Personal businesses are single person businesses that do not have employees. This includes sole proprietorships, independent contractors, most home businesses and most micro businesses. The US government calls them "businesses without employees" or "nonemployer businesses", and there are over 20 million in the US. For a variety of reasons they are a relatively understudied segment of our economy, and only recently starting to be recognized for their economic impact.
I just finished reading a fascinating paper by John Haltiwanger, who is a research associate of the Center for Economic Studies and a senior research fellow with the LEHD program at the US Census. The paper is titled "Entrepreneurship and Job Growth", and it covers several interesting topics. What really jumped out at me is that a large number of employer businesses started as non-employer businesses. Key quote on this topic from the report:
"a substantial fraction of young employer businesses have a pre-history as a nonemployer business. ...about 30 percent of young employer firms ... have a pre-history as a nonemployer. These patterns vary considerably across industries with some industries such pre-history accounting for as much as half of young businesses."
While somewhat intuitively obvious that many employer businesses would start as non-employer businesses, there has been little data to back this up and the overall value of personal businesses to the US economy has been questioned.
We are forecasting strong growth in personal businesses over the next decade. This should result in a steady stream of new employer businesses as some of these personal businesses grow into businesses with employees.
There are many factors that are working for the growth of personal business. I collected some thoughts on it and put it in a post a few days ago. Please take a look at the link above.
Posted by: Sanjay | July 29, 2007 at 09:46 AM