What businesses are small companies really in -- and where are they scarce?
Small Business 2001
In the United States there are an estimated 5.8 million small companies with 500 or fewer employees. (There were 5.5 million in 1997, the last year for which full data are available.) Which industries are small companies in?
It turns that out the Census Bureau examines that question with a pretty high-powered microscope. The lens of the microscope: Standard Industrial Classification (SIC) codes, a system the government developed to categorize every company's primary line of business. SIC codes are detailed. A listing of all companies by SIC codes reveals, for example, how many businesses are engaged in hunting, trapping, and game propagation (295, and all but one employs fewer than 500 people); coin-operated amusement devices (4,513, and all but 28 are small companies); and hundreds of other subindustries and sub-subindustries.
First train the microscope on the aggregate numbers -- in other words, on broad industrial sectors. (See "All Small Companies, by Industry," at right.) Nothing too surprising there. More than one million small companies are in retail trade. And more than 2 million are in that catchall category the government calls "services."
But ratchet up the magnification, and you start to see some interesting phenomena, such as the many, many different kinds of companies that make up the service sector. (See "Top Five Service Industries," below.)
All small companies, by industry Number of businesses with 500 or fewer employees in 1997 (rounded)
Services (40.0%) 2,215,000
Retail trade (20.0%) 1,094,000
Construction (12.0%) 662,000
Finance, insurance, and real estate (8.0%) 457,000
Wholesale trade (7.4%) 410,000
Manufacturing (6.0%) 329,000
Transportation, communications, and public utilities (4.0%) 217,000
Agricultural services (2.0%) 115,000
Mining (0.4%) 20,000
Source: SBA's Office of Advocacy, based on data provided by the U.S. Cencus Bureau, Statistics of U.S. Business. Percentages do not add to 100% because of rounding.
Top five service industries The biggest single SIC category for small companies is services, which comprises about 40% of all small businesses. It's a catchall category that includes some 2.2 million businesses, but it still doesn't include everything we usually think of as the service sector of the economy. Transportation, communication, and public utilities get their own category, for instance; so do wholesale trade and retail trade, and finance, insurance, and real estate. What's left for the service category? Here are the top five from the dozen or so subcategories:
Health services (Doctors' offices, nursing facilities, etc.) 423,000
Business services (Advertising, programming, personnel, etc.) 345,000
Engineering, accounting, research, management, and related services 275,000
Personal services (Cleaning establishments, hair salons, etc.) 177,000
Other services 750,000
Each of those subcategories, in turn, includes many subcategories of its own, usually designated "four-digit SIC codes." Here are the five categories with the largest number of small companies in the business-services sector:
Building cleaning and maintenance services 54,000
Computer programming services 30,000
Computer services (Other than programming) 29,000
Commercial art and graphic design 15,000
Help-supply services (Staffing and personnel) 14,000
Other business services 203,000
Source: SBA's Office of Advocacy, based on data provided by the U.S. Cencus Bureau, Statistics of U.S. Business.
Small businesses need not apply Quick -- which industries have more large companies than small ones? There aren't many, since small companies outnumber large companies overall. But unless you get a charge out of attacking the big boys, stay out of these businesses:
Pulp and paperboard mills
Copper smelting and refining
Guided-missile and space vehicle-propulsion units
And by the way ... The SIC-code system is being supplanted by the new North American Industry Classification System. The differences between the two systems are minimal.