SBA Report Outlines State of Small Business

The Office of Advocacy of the U.S. Small Business Administration recently unveiled a new federal government report outlining the state of small business and its contributions to the economy. The Small Business Economy, 2004, the latest in an annual series, analyzes 2003 data.

“In 2003, the overall economic indicators improved as the economy gained momentum,” said Office of Advocacy Chief Economist Dr. Chad Moutray. “Small businesses led the way. However, continued strong economic growth will require an environment that fosters more entrepreneurial activity.”

The report examines the role small business plays in the economy. It focuses on economic trends and indicators, regulatory issues at the federal, state and local levels, innovation and technology transfer, and federal government procurement and small business financing data.

Among the report's highlights:

• The second half of 2003 marked a return of consumer and business confidence. Real gross domestic product increased at an annual rate of 8.2 percent in the fourth quarter, and the number of employer firms increased by 0.3 percent over the year. The number of unincorporated self-employed also increased by 3.7 percent during the year.
• Home-based businesses, which make up 53 percent of the small business population and serve as incubators for many growing businesses, face a unique regulatory environment that can restrain their expansion and growth. Notable regulatory barriers include complex IRS rules on home office deductions and the complicated test for determining independent contractor status. Local zoning laws also may discriminate against home-based businesses, the report notes.
• Some of America’s best-known companies are university spin-offs. Current research suggests that university spin-offs can have a dramatic effect on the economy of a region. These effects have been enhanced by government policies such as the Bayh-Dole Act, which gave universities the rights to inventions derived from federally funded research.

The Office of Advocacy independently represents the views of small business to federal agencies, Congress and the President. The Small Business Economy, 2004 is available at: http://www.sba.gov/advo/