Survey of Business Owners (SBO)

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Survey of Business Owners - Characteristics of Businesses: 2002

SUMMARY OF FINDINGS

Firms that responded to the 2002 Survey of Business Owners (SBO) have provided data on the selected economic and demographic characteristics of an estimated 16.7 million businesses or 72.6 percent of the nation's 23 million nonfarm firms. More than 12.5 million of these businesses (75.5 percent) were owner-operated with no paid employees.

SCOPE OF THIS REPORT

The Characteristics of Businesses: 2002 is the only report in the 2002 SBO publication series with selected economic and demographic characteristics of U.S. firms. Data aggregates are presented by gender, Hispanic or Latino origin, and race for the U.S. by 2002 North American Industry Classification System (NAICS), employment size, and receipts size of firm. Additional statistics for both employer and nonemployer respondent firms are provided for the following:

• Home-based, family-owned, and franchised businesses;
• Sources of financing for expansion, capital improvements, or start-up;
• Years that the owner(s) established, purchased, or acquired the businesses; and
• Self-employment or business activities of sole proprietorships.

The data in this report were compiled by combining data collected on businesses and business owners in the 2002 SBO with data collected by the main economic census and administrative records. Included are businesses that filed 2002 tax forms as individual proprietorships, partnerships, or any type of corporation, and with receipts of $1,000 or more.

Firms were asked to report information about the characteristics of up to three individuals with the largest share of ownership; additional owners were not surveyed regarding characteristics.

Business ownership is based on the characteristics of the owners that possessed 51 percent or more of the stock or equity in the business and is categorized by:

• Gender: Male; Female; or Equally Male-/Female-Owned;
• Ethnicity: Hispanic or Latino Origin; Not Hispanic or Latino Origin; and
• Race: White; Black or African American; American Indian or Alaska Native; Asian; Native Hawaiian or Other Pacific Islander.

Businesses could also be placed in the category of "Publicly held or other firms whose owners' characteristics are indeterminate."

The data are not directly comparable to earlier surveys (see details in the section below on Data Comparability to Prior Surveys).

GENDER, HISPANIC OR LATINO ORIGIN, AND RACE

Table A [xls, 24K] shows a comparison of business ownership for SBO respondent firms to all U.S. firms by detailed group and for publicly held and other firms whose ownership characteristics are indeterminate. Table B [xls, 24K] shows the gender distribution by Hispanic or Latino origin and race of all SBO respondent firms, employer respondent firms, and nonemployer respondent firms. Detail may not add to total because a Hispanic or Latino firm may be of any race. Moreover, each owner had the option of selecting more than one race and therefore a business may be included in more than one racial group.

HOME-BASED BUSINESSES

Overall, approximately half of the 16.7 million SBO respondent firms were home-based in 2002. The percentage of firms operating from somebody's home in 2002 varied by kind of business, employer status, and size of firm. Four industries accounted for the largest share of home-based businesses: professional, scientific, and technical services (19 percent); construction (16 percent); retail trade (11 percent); and other services, such as personal services, and repair and maintenance (10 percent). Fifty-eight percent of businesses with no paid employees were home-based compared to 22 percent of firms with paid employees. Table C [xls, 26K] shows that 64.7 percent of businesses with receipts of less than $5,000 were home-based compared to only 5.8 percent of firms with receipts of $1,000,000 or more.

Among businesses owned by minorities and women, 56 percent of both American Indian- and Alaska Native-owned firms and women-owned firms, 53 percent of both Black-owned firms and Native Hawaiian- and Other Pacific Islander-owned firms, and 45 percent of Hispanic-owned firms reported that they were home-based. In contrast, two out of every three Asian-owned firms reported that they conducted business from nonresidential locations. Table D [xls, 23K] shows that female-owned respondent firms (56.1 percent) and equally male-/female-owned respondent firms (54.0 percent) were more likely to be home-based than male-owned respondent firms (47.1 percent).

Twenty-nine percent of all respondent firms with 1 to 4 employees operated as home-based firms in 2002. Home-based business rates declined sharply as the firm employment size increased. Table E [xls, 21K] shows a comparison of home-based respondent firms by employment size of firm, Hispanic or Latino origin, and race.

Table F [xls, 20K] shows the percent of all respondent firms, female-, male-, and equally male-/female-owned respondent firms by employment size of firm which were home-based in 2002.

FRANCHISED BUSINESSES

Franchised businesses were 3.7 percent of all employer respondent firms, and the rate increases as the firm employment size increases. Accommodation and food service employer firms were most often franchised (16.2 percent), followed by employer firms in management of companies and enterprises (8.6 percent), and retail trade (7.1 percent).

CAPITAL REQUIREMENTS

More than 6-in-10 of the nation's businesses reported using money or assets of their own or from their families to start or acquire the business. A higher percentage of businesses with paid employees (77.3 percent) than businesses with no paid employees (59.2 percent) were self-financed.

Four industries, shown in Table G [xls, 24K], account for the largest percentage of these self-made firms: accommodation and food services (79 percent); manufacturing (78 percent); wholesale trade (74 percent); and retail trade (72 percent).

Nine percent of businesses, both employer firms and nonemployer firms, used a personal or business credit card to finance the start-up or acquisition of their business.

Over 11 percent of all businesses, 22 percent of employer businesses, and 8 percent of nonemployer businesses secured a loan from a bank.

Nearly 28 percent of all businesses, 12 percent of employers, and 33 percent of nonemployers started or acquired their business with no capital at all.

Table H [xls, 25K] shows that among firms owned by minorities, 61.4 percent of Asian-owned firms used their personal or family savings to finance start-up or acquisition of their business, while 10.3 percent of Native Hawaiian- and Other Pacific Islander-owned firms used personal or family assets, and 12.7 percent used a personal or business credit card.

Table I [xls, 23K] shows that women-owned businesses were more likely than male-owned firms to use a personal or business credit card to finance start-up (9.2 percent and 8.3 percent, respectively) and less likely to use money of their own or from their families (48.2 percent and 56.2 percent, respectively).

Table J [xls, 24K] shows that among businesses requiring capital to finance expansion or make capital improvements, 25.5 percent used personal/family savings, 11.4 percent used a personal or business credit card, and 9.2 percent used a business loan from a bank.

The industries in which the largest percentages of businesses used their own money or assets for expansion capital were forestry, fishing and hunting, and agricultural support services (37.3 percent); arts, entertainment, and recreation (36.0 percent); information (33.3 percent); and construction (32.7 percent).

TYPES OF CUSTOMERS

Almost half of respondent firms reported that household consumers and individuals accounted for 10 percent or more of their total sales in 2002, as shown in Table K [xls, 24K]. Thirty-two percent reported sales to other businesses and organizations; 5 percent to state and local governments; and 2 percent reported that 10 percent or more of their total sales were to the federal government.

More than three-quarters of respondent firms operating in retail trade reported that household consumers and individuals accounted for 10 percent or more of their total sales. Seventeen percent of respondent firms providing educational services reported that state and local governments accounted for 10 percent or more of their total sales.

Only 1.4 percent of all respondent firms reported that 10 percent or more of their sales were from exports. The percent of businesses that export increases as the firm employment size increases (2 percent of firms with between 10 and 19 employees, compared to 5 percent of firms with 500 employees or more). Over 8 percent of retail trade employer businesses reported that 10 percent or more of their sales in 2002 were from exports, followed by 6.5 percent of manufacturing firms, and 5.2 percent of businesses engaged in transportation and warehousing.

WORKFORCE

Thirty-four percent of employer firms (60 percent of those in the construction industry) reported using contractors, subcontractors, independent contractors and/or outside consultants to supplement their workforce Table L [xls, 23K]. Eleven percent of construction employer firms used paid day laborers; 8.5 percent used temporary staffing from a leasing service or a professional employer organization; and 2.2 percent leased employees from a leasing service or a professional employer organization.

Nearly 17 percent of manufacturing employer firms and nearly 12 percent of wholesale trade employer firms reported using temporary staffing from a temporary help service.

YEAR OWNER(S) ESTABLISHED, PURCHASED, OR ACQUIRED THE BUSINESS

Nearly 21 percent of employer respondent firms reported that their business was established, purchased, or acquired between 1990 and 1996, compared to almost 18 percent of all respondent firms, and nearly 17 percent of nonemployer respondent firms. In 2002, 17.3 percent of firms reported that the business was started within the previous two years.

SELF-EMPLOYMENT OR BUSINESS ACTIVITIES OF SOLE PROPRIETORSHIPS

Nearly 17 percent of sole proprietorships with no paid employees operated less than 12 months; 9.2 percent reported their business as a hobby which generated income; and 29.0 percent operated a business to supplement their income.

Forty-two percent of owner-operated firms with no paid employees and revenues of less than $5,000 operated their business to supplement their income, compared to 7.0 percent of those with revenues of $1,000,000 or more.

DATA COMPARABILITY TO PRIOR SURVEYS

The kind-of-business data from the 2002 CB/CBO are not comparable to the 1992 CBO data due to the transition from the 1987 Standard Industrial Classification (SIC) system to the 2002 North American Industry Classification System (NAICS). Additional changes affecting data comparability are discussed in detail in Methodology, in the section titled "Comparability of the 2002 CB/CBO and 1992 CBO Data."