The growth of one-person manufacturing businesses* was the subject of a recent Wall Street Journal article, Big Growth in Tiny Businesses. Growth in this sector is a trend long-followed by Steve King, a partner at Emergent Research and a regular contributor to SmallBusiness.com. Here is what Steve has to say about the article.
*Note: One-person business is a term SmallBusiness.com uses to describe companies with no employee other than the owner. There are many terms used to describe the same thing, including: solopreneur, sole-proprietor, non-employee businesses.
The key quote in the Wall Street Journal article:
“The number of businesses classified as manufacturers with no employees has been rising steadily since the depths of the recession. The tiny operations often make food, craft beer, toiletries or other niche products. Their growth stands out in a sector that has been shedding workers for decades.”
As the chart below shows (click to enlarge), there were about 350,000 manufacturing firms with no employees other than the owner in 2014, up almost 17% from 2004. During the same period, the number of U.S. manufacturing establishments with employees declined by 12%, to about 293,000.
The growth of single employee/employer manufacturing companies is part of the broader trend towards more one-person businesses in general. There are a number of drivers of this trend, including a shift to contract workers instead of traditional employees.
Emergent has been tracking these “employee free” businesses for the past 5 years through the MBO Partners State of Independence in America study series. In 2016 we found that there are about 5.4 million U.S. single employer/employee businesses who use contract labor instead of hiring traditional employees.
We also found these firms spent about $95 billion hiring other independents over the past year. This is the equivalent of hiring about 2.3 million full-time workers. The recently released U.S Federal Reserve study 2015 Small Business Credit Survey: Report on Non-Employer Firms also found a high rate of contract worker usage by non-employers.
The Fed study found 32% of all non-employer businesses surveyed use contract labor and almost half of non-employers with revenue greater than $100,000 use contract labor.
The growth in the use of contract labor by non-employer, solopreneur businesses is one of the most important and least understood economic trends. The reason is non-employer firms are not included in most small business studies, so therefore, many of such studies are finding entrepreneurship is in decline in America.
But if non-employer businesses who use contract labor were included in these studies – and we believe they should be – the findings would be that entrepreneurship is the strongest it’s been in decades.
VIA | Small Business Labs, “The Rise of Solopreneur Manufacturing Companies“