Chart: The Hit to Business Owners’ Equity

The Great Recession took a bite out of the value of the business equity of U.S. households that own small companies. Of course, the fact that the biggest recession in a generation caused a decline in households’ business equity holdings is probably intuitively obvious. But until recently the size of that decline has been unclear.

A recent Federal Reserve report provides an estimate of the size of the reduction. As the figure below shows, the Fed researchers found that between 2007 and 2009, the median value of business equity (which was held by a little over 12 percent of U.S. households in 2007) fell from $103,600 to $94,500 when measured in constant dollar terms. The report also showed that the slice of family income coming from operating a business dropped from nearly 16 percent to 10 percent.

Of course, the big question now is when, or even if, small business owners’ equity will recover from the hit taken during the Great Recession. Unfortunately, we’ll have to wait a couple of years until the Fed collects, analyzes, and releases more data to know the answer. But my guess is that the recovery in households’ small business equity holdings won’t come quickly.

Source: Created from data from Surveying the Aftermath of the Storm: Changes in Family Finances from 2007 to 2009

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Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

One Reaction
  1. Recovery time and value will greatly depend upon the business the small business is in.

    As in a forest fire, businesses, like some trees, die, some are not affected and some cannot thrive without the calamity and change.