The number of no-employee businesses in the United States has gone up. The number is now 20.7 million small businesses with no employees — a record level. That’s according to the latest U.S. Census figures. These are 2006 figures, but they are the most recently available and were just released within the past two weeks.
Here’s the chart I prepared showing the growth of no-employee businesses in the 10-year period from 1997 to 2006, according to official U.S. Census figures:
What I find interesting is how fast the growth rate was in the middle part of this century, but the rate of growth of these businesses appears to have slowed recently. For example, between 2002 and 2004, the number of these businesses jumped by roughly 1 million each year. However, between 2005 and 2006, the number increased by just 376,000.
Now, keep in mind what these numbers signify. These are the number of small businesses that do not have any employees.
These small businesses include the self-employed, freelancers, independent contractors, sole proprietorships, family-owned businesses, LLCs, corporations, S-corporations or partnerships.
This group goes by various category names. In fact, the nomenclature is a bit of an awkward circus. The government calls them “nonemployer businesses” — accurate but hard to get your arms around.
For shorthand purposes I’ve often called them single-person businesses or solo businesses (although that’s not strictly correct because they could consist of a husband-wife team, partnership, etc.) — but it seems to convey the idea most of the time. I’ve heard this group of businesses called “personal businesses” — that’s another approach to naming them. Some people call them microbusinesses, although microbusinesses can include businesses with up to 5 employees, depending on how you define them, so that’s not entirely accurate either.
Whatever you want to call these businesses — they are small and have no payroll /no employees (other than the owners themselves). That we know.
These no-employee businesses brought in $970 Billion in revenues in 2006. Almost half of the revenue came from just 3 economic sectors: real estate and rental and leasing ($193 billion); construction ($159 billion); and professional, scientific and technical services ($124 billion). About 7.9 million businesses (38% of the total number) were in these three sectors.
Now, there is another group of small businesses — those small businesses that have fewer than 500 employees. When you add those small businesses with <500 employees (5.9 million) to the number with no employees (20.7 Million) you get a total of small businesses in the United States of nearly 27 Million.