West leads self-employment growth

Michelle Swafford

Friday, Dec. 3, 2004 | 11:08 a.m.

A new small-business study reported Thursday that the number of minority business owners rose rapidly in recent years, and Western states are leading the way for growth of self-employed firms.

The Small Business Administration's Office of Advocacy reported that Western states experienced a 6.8 percent growth rate from 2000 to 2003, increasing by 199,000 business owners. The rate of Western-based self-employed owners in 2003 as a percent of the 27.7 million jobs in the labor force rose to 11.2 percent.

The report also noted that the Bureau of Labor Statistics understated the number of self-employed business owners by 3 million because it does not include incorporated firms in its analysis. An incorporated business owner is considered an employee of the firm so those companies are excluded.

The SBA's Office of Advocacy reported that there were about 12.2 million self-employed business owners in 2003, which is up 6.2 percent, or 716,000 people, from 2000's 11.5 million people. Self-employed business owners include those who do and do not have employees as long as they describe themselves as being self-employed. The report excluded business owners who operated a business less than 15 hours per week and agricultural firms.

Thomas Sullivan, chief counsel for the Office of Advocacy, said the study was needed to fill in data gaps and help small business agencies and associations understand who their programs should be helping.

"There is a very sharp growth in self-employment, and that is positive," Sullivan said. "This does mirror the population trends, and that is positive news."

Asians, Hispanics and blacks reported significant increases in business ownership in recent years.

The number of Hispanic self-employed business owners increased 41 percent from 2000 to 2003, bringing the total to 1.03 million businesses from 732,000. The number of black self-employed business owners increased nearly 2 percent to 710,000 firms in 2003, which is a new high for the group. The number of Asian self-employed business owners increased 27 percent to 590,000 firms in 2003.

"The growth in Latino, African American and Asian (businesses) was surprising to me," said Gene Fairbrother, lead small business consultant for the National Association for the Self-Employed.

The number of white self-employed business owners increased 1.5 percent to 9.7 million firms in 2003. This racial category reached its peak number of firms in 1997.

The number of women self-employed business owners increased nearly 7 percent to 3.8 million firms in 2003. Women self-employed businesses as a percent of the women's labor forced increased to nearly 7 percent in 2003.

In comparison, the number of male self-employed business owners increased nearly 6 percent to 8.3 million firms in 2003. Male self-employed firms as a percent of the male labor forced increased to 12.4 percent in 2003.

Talking to a male business owner is different from talking to a woman business owner or a Hispanic, Fairbrother said.

"It's not just the demographic issue of the individual, but the cultural issue as well," he said.

The National Association for the Self-Employed is also hoping the report will help legislators understand how many people are self-employed so that the tax deductions laws can changed to allow self-employed individuals to deduct their health premiums, said Kristie Darien, director of government affairs for the association.

She said it could also help legislators when they appropriate money for SBA programs that are specific to women and minorities.

In Southern Nevada, small business leaders say the number of people inquiring about starting a business is on the rise, as is the demand for programs to help them learn how to run a business.

"In April, the number of calls we were getting became such a volume, we initiated a class to answer questions about starting a business in Nevada," said Michael Graham, deputy director of the Nevada Small Business Development Centers. The small business development center receives some funding from the SBA and offers classes and one-on-one counseling to small-business owners.

Programs offered by the Nevada Small Business Development Centers, the Service Corps of Retired Executives and the Microenterprise Initiative could help small business owners stay in business, Graham said.

"The problem is they may incorporate and open a business -- but what is the staying power?" he asked. "We see it all the time. People who come to us and have sunk their life savings into something six months ago and they want to know how to run a business."