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Average Sales Are Up At Non-Employer Firms

Source: Calculated from U.S. Census data

In February, I wrote a post [1] about the downward trend in real sales at the average non-employer business – a company with yearly sales of at least $1,000, but no payroll – since the late 1990s. In it, I predicted that the 2012 non-employer data would show a continued decline.

I’m happy to report that my prediction was wrong. The data [2] released by the Census Bureau in late April show a small increase.

The average real revenue of a non-employer firm rose from $44,001 in 2011 to $44,437 in 2012 (measured in 2011 dollars). As the figure above shows, the increase is modest, and does little to offset the longer term decline. And it’s unclear whether this uptick marks an end to the downward trend we experienced from 1998 to 2011, when average revenues at businesses without workers dropped from $56,550 to $44,001 in inflation-adjusted terms, or simply a brief respite within a period of multi-year declines, as occurred between 1999 and 2000.

Nevertheless, after so many years of drops, it’s good to see an increase again.

The rise in average revenues appears to be driven by a big jump on the revenue side of the equation. Between 2011 and 2012, revenues at non-employer businesses rose by $20.1 billion in inflation-adjusted dollars, a 2.1 percent increase.

The number of non-employer businesses also went up between 2011 and 2012, but by only 1.1 percent, a slower increase than the 1.7 percent notched between 2010 and 2011, the recently released Census Bureau data show [2]. In the latest year data are available, Americans created an additional 245,000 non-employer businesses, increasing the overall total to 22,736,000.

Despite the increase in real average sales at non-employer businesses, these companies remain a small part of the overall economy. As I mentioned in my earlier post, the Census Bureau estimates [3] that the vast majority of them are sideline businesses run by self-employed sole proprietors.

Collectively, non-employer businesses account for 4 percent of total business revenues, 7 percent of overall capital expenditures, and zero employment.

Image Source: Calculated from U.S. Census data