Small Business

In Manufacturing, 295,596 companies were active in 2003. Of these 291,494 had 499 or fewer employees. Thus 98.6 percent of Manufacturing firms were classified as small business. They employed 43.2 percent of the manufacturing workforce. In Mining 98.3 percent of companies were small (17,896 of 18,210) and employed 44.2 percent of the workforce in the industry. Finally, in Wholesale Trade, 331,633 of 342,450 firms fell into the 99 or fewer employee category—96.8 percent of companies. They employed 45.3 percent of those engaged in wholesale trade.

These three sectors in aggregate represented 11.4 percent of all firms and 18 percent of total employment. Small businesses within them were 11.3 percent of all small businesses and represented 21.8 percent of small business employment.

AMERICA'S "MICROS"

The data cited above exclude a very large category of tiny businesses—those that do not have employees at all. Their owners earn business income and are not paid a salary. The Census Bureau classifies these entities as "nonemployer businesses." They are America's own "micro" enterprises—the seeds from which small businesses with employees develop. Data released by the Bureau in connection with Small Business Week in 2006 indicate (again for the year 2003) that 18.6 million such businesses existed. They had revenues of $830 billion, equivalent to $44,623 per entity.

Who are these people? They are engaged across the board in every industrial sector, albeit, obviously, at a very small scale. An indication is provided by categories that had particularly strong growth between 2002 and 2003. They were real estate appraisers growing by 19.1 percent, nail salons (15.9 percent), landscape architectural services (14.6 percent), software publishers (14.4 percent), clothing accessories stores (12.9 percent), bed and breakfast inns (8.5 percent), carpet and upholstery cleaning services (7.5 percent), and confectionery and nut stores, growing 6.5 percent between 2002 and 2003.

The Census Bureau's press release also identified the biggest sectors as follows: "Four economic sectors accounted for almost 60 percent of nonemployer receipts in 2003—real estate and rental and leasing ($176.0 billion, or 21.2 percent); construction ($126.4 billion, or 15.2 percent); professional, scientific and technical services ($102.9 billion, or 12.4 percent) and retail trade ($80.5 billion, or 9.7 percent)."

The growth rate of nonemployer revenues was 5.7 percent between 2002 and 2003, the largest annual increase since the Bureau began collecting such statistics in 1997. The growth rate, of course, may in part be a reflection of bad news: individuals affected by slow recovery, outsourcings, and layoffs may have been, as it were, "fighting back" by creating a modest income for themselves by enterprise.

A DIFFERENT CULTURE

Anybody who has ever worked in or run a small business will be aware of a difference in culture between "small" and "big" business. The difference arises from structural factors, of course, but equally from different values. To be sure, in specific cases a small business may have "big business" values and attitudes arising from the experience and intentions of the owners. On the whole, however, the small business culture is marked by close and familiar contact between owners and employees; and the business as a whole is close to the outside world—customers, neighbors, and suppliers. Structural factors arise because communications in a small business are easy and informal; there is much less layering; contact with the world is immediate and does not require expensive market surveys. The owners very often work within the business and are not the abstract and distant symbol of a faceless stockholder somewhere out there. Much more so in small businesses than in large, the enterprise has a "family" or "tribal" atmosphere and the predominant value is continuity and survival rather than abstract concepts like profit, return, and asset appreciation. Being in close and direct contact with the environment ("belly-to-belly" as Japanese business people say), with information flow rapid and decisions easier to make and to implement, small businesses tend on the whole to be capable of rapid reaction—but are also limited by limited means.

The small business environment is both more open, free, quick, and "organic" than large structures where size alone imposes bureaucratic methods of control and slow communications through many layers of decision-makers. For this reason a highly disproportionate number of innovations arise first in small businesses. And, as the SBA points out, small business is also the source of most new jobs: 75 percent of net new jobs added to the economy come from small business. When it comes to the future, one can confidently say: "Small is beautiful."

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