Research Information System
Technical Report, pp.1-59, 2023
Small and young businesses are essential for job creation, innovation, and economic growth.
Even most of the superstar firms start their business life small and then grow over time. Small
firms have less internal resources, which makes them more fragile and sensitive to macroeconomic conditions. This suggests the need for frequent and real-time monitoring of the small
business sector’s health. Previously this was difficult due to a lack of appropriate data. This
paper fills this important gap by developing a new Intuit QuickBooks Small Business Index
that focuses on the smallest of small businesses with at most 9 workers in the US and the
UK and at most 19 workers in Canada. The Index aggregates a sample of anonymous QuickBooks Online Payroll subscriber data (QBO Payroll sample) from 333,000 businesses in the
US, 66,000 in Canada, and 25,000 in the UK. After comparing the QBO Payroll sample data
to the official statistics, we remove the seasonal components and use a Flexible Least Squares
method to calibrate the QBO Payroll sample data against official statistics. Finally, we use
the estimated model and the QBO Payroll sample data to generate a near real-time index
of economic activity. We show that the estimated model performs well both in-sample and
out-of-sample. Additionally, we use this analysis for different regions and industries.