Small businesses' share of the gross domestic product has fallen but they continue to be "incubators for innovation and employment growth," says a new report.
The U.S. Small Business Administration's Office of Advocacy, which commissioned the report, said small firms produced 46 percent of private non-farm GDP in 2008, the last year for which figures are available. That's down from 48 percent in 2002–and less than the "over 50 percent" figure so often cited in the 1990s.
The report noted that preliminary information about 2009 suggests that weak business conditions affected small firms and large equally–resulting in only a minor change to the shares. But it added: "Starting in late 2009 and early 2010, small businesses appear to have been more negatively affected by business conditions than large businesses. Corporate profits recovered more quickly than non-corporate profits in 2010. Since a larger share of corporations are large businesses, that likely resulted in a further weakening of the small business share of GDP."
However, small business started more than matching job growth of large companies by the last half of 2010: "[G]ross job gains of small businesses outpaced those of large businesses by about 3 to 1," the study said.
What industries were the best for small business in this millennium? The report pointed to five.
Two big winners: health services and education services. More generally, anything relating to the service industry fared well. Four of the five most successful industries for small business were in this category. Gross revenues of small health businesses rose 67.2 percent over the decade to $551.6 billion, according to the Office of Advocacy report. The education services industry is much smaller–at $67.3 billion–but that's a growth of 80 percent since 2000.
Other bright spots: Professional and technical services, where sales grew 39 percent for small businesses between 2000 and 2010. (The average growth for small business revenues in the period was 28 percent.) Gross sales in this category hit $644.3 billion in 2010. Small business in the administrative services category had grosses up 37.7 percent by the end of the decade. And utilities were slightly ahead of the 28 percent average growth rate, with a growth of 29.2 percent.
What has been your experience in these industries? What do you predict will be the best categories for small business in the next decade?
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