Euquant Business Analysis: Firm growth in the U.S. Economy
An examination of the Survey of Business Owners.
One of the best data sources on the state of business in the U.S. is the Survey of Business Owners (SBO). The purpose of the SBO is listed below:
The Survey of Business Owners (SBO) provides the only comprehensive, regularly collected source of information on selected economic and demographic characteristics for businesses and business owners by gender, ethnicity, race, and veteran status.
SBO data has been collected every 5 years since 1972, for years ending in “2” and “7” as part of the economic census. Firms that are surveyed come from all non-farm businesses listed with the Internal Revenue Service that identify as individual proprietorships, partnerships, or any type of corporation, and have receipts of $1,000 or more.
SBO survey results provide estimates of the number of employer and non-employer firms, sales and receipts, annual payroll, and employment. Data is aggregated by the North American Industry Classification System (NAICS) and presented by gender, ethnicity, race, and veteran status for the entire United States, individual states, metropolitan statistical areas, counties, places, and employment and receipts size. Go to the link for more information on the SBO https://www.census.gov/econ/sbo/index.html.
Below is the first part of an on-going series where we will examine the SBO in detail and discuss how it can be utilized to understand the dynamics of the economy. The ultimate goal of this analysis is to determine what new sectors are adding and losing jobs, who is responsible for this job growth or decline, and what impact is it having the economy?
Part 1: Are the number of businesses increasing?
We will first start with an examination of all firms including female and male-owned firms in all sectors. The purpose of this is to determine whether or not the total number of businesses in all sectors is increasing and if so what is happening to the revenue? Also how has firm growth been affected by gender?
Let’s begin by examining the Number of firms with or without paid employees for All Firms, Female-Owned firms and Male Owned firms in All Sectors in 2002, 2007, and 2012.
Graph 1 shows an increase in the total number of U.S. firms for all sectors/industries from 2002 to 2007 and 2007 to 2012. The most interesting fact is that the greatest number of new firms are female-owned firms which increased by 1.3M from 2002-2007 and 2.1M from 2007-2012. This surge in the number of female-owned businesses has garnered a lot of attention from recent economists as it represents a growing sector of the economy.
What is the Impact of Firms on the Economy?
One way to examine the impact of new firms is to look at the increase in the total number of sales/receipts. This can be done by examining the Sales, Receipts, and Value of Shipments of firms with or without paid employees ($1,000) for All Firms, Female-Owned firms and Male Owned firms in All Sectors in 2002, 2007, and 2012. This is done in Graph 2 below.
Graph 2 shows an increase in the sales for all firms, male-owned firms as well as female-owned firms over the ten year period. However, the increase in the number of female-owned firms shown in Graph 1 is not mirrored by an equal increase in sales by Graph 2; this is even more evident when this increase is compared to the increase in the sales of male-owned firms. What does this mean? It shows that even though the number of women-owned businesses is on the rise male-owned firms still add more sales per new firm. This will be explored further in the second part of the series.