What Does the Average American Business Look Like?

The Census Bureau recently released the results of the 2007 Survey of Business Owners, the government’s effort to examine American businesses every five years. The survey paints an interesting picture of what the average American business looks like.

The largest share of American companies is in the professional, scientific, and technical services sector, which accounts for 14.0 percent of U.S. companies. Construction accounts for the next highest portion at 12.6 percent. Manufacturing and agriculture, once the mainstays of American business, now account for 2.3 and 1.0 percent of U.S. companies, respectively.

The vast majority (78.8 percent) of U.S. businesses have no employees. And the share of businesses without employees now exceeds 90 percent in agriculture and arts, entertainment and recreation. The only sector of the economy where the majority of businesses has employees is accommodation and food services, in which 61.5 percent of businesses still have workers.

The average business generates over $1.1 million in sales, has more than 4 employees and pays an average compensation of over $41,000. However, when firms without employees, which have an average of only a little more $45,000 in sales and no employees (by definition) are excluded, average sales per firm rises to over $5 million, and average number of employees per business exceeds 20.

Wide industry variation exists in average sales and average employment. Average sales range from a little more than $96,000 in other services to over $25.1 million in utilities. Average employment varies from 0.7 employees per business in agriculture to over 107 in the management of companies.

One final point about the data is worth noting. The difference in economic impact of employer and non-employer firms is extraordinary. The 78.8 percent of businesses without employees only account for 3.2 percent of sales and none of the employment of U.S. companies. Employer firms are clearly much more economically important than non-employer firms.

Click here to see a table showing the numbers in greater detail (Excel –
.XLS file)

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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.