved per week for a small business employer, as well as 13.06 hours saved per week for small business employees.

Fourth, while there are assorted estimates as to earnings per hour among those working in small businesses, we have turned to two sources for our calculations. ZipRecruiter’s data seems to be the most inclusive, and their estimate for the average earnings for a small business owner comes in at $53 per hour (as of October 5, 2023). (See the following chart from ZipRecruiter.)

Fifth, according to the latest Paychex/IHS Markit survey data, small business employees earn an average of $31.93 per hour. (See the following from the Paychex/IHS Markit “Small Business Employment Watch.”)

Sixth, using the above findings and data, we arrive at various estimates.

For Small Business Employers/Owners:

● Per small business owner/employer savings on average per week (14.97 hours saved or better utilized each week at $53 per hour):  $793.41

● Per firm per year dollars saved assuming 50 work weeks:  $39,670.50

● Per firm per year hours saved or used more effectively assuming 50 work weeks:  748.5 hours

Annual estimated savings for all small businesses: $179.3 billion and 3.38 billion hours

For Small Business Employees:

● Per small business employees savings on average per week (13.06 hours saved or better utilized each week at $31.93 per hour):  $417.01

● Per firm per year dollars saved assuming 50 work weeks:  $20,850.50

● Per firm per year hours saved or used more effectively assuming 50 work weeks:  653 hours

Annual estimated savings for all small businesses: $94.2 billion and 2.95 billion hours

Total Annual Estimated Small Business Savings: $273.5 Billion and 6.33 Billion Hours.

What if all small businesses with fewer than 100 employees invested in AI use?

Small businesses could save 4.51 billion employer hours annually, translating into an estimated dollar value of $239 billion annually in savings.

Small businesses could save 3.93 billion employee hours annually, translating into an estimated dollar value of $125.6 billion annually in savings.

Total annual estimated small business savings: $364.6 billion and 8.44 billion hours.

It must be noted that these are very conservative estimates because we’re only looking at small business employer firms with fewer than 100 workers. This excludes nonemployer firms. In fact, nonemployers – i.e., one-person businesses – were not covered in the SBE Council survey, as our goal was to determine the employee effects of AI adoption and to obtain a sense of how small businesses were utilizing AI to fill employee gaps due to the lack of available workers and labor costs. The one-person business is an obviously a very significant part of the small business count in the United States. The Census Bureau (2020) shows that there are 27,151,987 non-employers. However, this data fails to differentiate between nonemployers who run their businesses full-time and those who only have a side gig. But the exclusion of this group of small business owners points to our estimates of savings from AI being very conservative.

Another way of looking at this is using self-employment data from the U.S. Bureau of Labor Statistics. These numbers capture full-time entrepreneurs whether they are non-employers or employers. The latest numbers from that dataset points to 16.29 million self-employed (as of September 2023). Again, we don’t know how many of these are employers and how many are non-employers. We also cannot strictly apply the findings from the SBE Council survey to full-time non-employer small business owners. However, it is not unreasonable to calculate the estimates using the self-employment numbers and the survey findings to simply gain a sense for how conservative our original estimates might be. Applying the survey hours saved for small business owners and the average hourly earnings from ZipRecruiter to these self-employment numbers, the annual estimated savings for small business owners come in at 12.2 billion hours and $646.1 billion. And this is only for small business owners.

These 12.2 billion hours and $646.1 billion saved due to AI for small business owners, again, is the most expansive estimates, and cannot be strictly cited. However, the size of these numbers do give us an idea of the fuller potential savings and better utilized time and resources for small business owners using AI.

Raymond J. Keating

Chief Economist

Small Business & Entrepreneurship Council

rkeating@sbecouncil.org