June, 2002
Inspection News and Views from the American Society of Home Inspectors

Increase in Small Business Share of the Economy


Small businesses share of the private, non-farm economy has increased to 52 percent over the last decade, according to a report by the Office of Advocacy of the U.S. Small Business Administration (SBA). The growth has been driven by the shift in the economy towards small business dominated sectors, such as services.

The growth of small business private, non-farm Gross Domestic Product (GDP) shows the continuing importance of small business to the overall health of the U.S. economy. “As firms start, grow, merge, split, contract, and exit over time, small firms continue to produce the majority of private economic output,” said Tom Sullivan, Chief Counsel for Small Business Advocacy. “While individual firms and economic sectors experience growth or decline, the vital role of small business remains the same. It’s clear that the health of small business in general drives our economy, and that it will be small business that leads us out of our current economic downturn,” he said.

The study, performed by Joel Popkin and Company, also highlighted small business share of various sectors of the economy. The authors found that small businesses constitute 68 percent of services, 65 percent of wholesale and retail trade, and 27 percent of mining and manufacturing. Mining and manufacturing is significant, since it is the only sector where small business increased its share over the last two decades. Changes in share are affected by business turnover, as well as by growth of small businesses into large firms.