Business Opportunities

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CHAPTER 9
BUSINESS OPPORTUNITIES

Starting or acquiring a business has long been considered an American dream. For many, this dream is reality, whether it is a part-time venture with annual receipts of less than $25,000 or a corporate entity with receipts of more than $1,000,000 per year. For the purpose of discussing the present and future of self-ownership business opportunities in the United States, the material in this chapter will focus primarily on what has been published about small business and homebased business from a variety of sources, including the U.S. Census Bureau and the U.S. Small Business Administration (SBA).

In its efforts to estimate the number of small businesses in the country, the U.S. Census Bureau counts Schedule C businesses (individual proprietorship or self-employed persons), partnerships, and Subchapter S corporations (usually small corporations in which the profits pass through to the owners without being taxed first). It does not count the large number of small businesses incorporated as standard corporations.

Every five years, in years ending in "2" and "7," the U.S. Census Bureau surveys business enterprises and publishes an Economic Census that compiles and analyzes a wide variety of statistical data about business and industry. The entire report is published in stages, starting two years after the designated census date. The most recent report to be compiled is the 2002 Economic Report. However, the business owner survey and other small business–related reports associated with this document were scheduled to be released throughout 2004 and 2005 according to a calendar published at the U.S. Census Bureau's Internet Web site (http://www.census.gov/econ/census02/). As these are released and posted on the Web site, they will become the most accurate data available concerning the state of small business at the turn of the twenty-first century.

As of April 2004 the most current U.S. Census Bureau economic survey with fully available data on small business and homebased business is the 1997 Economic Census. In some instances, this five-year census report does not analyze the data for the same criteria used previously. Therefore, data derived from the 1992 census and published in 1997 as Characteristics of Business Owners Survey, is also used in this chapter.

BUSINESS STARTS

According to the U.S. Census Bureau, more than one-half million businesses started (employer births) each year between 1990 and 2002. (See Table 9.1.) In the years between 1990 and 2002, the highest number of business starts in one year occurred in 1996, with 597,792; the lowest number for one year occurred in 1991 (541,141).

The annual rate of business starts varies from state to state. Table 9.2 provides a state-by-state listing of the number of "employer firm" business starts between 1990 and 2002. These constitute businesses that employ one or more workers. In 2002 the state with the most employer firm business starts was California, with 130,840 business start-ups. However, the states with the highest year-to-year increase in business starts were Arkansas, with an increase of 34.9 percent from 2001 (3,990 starts) to 2002 (5,381 starts); Georgia, with an increase of 23.9 percent (23,211 starts in 2001 and 28,756 in 2002); and Florida, with an increase of 20.5 percent (60,370 in 2001 and 72,720 in 2002). (See Table 9.2.)

Reasons for Becoming a Business Owner

In the Characteristics of Business Owners Survey, one-fifth (21.3 percent) of business owners reported that they became an owner to have a primary source of income, while one-fourth (25.6 percent) wanted to have a secondary source of income. (See Table 9.3.) Another one-fifth (21.5 percent) wanted to be their own boss. Less than 3 percent wanted to bring a new idea to the marketplace. Approximately 8 percent wanted to have more freedom to meet family responsibilities.

YearReal GDP(billions 96$)Employer firmsEstablishments*Self emp.(000)Self emp. rate (%)Nonfarm bus. tax returnsNonfarm sole props.Employer birthsEmployer terminationsBusiness bankruptcies
20029,4405,595,200 e.NA9,6506.726,363,80018,389,000550,100 e.584,500 e.38,155
20019,2155,629,600 e.NA9,8266.825,631,20017,904,900545,400 e.568,300 e.39,719
20009,1915,652,5447,070,0489,9076.925,106,90017,570,500574,300542,83135,219
19998,8595,607,7437,008,44410,0877.224,750,10017,377,100579,609544,48737,639
19988,5095,579,1776,941,82210,3037.524,285,90017,183,700589,982540,60144,197
19978,1605,541,9186,894,86910,5137.723,857,10017,176,000590,644530,00353,819
19967,8135,478,0476,738,47610,4907.823,115,30016,955,000597,792512,40253,200
19957,5445,369,0686,612,72110,4827.922,555,20016,424,000594,369497,24650,516
19947,3485,276,9646,509,06510,6488.122,191,00016,154,000570,587503,56350,845
19937,0635,193,6426,401,23310,2808.020,874,79615,848,000564,504492,65162,399
19926,8805,095,3566,319,3009,9607.820,476,77515,495,000544,596521,60669,848
19916,6765,051,0256,200,85910,2748.120,498,85515,181,000541,141546,51870,605
19906,7085,073,7956,175,55910,0978.020,219,40014,783,000584,892531,40063,912
19896,5925,021,3156,106,92210,0088.119,560,70014,298,000NANA62,449
19886,3684,954,6456,016,3679,9178.218,619,40013,679,000NANA62,845
19876,113NA5,937,0619,6248.018,351,40013,091,000NANA81,463
19865,912NA5,806,9739,3277.917,524,60012,394,000NANA79,926
19855,717NA5,701,4859,2698.016,959,90011,929,000NANA70,644
19845,505NA5,517,7159,3388.216,077,00011,262,000NANA64,211
19835,132NA5,306,7879,1438.215,245,00010,704,000NANA62,412
19824,919NA4,633,9608,8988.114,546,00010,106,000NANA69,242
19815,021NA4,586,5108,7358.013,858,0009,585,000NANA48,086
19804,901NA4,543,1678,6438.113,021,6008,932,000NANA43,252
NA = not available
GDP = gross domestic product
e. = estimate
*Units with paid employees in the fourth quarter through 1983. 1984 on includes units active in any quarter of the year.
source: "Table 3. U.S. Business Measures, 1980–2002," in Small Business Economic Indicators for 2002," Office of Advocacy, U.S. Small Business Administration, Washington, DC, June 2003 [Online] http://www.sba.gov/advo/stats/sbei02.pdf [accessed March 3, 2004]

According to the Small Business Administration, the receipts of women-owned companies constitute 100 percent of personal income for 19 percent of those with homebased businesses and 26 percent of those with firms not based at home. Among nonminority men who own businesses, 28 percent derive all of their personal income from a homebased business, while 36 percent do the same with their non-homebased companies. (See Table 9.4.)

BUSINESS SIZE

Most business start-ups are very small. In a January 2002 report, Nonemployer Statistics: 1999, the U.S. Census Bureau stated that in 1999 more than 16 million businesses were nonemployer businesses, meaning they had no paid employees. This figure was up 2.8 percent from 1998. This represents just a portion of the small business startups over that period, since many small businesses have some employees. Nearly 60 percent of nonemployer sales were from four sectors of the economy: real estate and rental and leasing ($125 billion); construction ($103 billion); professional, scientific and technical services ($85 billion); and retail trade ($73 billion).

An analysis of 24.1 million full- and part-time business enterprises conducted by BizStats.com revealed that nearly 60 percent had annual revenues of less than $25,000. (See Table 9.5.) The number of businesses reporting revenues of less than $25,000 was 67.6 percent among sole proprietorships, which is the largest category of small business owners.

Another indicator of small business size is whether or not a firm hires employees. Among small businesses surveyed in 1996 and 1997 for the SBA report Homebased Business: The Hidden Economy, only 9 percent of homebased businesses had paid employees, while 32 percent of nonhomebased small businesses reported having paid employees. (See Table 9.6.) According to the SBA report, sole proprietors accounted for 90 percent of all homebased business owners and 74 percent of all nonhomebased small business owners. (See Table 9.6.)

BUSINESS FAILURES

Table 9.1 provides a two-decade overview of business bankruptcies in the United States, as reported by the Administrative Office of the U.S. Courts. The highest number of bankruptcies in one year of this time period occurred in 1987, when more than 81,000 businesses filed for bankruptcy. The lowest rate occurred in 2000, with just over 35,000 businesses filing for bankruptcy.

Bankruptcy is one measure of business failure. Business owners may also choose to terminate their business without declaring bankruptcy. Since 1990, the highest number of employer terminations, meaning business closings that were not due to bankruptcy, occurred during

State19901995200020012002Ann. percent changeRank
U.S. total584,892594,369574,300545,400 e.550,100 e.
Yearly change (%)(0.9)(5.0)0.9
Opening rate (%)10.29.69.8
Alabama9,2609,14010,06710,0609,599(4.6)37
Alaska2,6882,5212,3332,4382,270(6.9)44
Arizona9,83212,04415,17514,54114,291(1.7)27
Arkansas6,4847,0424,6803,9905,38134.91
California139,146127,074167,047128,885130,8401.514
Colorado11,96219,70325,46224,73025,2902.312
Connecticut9,3999,3959,9109,0748,726(3.8)34
Delaware2,0832,7833,6823,3523,223(3.8)35
District of Columbia3,2263,2504,4724,0904,1571.613
Florida48,39154,00659,91260,37072,72020.53
Georgia22,30924,47828,92523,21128,75623.92
Hawaii3,5853,8743,7453,8113,555(6.7)43
Idaho3,8535,0535,8295,5345,039(8.9)46
Illinois27,95230,39328,87528,42627,342(3.8)33
Indiana10,99314,35514,11213,90313,530(2.7)30
Iowa5,5266,1035,6685,6595,6600.020
Kansas6,7167,6006,4837,0266,703(4.6)38
Kentucky7,7309,0788,6378,7138,526(2.1)28
Louisiana8,3219,81710,4689,8169,810(0.1)21
Maine3,9784,4765,1354,6674,428(5.1)41
Maryland18,92318,45820,53920,07220,5762.510
Massachusetts14,69716,04018,64018,16621,72519.64
Michigan16,80423,97223,76023,06022,799(1.1)26
Minnesota11,52512,17813,90612,70013,6837.76
Mississippi5,6206,1856,4396,1646,2561.515
Missouri13,33614,93513,99614,36016,33713.85
Montana2,2953,3774,4183,6083,569(1.1)25
Nebraska4,1433,8954,4414,4194,372(1.1)24
Nevada4,9347,1518,5878,8648,826(0.4)22
New Hampshire4,2784,9884,6774,3984,5623.79
New Jersey24,61027,10627,885 e.36,74729,916(18.6)50
New Mexico4,7214,8375,8365,7535,281(8.2)45
New York54,78154,62061,50762,73059,571(5.0)40
North Carolina19,65221,65023,31022,43622,9502.311
North Dakota1,3921,6311,4931,4191,356(4.4)36
Ohio20,28627,04622,29022,95122,379(2.5)29
Oklahoma8,0698,7908,9799,9408,702(12.5)49
Oregon15,50413,77014,72913,24613,160(0.6)23
Pennsylvania26,12523,82035,10433,49731,939(4.7)39
Rhode Island2,9003,2903,6753,5473,5971.416
South Carolina9,91310,44711,11411,37210,266(9.7)47
South Dakota2,0261,8582,1381,9531,389(28.9)51
Tennessee17,29715,82315,79316,48815,982(3.1)32
Texas49,41952,87154,33053,27154,0091.417
Utah4,6627,7429,87510,74510,431(2.9)31
Vermont2,1832,1392,5112,2262,3314.78
Virginia19,85619,43322,21921,37121,4380.319
Washington29,32230,24340,35739,64137,562(5.2)42
West Virginia4,2314,4254,1773,6913,9446.97
Wisconsin10,30712,34212,43612,02512,1721.218
Wyoming1,8792,2302,3142,5582,275(11.1)48
Notes: State totals do not sum to U.S. total as firms can be in more than one state. On occasion, some state terminations result in successor firms which are not listed as new firms.
source: "Table 7. Employer Firm Births by State, 1990–2002," in Small Business Economic Indicators for 2002," Office of Advocacy, U.S. Small Business Administration, Washington, DC, June 2003 [Online] http://www.sba.gov/advo/stats/sbei02.pdf [accessed March 3, 2004]

2001 and 2002. (See Table 9.1.) The years from 1990 to 2002 saw an overall decline in both business bankruptcies and in the number of business start-ups.

The 1992 Economic Census reported that 71.7 percent of discontinued businesses attributed their failure to inadequate cash flow or low sales. Another 8.2 percent thought they were unsuccessful due to lack of access to business loans or credit.

Table 9.7 offers a state-by-state analysis of business bankruptcies between 1990 and 2002. Twenty-five states experienced a decrease in the number of bankruptcies from 2001 to 2002, including Delaware, which saw a 52.8 percent drop, and New Hampshire, which had 36.5 percent fewer bankruptcies. Of the states that experienced an increase in bankruptcies from 2001 to 2002, Utah saw the highest jump, 26.7 percent, with Colorado experiencing a 26.3 percent increase.

ItemAll businesses
How the owner acquired the business
Founded68.9
Received transfer of ownership/gift10.5
Purchased10.1
Inherited2.7
Other means2.2
Not reported5.6
Reason for becoming an owner in the business
To have a primary source of income21.3
To have a secondary source of income25.6
To have work which conforms to owner's health limitations1.6
To have work not available elsewhere in the job market1.5
To have more freedom to meet family responsibilities7.6
To bring a new idea to the marketplace2.6
To advance in my profession6.2
To be my own boss21.5
Other reason6.7
Not reported5.5
Total capital needed by owner to start/acquire the business
None25.0
Less than $5,00032.0
$5,000 to $9,9999.6
$10,000 to $24,99911.4
$25,000 to $49,9995.7
$50,000 to $99,9994.6
$100,000 to $249,9993.0
$250,000 to $999,9991.4
$1,000,000 or more.5
Not reported6.8
source: Adapted from Durwin Knutson, "Table 1. Summary Characteristics of Business Owners and Their Businesses: 1992," in Characteristics of Business Owners Survey, U.S. Census Bureau, Washington, DC, September 1997

Table 9.8 offers a state-by-state analysis of employer firm terminations for the same years. Minnesota had the greatest increase from 2001 to 2002, experiencing 89.8 percent more business closures. Alabama, on the other hand, had an 18.1 percent decrease in employer terminations during the same period.

An analysis of 120 categories of sole proprietorships (single-owner businesses) provides an overview of safest and riskiest small businesses in 2002, based solely on which categories had the highest number of sole proprietorships with profits. (See Table 9.9.) Four health care–related businesses appear among the top ten safest businesses to start: optometrists have a 93 percent likelihood of profitability; dentists, 91.8 percent; mental health practitioners, 87.8 percent; and physicians, 87.1 percent. Also among the top ten are two construction-related categories: special trade contractors, with an 88.2 percent chance of profitability, and residential building construction, with 85.9 percent.

Sole proprietorships experiencing less than 50 percent profitability included health and personal care stores

Characteristic (percent of firms in category)Homebased businessesNon-homebased firms
Women–owned businesses55.2%44.8%
Main reason for being in business2.7/1 second income/primary1.3/1 second income/primary
Main work at homeProductionNA
Percent with employees3%15%
Hours worked, maximum average32 hours/week38 hours/week
Capital need< $5,000< $5,000
Capital sourcePersonal loan/savingsBank loan/savings
Dominant industryAll but finance, insurance & real estate (FIRE)FIRE
Best business opportunityConstruction, wholesale tradeFIRE
Profits > $10,0006%24%
Percent for whom firm contributes19%26%
100% of personal income Range in which receipts are independent of HBB/non-HBB location$25,000–50,000
Nonminority male-owned businesses51.7%48.3%
Main reason for being in business1.7/1 second income/primary1.5/1 primary income/second
Main work at homeClericalNA
Percent with employees9%25%
Hours worked, maxmum average36 hours/week44 hours/week
Capital need< $5,000$5,000–$25,000
Capital sourcePersonal loan/savingsBank loan/savings
Dominant industryAgric. services, construction, transportation, communications & utilities (TCU), servicesManufacturing, retail trade, wholesale trade, FIRE
Best business opportunityTCU, wholesale trade, construction, FIREWholesale trade, TCU, construction
Profits > $10,00022%38%
Percent for whom firm contributes28%36%
100% of personal income Range in which receipts are independent of HBB/non-HBB location$50,000–100,000
FIRE = finance, insurance, and real estate.
TCU = transportation, communcations, and utilities
source: Joanne H. Pratt, "Table 6-1. Business Profiles by Gender," in Homebased Business: the Hidden Economy, Office of Advocacy, United States Small Business Administration, Washington, DC, August, 1999 [Online] http://www.sba.gov/advo/research/rs194tot.pdf [accessed March 6, 2004]

(49.5 percent); video tape and disc rental stores (48.4 percent); computer and electronic products manufacturing (35.4 percent); and scenic and sightseeing transportation (33.8 percent). (See Table 9.9.)

NUMBER OF BUSINESSES

The U.S. Census Bureau identified 20.8 million firms in 1997 with sales and receipts of $18.6 trillion. Of these businesses, 14.6 percent (over three million businesses) were owned by minorities, generating more than $591 billion in revenues. (See Table 9.10.) According to the Census Bureau's 1997 Economic Census Survey of Minority-Owned Business Enterprises (Washington, DC, 2001), between 1992 and 1997, minority businesses increased in number four times as fast as the number of total businesses in the United States. Although Hispanics

Type of business entity and annual revenueNumber of enties (in thousands)%
All business entities24,113.0100.0%
Annual revenue less than $ 25,00013,973.057.9%
$25,000 to $100,0004,765.019.8%
$100,000 to $ 500,0003,491.714.5%
$ 500,000 to $ 1 million804.83.3%
$1,000,000 or more1,078.44.5%
All corporations4,848.9100.0%
Annual revenue less than $25,0001,168.124.1%
$25,000 to $50,000289.06.0%
$50,000 to $100,000459.99.5%
$100,000 to $250,000839.717.3%
$250,000 to $500,000645.513.3%
$500,000 to $1,000,000553.111.4%
$1,000,000 or more893.518.4%
All partnerships & LLCs1,855.3100.0%
Annual revenue less than $25,0001,037.655.9%
$25,000 to $50,000157.38.5%
$50,000 to $100,000156.88.5%
$100,000 to $250,000206.411.1%
$250,000 to $500,000113.86.1%
$500,000 to $1,000,00076.64.1%
$1,000,000 or more106.85.8%
All sole proprietorships17,408.8100.0%
Annual revenue less than $25,00011,767.367.6%
$25,000 to $50,0002,111.912.1%
$50,000 to $100,0001,590.19.1%
$100,000 to $200,0001,019.75.9%
$200,000 to $500,000666.63.8%
$500,000 to $1,000,000175.11.0%
$1,000,000 or more78.10.4%
source: Patrick O'Rourke, "Number of Businesses by Annual Revenue," in Useful Business Statistics,Bizstats.com, Washington, DC 2003 [Online] http://www.bizstats.com/bizsizes98.htm [Accessed March 6, 2004]

owned the largest number of minority-owned businesses, Asian-owned firms brought in the largest share of revenues. Women owned 5.4 million businesses in 1997, with sales and receipts of $819 billion.

The U.S. Census Bureau also reported that most of the firms were concentrated in the service industries. Forty-three percent of all U.S. firms, 47 percent of the minority-owned firms, and 56 percent of the firms owned by women were classified as services. Retail trade had the next largest share—14 percent of all U.S. firms, 15 percent of the minority-owned firms, and 17 percent of the women-owned firms.

Table 9.11 provides a view of the spectrum of U.S. sole proprietorships in 2000 by number within broad business type category, and by monetary receipts. Broad categories include professional, scientific, and technical services; health care and social assistance; wholesale trade; retail trade; information; finance and insurance; agriculture, forestry and fishing; accommodation and food services; manufacturing; construction; real estate and rental industries; transportation and warehousing; and other services.

Owner characteristic (percent of firms in category)Homebased businessesNon-homebased businesses
Sole proprietorship90%74%
Franchise2.1%4.2%
Founded by owner86.5%72.0%
Required $25,000 or more capital6.7%25.5%
Borrowed 50–100% of capital11.0%24.8%
Borrowed capital from personal sources12.4%15.4%
Used personal saving40.5%41.9%
Has paid employees9%32%
Worked 48 + weeks in business52.5%64.8%
Sell to individuals66.9%70.1%
Market area is city/country52.9%55.1%
Export2.5%2.6%
Average business receipts$37,000$353,000
Profit > $10,00016%34%
Business contributes 100% to personal income25%33%
source: Joanne H. Pratt, "Table 4-1. Business Profiles," in Homebased Business: The Hidden Economy, Office of Advocacy, United States Small Business Administration, Washington, DC, August, 1999 [Online] http://www.sba.gov/advo/research/rs194tot.pdf [accessed March 6, 2004]

HOMEBASED BUSINESSES

The 1999 SBA report Homebased Business: The Hidden Economy gathered information from 125,000 businesses and included two gender categories, as well as three ethnic or racial categories. Included in the sample were businesses owned by women (33 percent); by nonminority men (59 percent); by blacks (3 percent); by Hispanics (4 percent); and by "other minorities," mainly Asian and Pacific Islander, American Indian, or Alaskan Native individuals (4 percent).

Based on 24.8 million nonfarm business tax forms filed in 1998, the SBA estimated in 2000 that the number of homebased businesses had increased between 11 and 33 percent (from nine million to 10–12 million) between 1992 and 1999. Table 9.6 provides a look at characteristics of homebased businesses as compared to nonhomebased small businesses. Among homebased businesses, 90 percent are sole proprietorships. Only 2.1 percent are franchises. More than 86 percent of homebased businesses are likely to be run by the founder, as compared to 72 percent of nonhomebased businesses. Homebased businesses typically generate lower monetary receipts ($37,000) than do nonhomebased businesses ($353,000). (See Table 9.6.)

The SBA reported that while only 6.7 percent of homebased businesses operating in the early 1990s required $25,000 or more in capital, slightly more than one-quarter (25.5 percent) of nonhomebased businesses required that level of start-up capital. (See Table 9.6.)

According to the SBA, there is a measurable gender difference in the use of home for business tasks among full-time self-employed businesspersons. Full-time self-employed women were most likely to engage in production (60 percent), followed by clerical work (29 percent). (See Figure 9.1.) Production refers to the creation of

State19901995200020012002Ann. percent changeRank
U.S. total63,91250,51635,21939,71938,155
Yearly change (%)(6.4)12.8(3.9)
Alabama1,356796445428381(11.0)37
Alaska16415911810412015.410
Arizona2,3771,0457657537560.426
Arkansas467422261290282(2.8)28
California7,39112,0974,5955,2385,141(1.9)27
Colorado1,08861037346759026.32
Connecticut44520513915618116.08
Delaware1142772,3201,374649(52.8)51
District of Columbia1291005849526.120
Florida2,8421,9491,4471,8961,803(4.9)29
Georgia2,3664961,0121,1621,35917.05
Hawaii74159636853(22.1)46
Idaho365391269303260(14.2)39
Illinois2,0411,6241,2701,5471,240(19.8)44
Indiana1,0908423986046619.415
Iowa89355621428935422.53
Kansas5604191692202388.217
Kentucky1,324473355474445(6.1)33
Louisiana1,338562619716672(6.1)34
Maine318274162151101(33.1)48
Maryland1,3561,49367775887315.211
Massachusetts1,8381,116393427380(11.0)38
Michigan1,6331,07257768880216.67
Minnesota1,7711,9011,4921,8871,729(8.4)36
Mississippi2882832032893096.918
Missouri1,319521369505394(22.0)45
Montana223171141149120(19.5)43
Nebraska4252121151441525.621
Nevada35439033241946210.314
New Hampshire49092302334212(36.5)50
New Jersey1,1201,195660730689(5.6)31
New Mexico34832251362069311.812
New York2,6063,3741,9602,4322,5856.319
North Carolina1,280726445613576(6.0)32
North Dakota209118921151160.925
Ohio1,7781,0521,4711,7941,538(14.3)40
Oklahoma1,716946876941607(35.5)49
Oregon1,0617811,4531,3891,60615.69
Pennsylvania1,7511,7701,4551,5411,263(18.0)42
Rhode Island3271627464651.624
South Carolina40433713814717821.14
South Dakota388172133164119(27.4)47
Tennessee1,274949641886735(17.0)41
Texas5,3183,4102,5923,1552,994(5.1)30
Utah89524245147560226.71
Vermont179167719791(6.2)35
Virginia2,9581,2618159249694.922
Washington1,9781,3357176426988.716
West Virginia38131427732235710.913
Wisconsin1,3661,06768573485616.66
Wyoming1361094745474.423
Puerto Rico2093333515.4
Note: U.S. totals exclude Puerto Rico, Guam, Virgin Islands and Northern Mariana Islands. A business bankruptcy is the legal recognition that a company is insolvent (i.e., not able to satisfy creditors or discharge liabilities); must restructure or completely liquidate under Chapter 7, 11, 12, or 13 of the federal bankruptcy laws.
source: "Table 9. Business Bankruptcies by State, 1990–2002," in Small Business Economic Indicators for 2002," Office of Advocacy, U.S. Small Business Administration, Washington, DC, June 2003 [Online] http://www.sba.gov/advo/stats/sbei02.pdf [accessed March 3, 2004]

goods and services. Full-time self-employed male business owners report a higher level of clerical work (51 percent) and lower level of production (28 percent). (See Figure 9.2.) Full-time self-employed women were less likely than men to telecommute to employment outside the home (11 percent of women and 20 percent of men).

Homebased businesses are found in all 50 states, but in some states they represent a higher percentage of all small businesses than in others. (See Figure 9.3.) The nationwide average of homebased to nonhomebased small business was 54 percent according to the SBA study. New Jersey is the state with the lowest percentage of homebased businesses (40 percent of those surveyed by the SBA). Hawaii (64 percent), and Utah and Wyoming (each 63 percent) have the highest percentage of homebased businesses. Research does not quantify reasons for the

State19901995200020012002Ann. percent changeRank
U.S. total531,400497,246542,831568,300 e.584,500 e.
Yearly change (%)(0.3)4.72.9
Closing rate (%)9.710.110.4
Alabama10,92710,9689,30214,78112,103(18.1)51
Alaska3,3822,5302,6712,5752,541(1.3)27
Arizona14,23515,43111,98416,37117,6427.815
Arkansas7,2524,8725,5814,7464,491(5.4)43
California135,767152,945134,541149,831156,8584.718
Colorado12,86417,9337,5616,95410,33248.62
Connecticut11,99411,61911,52811,34811,3830.324
Delaware1,4223,1933,0523,1223,89124.66
District of Columbia3,7153,3024,9964,0133,973(1.0)26
Florida54,00952,46755,18654,57352,241(4.3)37
Georgia24,44823,16126,75424,35231,47929.35
Hawaii3,3853,9533,5214,0803,994(2.1)29
Idaho3,3374,8616,2495,8517,04020.37
Illinois29,17330,26031,36131,97632,0930.423
Indiana10,63214,12915,73815,83916,1562.020
Iowa6,9717,7027,4857,7707,480(3.7)36
Kansas8,7888,3876,9818,0556,876(14.6)49
Kentucky11,2769,3077,5089,88311,61417.510
Louisiana10,88311,34713,70813,31914,4168.214
Maine4,7374,6764,9065,4015,042(6.6)46
Maryland17,94516,25619,56320,66720,9271.322
Massachusetts17,53915,41718,16418,26820,53212.413
Michigan28,67620,34030,24026,53526,9751.721
Minnesota13,61412,4584,8296,77012,85189.81
Mississippi7,2007,0777,5557,5577,160(5.3)41
Missouri16,67417,58817,58018,18821,65319.19
Montana3,4534,0662,4353,8814,44514.511
Nebraska6,1444,6455,2345,3945,234(3.0)33
Nevada4,8886,4837,7618,2528,6675.017
New Hampshire6,0185,0447,3415,2645,4182.919
New Jersey25,53825,66723,95027,89031,57113.212
New Mexico4,9435,2406,4515,4957,94944.73
New York63,62756,81357,42365,61663,631(3.0)34
North Carolina21,64323,38923,46723,21722,184(4.4)38
North Dakota2,2652,0452,1912,1121,893(10.4)47
Ohio23,86328,09124,27625,46024,269(4.7)40
Oklahoma9,3978,6238,8489,4988,923(6.1)44
Oregon11,92113,02216,10215,51214,793(4.6)39
Pennsylvania27,92927,25434,89333,42635,8597.316
Rhode Island3,8635,9854,1704,1524,98120.08
South Carolina10,73610,39111,72112,89311,491(10.9)48
South Dakota2,3702,3601,8092,1562,098(2.7)32
Tennessee18,90215,89617,56317,63716,514(6.4)45
Texas53,83156,02757,30059,34258,114(2.1)28
Utah5,7747,65410,13513,56511,272(16.9)50
Vermont2,6872,5772,6532,5783,50135.84
Virginia21,43818,49320,56921,44920,305(5.3)42
Washington23,08730,84741,79341,12240,782(0.8)25
West Virginia4,4085,1195,5425,7415,595(2.5)31
Wisconsin11,59113,05415,15114,13513,651(3.4)35
Wyoming2,9002,7352,9082,9692,895(2.5)30
Notes: State totals do not sum to U.S. total as firms can be in more than one state. On occasion, some state terminations result in successor firms which are not listed as new firms.
source: "Table 8. Employer Firm Terminations by State, 1990–2002," in Small Business Economic Indicators for 2002," Office of Advocacy, U.S. Small Business Administration, Washington, DC, June 2003 [Online] http://www.sba.gov/advo/stats/sbei02.pdf [accessed March 3, 2004]

differences among states, but some possible factors include variances among state business and tax laws and differences in employment opportunities.

OWNER CHARACTERISTICS

As reported in Homebased Business: The Hidden Economy, small business owners are likely to be male (about 64 percent of homebased businesses; 70 percent of non-homebased businesses); married (76 percent of homebased business owners; 72.2 percent of nonhomebased business owners); and in their mid-40s. (See Table 9.12.)

About half of all small business owners have had some family business experience, and about 25 percent of those who have a college degree majored in business. Homebased business owners were somewhat more likely to have a college degree (21.4 percent) than nonhome-based

RankType of businessIndustry% with profits% with losses
All sole proprietorshipsAll74.9%25.1%
1Surveying and mapping (except geophysical) servicesservices93.7%6.3%
2Optometristshealth care93.0%7.0%
3Dentistshealth care91.8%8.2%
4Certified public accountantsservices91.2%8.8%
5School and charter bus driverstransportation90.8%9.2%
6Special trade contractorsconstruction88.2%11.8%
7Mental health practitioners and social therapistshealth care87.8%12.2%
8Physicians (except mental health specialists)health care87.1%12.9%
9Taxi and limousine servicetransportation86.3%13.7%
10Residential building constructionconstruction85.9%14.1%
11Medical and diagnostic lab serviceshealth care85.4%14.6%
12Architectural servicesservices85.1%14.9%
13Land subdivision and land developmentconstruction85.1%14.9%
14Child day care serviceshealth care85.0%15.0%
15Legal servicesservices84.6%15.4%
16Administrative and support servicesservices84.6%15.4%
17Home health care serviceshealth care83.5%16.5%
18Physicians (mental health specialists)health care83.1%16.9%
19Educational servicesservices83.0%17.0%
20General freight trucking, localtransportation82.8%17.2%
21Architectural, engineering, and related servicesservices82.7%17.3%
22Drafting, building inspection and geophysical surveyservices82.4%17.6%
23Support activities for miningservices82.4%17.6%
24Motor vehicle towing and other transportationtransportation82.0%18.0%
25Personal and laundry servicesservices81.5%18.5%
26Couriers and messengerstransportation81.0%19.0%
27Machinery manufacturingmanufacturing80.9%19.1%
28General merchandise storesretailing80.9%19.1%
29Religious, civic, professional and similar organizationsservices80.6%19.4%
30Chiropractorshealth care80.4%19.6%
31Nursing and residential care facilitieshealth care80.2%19.8%
32Social assistancehealth care79.9%20.1%
33Publishing industriesinformation79.8%20.2%
34Engineering servicesservices79.8%20.2%
35Miscellaneous repair servicesservices79.7%20.3%
36Real estate agents, managers and appraisersreal estate79.6%20.4%
37Nonresidential building constructionconstruction79.5%20.5%
38Automotive mechanical and electrical repairservices79.0%21.0%
39Podiatristshealth care79.0%21.0%
40Leather and allied productsmanufacturing78.9%21.1%
41Transportation equipmentmanufacturing78.4%21.6%
42General freight trucking, long-distancetransportation78.1%21.9%
43Building material and garden suppliesretailing78.1%21.9%
44Accounting services (except CPAs)services77.9%22.1%
45Forestry and loggingagri services77.7%22.3%
46Food manufacturingmanufacturing77.5%22.5%
47Scientific research and development servicesservices77.2%22.8%
48Automotive equipment rental and leasingrentals77.1%22.9%
49Automotive body shopsservices77.0%23.0%
50Broadcasting and telecommunicationsinformation76.8%23.2%
51Outpatient care and miscellaneous health practitionershealth care76.6%23.4%
52Credit intermediation and related activitiesfinance/insurance76.6%23.4%
53Water transportationtransportation76.3%23.7%
54Plastics, rubber, clay and glass productsmanufacturing75.8%24.2%
55Nondurable goods (including food, chemicals, etc.)wholesale75.8%24.2%
56Paper productsmanufacturing75.7%24.3%
57Insurance agencies and brokeragesfinance/insurance75.3%24.7%
58RV parks and recreational campsaccommodation74.4%25.6%
59Other activities related to real estatereal estate74.2%25.8%
60Waste management and remediation servicesservices74.1%25.9%
61Other insurance related activitiesfinance/insurance73.8%26.2%
62Management, scientific, and technical consultingservices73.6%26.4%
RankType of businessIndustry% with profits% with losses
63Electrical equipment, appliance, and componentsmanufacturing73.5%26.5%
64Apparelmanufacturing73.0%27.0%
65Food and beverage storesretailing72.9%27.1%
66Amusement, gambling, and recreation industriesentertainment72.9%27.1%
67Printing and related support activitiesmanufacturing72.7%27.3%
68Market research and public opinion pollingservices71.3%28.7%
69Durable goods (including machinery, wood, etc.)wholesale71.1%28.9%
70Investment bankers and securities dealersfinance/insurance70.9%29.1%
71Auto services (including oil change shops and car washes)services70.3%29.7%
72Computer systems design servicesservices70.2%29.8%
73Other miscellaneous servicesservices70.2%29.8%
74Fabricated metal productsmanufacturing69.6%30.4%
75Advertising and related servicesservices69.5%30.5%
76Furniture and related productsmanufacturing69.2%30.8%
77Food services and drinking placesaccommodation68.9%31.1%
78Rooming and boarding housesaccommodation68.5%31.5%
79Testing laboratoriesservices68.1%31.9%
80Medical equipment and suppliesmanufacturing67.8%32.2%
81Electronic and appliance storesretailing66.8%33.2%
82Furniture and home furnishing storesretailing66.7%33.3%
83Rental and leasing servicesrentals66.6%33.4%
84General rental centersrentals66.2%33.8%
85Lessors of real estate (including miniwarehouses)real estate66.0%34.0%
86Specialized design servicesservices65.8%34.2%
87Motor vehicle and parts dealersretailing65.8%34.2%
88Heavy constructionconstruction65.8%34.2%
89Information services and data processing servicesinformation65.5%34.5%
90Investment advice and other financial activitiesfinance/insurance65.1%34.9%
91Air and rail transportationtransportation64.9%35.1%
92Wood productsmanufacturing64.1%35.9%
93Fishing64.0%36.0%
94Motion picture and sound recordinginformation63.9%36.1%
95Hotels, motels, and bed and breakfast innsaccommodation63.2%36.8%
96Gasoline stationsretailing62.9%37.1%
97Commercial and industrial equipment rentalrentals62.6%37.4%
98Other ambulatory health services(including ambulances)health care61.7%38.3%
99Securities brokersfinance/insurance60.1%39.9%
100Clothing and accessories storesretailing59.5%40.5%
101Securities and commodity exchangesfinance/insurance59.1%40.9%
102Performing arts, recreation and relatedentertainment57.6%42.4%
103Utilities utilityservices57.3%42.7%
104Chemical manufacturingmanufacturing56.8%43.2%
105Sporting goods, hobby, book, and music storesretailing55.0%45.0%
106Support activities for agriculture and forestryagri services54.9%45.1%
107Oil and gas extractionextraction54.3%45.7%
108Miscellaneous store retailersretailing50.7%49.3%
109Textile and textile product millsmanufacturing50.5%49.5%
110Health and personal care storesretailing49.5%50.5%
111Other miscellaneous manufacturingmanufacturing48.8%51.2%
112Nonstore retailersretailing48.8%51.2%
113Video tape and disc rentalrentals48.4%51.6%
114Primary metal industriesmanufacturing41.0%59.0%
115Nonmetallic mineral mining and quarryingmining38.3%61.7%
116Commodity contracts brokers and dealersfinance/insurance36.6%63.4%
117Computer and electronic productsmanufacturing35.4%64.6%
118Animal production (including pet breeding)breeding34.5%65.5%
119Scenic and sightseeing transportationtransportation33.8%66.2%
120Hunting and trappinghunting/trapping23.6%76.4%
source: Patrick O'Rourke, "The Safest and Riskiest Small Businesses, 2002," in Useful Business Statistics,Bizstats.com, Washington, DC 2003 [Online] http://www.bizstats.com/sprisk2.htm [Accessed March 6, 2004]
All firms *Percent of minority-owned firms
Minority groupFirms (number)Sales and receipts (million dollars)FirmsSales and receipts
All minority firms3,039,033591,259XX
Black823,49971,21527.112.0
Hispanic1,199,896186,27539.531.5
American Indian and Alaska Native197,30034,3446.55.8
Asian and Pacific Islander912,960306,93330.051.9
*All firms data include both firms with paid employees and firms with no paid employees.
Note: Detail in this table does not add to total because of duplication of some firms. Hispanics may be of any race and, therefore, may be included in more than one minority group.
source: "Table A. Comparison of Business Ownership by Minority Group: 1997," in 1997 Economic Census: Survey of Minority-Owned Business Enterprises: Summary, U.S. Census Bureau, Washington, DC, July 2001 [Online] http://www.census.gov/prod/ec97/e97cs-7.pdf [accessed March 3, 2004]

business owners (15.6 percent). Approximately 10 percent of business owners have had between 10 and 19 years of prior management experience, and about 20 percent had previous employment by a relative prior to their own business ownership. (See Table 9.12.)

Gender Differences

Among women who own small businesses, the average number of hours worked per week in a homebased business is 32; the average number of hours worked in a nonhomebased business is 38 per week. For men these average hours are 36 per week and 44 per week, respectively. (See Table 9.4.) Women-owned businesses are less likely than those owned by men to have employees.

Minority Business Owners

In general, men own more than two-thirds of all small businesses. (See Figure 9.4.) Across ethnicity and racial groups, the proportion changes, but men continue to own businesses at a higher rate than women. This is particularly noticeable among Hispanic business owners; women own 30 percent of Hispanic-run homebased- and 28 percent of Hispanic-run nonhomebased small businesses. (See Figure 9.4.) Black women on the other hand, are close to equality in black-owned homebased businesses, owning 48 percent of this type of small businesses.

IMPACT OF THE INTERNET

E-Biz: Strategies for Small Business Success, a study published in 2002 by the SBA, reports that the gender differences

Number of sole proprietorshipsReceipts (in thousands)
All sole proprietorships17,575,643969,347,038
Professional, scientific & technical services
Legal services324,48427,649,186
Office of certified public accountants51,0793,063,764
Other accounting services339,0956,405,006
Architectural services68,1634,639,593
Engineering services95,9224,831,303
Drafting, building inspection and geophysical surveying41,9011,012,580
Surveying and mapping (except geophysical) services15,034647,042
Testing laboratories3,08072,843
Specialized design services159,8755,025,333
Computer systems design services234,9267,143,506
Management, scientific and technical
consulting589,95024,001,543
Scientific research and development
services33,161564,199
Advertising and related services92,4434,830,733
Market research and public opinion polling26,2121,057,364
Other professional and technical services368,42015,978,294
Administrative and support services1,433,42636,117,451
Waste management and remediation services22,4421,164,421
Educational services326,4434,155,635
Health care and social assistance
Physicians (except mental health specialists)178,87125,989,675
Physicians (mental health specialists)24,4091,978,299
Dentists95,53625,366,750
Chiropractors28,9503,756,135
Optometrists16,0062,603,483
Mental health practitioners and social therapists143,8135,715,529
Podiatrists7,650650,945
Outpatient care centers and other health practitioners99,2702,278,126
Medical and diagnostic laboratories18,4251,404,384
Home health care services114,4271,645,182
Other services (including ambulance services, blood banks)30,651689,575
Hospital services6,17603,583
Nursing and residential care facilities54,2172,400,695
Social assistance95,9961,246,162
Child day care services606,0386,931,928
Information
Publishing industries61,3481,927,882
Motion picture and sound recording61,9301,972,154
Broadcasting and telecommunications36,1181,382,339
Information services and data processing services77,1501,705,519
Wholesale trade
Durable goods, (including machinery, wood, metals, etc.)190,52422,381,553
Nondurable goods, (including food, fiber, chemicals, etc.)169,51120,658,107
Retail trade
Motor vehicle and parts dealers126,03433,371,057
Furniture and home furnishing stores55,5946,384,327
Electronic and appliance stores32,7855,257,972
Building materials and garden supplies50,9397,795,929
Food and beverage stores108,62431,684,545
Health and personal care stores118,0487,360,867
Gasoline stations33,43923,984,904
Number of sole proprietorshipsReceipts (in thousands)
Clothing and accessories stores103,92311,915,848
Sporting goods, hobby, book, and music stores150,9488,777,446
General merchandise stores31,0944,580,787
Miscellaneous store retailers422,68823,018,888
Nonstore retailers1,075,15421,042,740
Accommodation and food services
Hotels, motels, and bed and breakfast inns32,1163,396,910
Recreational vehicle parks and recreational camps15,791688,232
Rooming and boarding houses13,391764,503
Food services and drinking places253,85331,443,622
Construction
Land subdivision and land development20,3492,938,922
Residential building construction357,13637,960,287
Nonresidential building construction84,3257,519,397
Heavy construction58,2294,690,800
Special trade contractors1,763,890101,115,961
Manufacturing
Food manufacturing30,8763,021,165
Textile and textile product mills6,095136,218
Apparel27,0771,908,086
Leather and allied products1,652105,449
Wood products40,6802,729,519
Paper products4,567180,312
Printing and related support activities42,9513,364,033
Petroleum and coal products8999,374
Chemical manufacturing9,995259,770
Plastics, rubber, clay, refractory, and glass products19,979834,849
Nonmetallic mineral products7,091567,982
Primary metal industries3,669381,799
Fabricated metal products42,4764,086,061
Machinery21,8043,096,553
Computer and electronic products9,258348,151
Electrical equipment, appliance, and components9,096984,234
Transportation equipment8,925835,385
Furniture and related products29,2432,279,529
Medical equipment and supplies2,418293,351
Other miscellaneous manufacturing40,8081,905,388
Transportation and warehousing
Air and rail transportation14,574503,643
Water transportation4,349448,335
General freight trucking, local169,02713,456,352
General and specialized freight trucking, long-distance250,73621,875,973
Urban transit97326,839
Interurban and rural bus transportation9416,299
Taxi and limousine service107,3873,104,899
School, employee, and charter bus industry15,772658,603
Other transit and ground passenger transportation17,513317,771
Scenic and sightseeing transportation10,255205,850
Vehicle towing and other transportation37,4461,575,197
Couriers and messengers157,7533,438,180
Warehousing and storage facilities3,651371,352
Finance and insurance
Credit intermediation and related activities54,9133174,011
Investment bankers and securities dealers4,6725,566,788
Securities brokers27,69010,746,057
Commodity contracts brokers and dealers4,9654,455,966
Securities and commodity exchanges9561,086,282
Investment advice and other investment activities101,64537,823,097
Insurance agencies and brokerages326,76220,995,816
Insurance (other activities)57,7602,542,605
Number of sole proprietorshipsReceipts (in thousands)
Real estate and rental industries
Real estate lessors including warehouses and self storage16,7281,039,098
Real estate agents, brokers, managers and appraisers673,73434,016,819
Other activities related to real estate98,2544,362,306
Automotive equipment rental and leasing16,736694,034
Consumer electronics and appliances rental1,06464,281
Formal wear and costume rental94141,380
Video tape and disc rental7,476842,856
General rental centers11,269381,586
Commercial equipment rental and leasing25,2321,430,381
Other services
Automotive mechanical and electrical repair168,77512,405,736
Automotive body shops94,5406,897,434
Auto maintenance (including oil change and car washes)63,3294,190,180
Miscellaneous repairs (non-automotive)365,31612,488,692
Personal and laundry services1,104,62827,734,756
Religious, civic and professional organizations210,8432,209,867
Performing arts, spectator sports, and related876,28614,934,984
Museums, historical sites, and similar institutions4,03441,887
Amusement, gambling, and recreation industries159,8884,477,467
Agriculture, forestry and fishing
Animal production (including breeding of cats and dogs)35,201786,209
Forestry and logging54,3377,296,277
Fishing82,3802,668,631
Hunting and trapping9,361105,930
Support activities for agriculture and forestry125,6255,795,646
Oil and gas extraction97,1733,232,669
Coal mining99,011
Metal ore mining3,01735,808
Nonmetallic mineral mining and quarrying9,312711,567
Support activities for mining7,587445,445
Utilities9,077108,154
Unclassified establishments262,7683,349,077
source: Patrick O'Rourke, "Total Number of U.S. Sole Proprietorships" in Useful Business Statistics,Bizstats.com, Washington, DC 2003 [Online] http://www.bizstats.com/numbersp.htm [Accessed March 6, 2004]

associated with Internet use during the mid-1990s have disappeared. Now more women than men report using the Internet for both business and personal use. (See Table 9.13.) Among both men and women, about two-thirds of business owners report that they use the Internet for business. Approximately half of all business owners reported having a Web site for their business (50 percent of women; 54 percent of men).

E-mail is the most frequently used feature of the Internet among business owners. Thirty-six percent of women and 38 percent of men say they use e-mail very frequently. More than half of both men and women characterize their e-mail use as either occasional or somewhat frequent. Less than 10 percent of business owners say they never use e-mail. (See Table 9.14.) After e-mail, the most common reason that business owners say they use the Internet is to transmit files or documents; 22 percent of women and 25 percent of men report that they use the Internet for this purpose very frequently.

For most other business-related activities, including conducting fact-finding research, selling products or services, purchasing products or services, and seeking business opportunities, Internet usage is generally rated as occasional or somewhat frequent, if at all, by business owners surveyed by the SBA. The Internet capabilities least likely to be used by business owners include conducting online meetings (more than 80 percent say "never") and recruiting or hiring employees. (See Table 9.14.)

Owner characteristic (Percent of firms in category)Homebased businessesNon-homebased businesses
Male63.7%70.0%
Married76.0%72.2%
AgeMean 45.6 yearsMean 46.8 years
Military veteran7.7%7.1%
Disabled military veteran2%2%
Born in USA92.1%89.0%
High school level education25.8%25.4%
College degree21.4%15.6%
Professional or Ph.D. degree5.7%12.2%
Majored in business25.0%25.8%
Family business experience49.7%50.3%
Previous employment by relative19.7%20.4%
10–19 years prior management experience9.9%10.9%
2–5 years prior ownership experience5.0%5.7%p
source: Joanne H. Pratt, "Table 3-1. Business Owner Profiles," in Homebased Business: The Hidden Economy, Office of Advocacy, United States Small Business Administration, Washington, DC, August, 1999 [Online] http://www.sba.gov/advo/research/rs194tot.pdf [accessed March 6, 2004]
PercentWomenMen
Use Internet for business6362
N = 356N = 347
Use Internet for personal6864
Have Web site5054
(of Internet users)N = 256N = 258
Responses do not sum to 100 percent because Don't Know and Refused responses not shown. Numbers rounded.
source: Joanne H. Pratt, "Table II-9. Internet and Computer Use by Women and Men," in E-Biz: Strategies for Small Business Success, Office of Advocacy, United States Small Business Administration, Washington, DC, October 2002 [Online] http://www.sba.gov/advo/research/rs220tot.pdf [accessed March 6, 2004]
PercentNeverOccasionallySomewhat frequentlyVery frequently
E-mail
Women9272836
Men8282638
Transmit files/documents
Women32301622
Men26331725
Conduct fact-finding research
Women12353419
Men9413119
Collaborate with business partners or suppliers
Women33311917
Men33311819
Sell products and services
Women49251413
Men48231513
Purchase products and services
Women2645228
Men26451613
Seek business opportunities
Women3539169
Men3737206
Bid for contracts
Women5922125
Men6123115
Hire/recruit employees
Women83942
Men791083
Conduct online meetings
Women831142
Men811242
Responses do not sum to 100 percent because Don't Know, Refused and Not applicable responses not shown. Numbers rounded
source: Joanne H. Pratt, "Table II-10. Frequency of Internet Use," in E-Biz: Strategies for Small Business Success, Office of Advocacy, United States Small Business Administration, Washington, DC, October 2002 [Online] http://www.sba.gov/advo/research/rs220tot.pdf [accessed March 6, 2004]

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