Looking at trends in self-employment can offer guidance
By Rhonda Abrams
Do you work alone? If so, you're not alone. In fact, as a one-person business, you've got lots of company.
According to just-released statistics from the U.S. Census Bureau, the number of "non-employer" — one-person — businesses keeps growing, along with the money they make. Because the Census Bureau started reporting these statistics in 1997, there's now a five-year period in which we can look at trends in self-employment.
First, it's important to realize just how many people are running one-person businesses. In 2002 — the most recent year for which the Census Bureau has statistics — there were over 17.6 million solo shops in the U.S. with total receipts over $770 billion. Those entrepreneurs contribute a lot of money to the economy — an average of $43,637 in total revenue per business.
If you're one of those independent entrepreneurs, congratulate yourself on more than just generating a lot of money for America — you've also served as a key pressure valve for the overall economy.
During the past three years, the nation has lost more than 2 million jobs, while the number of non-employer businesses has increased by 1.5 million. If you and others like you hadn't decided to take control of your own future, unemployment lines would be a lot longer.
In fact, the number of non-employer businesses is growing at more than twice the rate of companies with paid employees. Estimating from census statistics, companies with payroll employees grew about 6 percent from 1997 to 2002. But the number of non-employer firms grew 14 percent, and their receipts grew 31 percent.
But not all self-employment is equal. If you're thinking about going into business or changing fields, what you really want to know is which industries hold the most promise. So I examined the statistics for specific industries to see which performed better than average, both in terms of the number of businesses and total receipts.
Some top-performers I expected:
• Real estate is hot. Real estate has always been dominated by one-person businesses. Home sales have been strong for many years now, so it's not surprising that the number of one-person real estate firms shot up by 59 percent and receipts by 35 percent. Although real estate continues to hold promise, expect this growth to slow when interest rates rise.
• Other services, especially personal care services, continue to grow. Personal care services, including health, beauty, and laundry, expanded 27 percent in terms of total businesses and almost 40 percent in receipts. People will always need their hair cut, and this is a hard job to send offshore, so expect continued strength in personal care services.
Likewise, some poor performers could be anticipated:
• Manufacturing is anemic. The total number of manufacturing businesses dropped 4 percent and receipts grew a measly 8 percent. Remember, these are one-person manufacturing companies, including handicrafts and specialty food products like jams and salsas.
• Mom and pop are in trouble. The number of independent retail businesses remained essentially flat over five years, and sales growth was well below other sectors. Wal-Mart has taken its toll. One bright spot in retail, however, is health and personal care stores.
Some trends were less obvious:
• Consulting is shrinking. Although it remains the single largest sector for self-employment, the total number of these businesses actually shrunk by almost 100,000 firms from 1997 to 2002. The growth in receipts also was below the average.
• Business services are a real bright spot. Administrative and support services for businesses grew substantially — a 41.5 percent increase in the number of firms and 58.5 percent in receipts. Big companies have found it cost-effective to outsource many key functions such as bookkeeping.
