PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

America as the Land of Entrepreneurship: The Nonemployer Portrait

By at 5 October, 2018, 2:26 pm

by Raymond J. Keating-

America is the land of opportunity and the land of entrepreneurship. A significant part of this story of opportunity and entrepreneurship is about the entrepreneur who works alone to make a living, build a business, strive and hopefully thrive.

Government data offers a glimpse at certain aspects of being a nonemployer –that is, a small business without employees – in this country. The Small Business Administration’s Office of Advocacy recently released “A Look at Nonemployer Businesses.” Among the bits of information served up were the following key points:

Income Contributions. “Nonemployer businesses are the primary source of income for 40 percent of their owners and an additional source for the remaining 60 percent.”

Time Invested. “Only about 50 percent of nonemployer business owners spend less than 20 hours a week working for or managing their business, while 30 percent spend at least 40 hours a week on the business and about 20 percent spend between 20 and 40 hours.”

Large Number of Nonemployers. “The number of nonemployer firms has risen 58 percent since 1997, from 15.4 million in 1997 to 24.3 million in 2015, while the number of employer firms has grown 6 percent in the same period.”

Earnings. “On average, nonemployer firms earn about $47,000 annually and employer firms earn nearly $6 million.”

Startup Dollars from Personal Savings. “Nearly a third of nonemployers report not needing startup capital. Among those who do, 79 percent rely on the owner’s personal or family savings. Other sources of startup capital include home equity loans, credit cards, business loans, and venture capitalists, although a smaller share of nonemployers use these compared to employer firms.”

Nonemployers Across Industries. “While nonemployers are most concentrated in industries like performing arts and passenger transportation, these businesses appear in practically every industry and comprise the majority of nearly 80 percent of industry subsectors. Nonemployers operate museums and hobby shops; provide pet care and dating services; manufacture clothing, electrical equipment, and machinery; sell real estate; process data, and much more.”

A Diverse Group. “Compared to employer owners, owners of nonemployer businesses are younger and more diverse in terms of race, ethnicity, and gender.”

These numbers and trends are encouraging in that, in contrast to assorted other data, we see a nation that very much still sees value in entrepreneurship, and views entrepreneurship as a path to opportunity. That opportunity can lead to, for example, supplementing the overall family budget, transforming hobbies into small businesses, or working to make a nonemployer enterprise the center of earning a living, and supporting oneself and one’s family.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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