How Well Do Nonemployer Firms Fare?

Tuesday, January 24, 2017
small business profitability
Thinkstock/mavoimages

About two of every five nonemployer businesses operated at a loss, according to the recently released 2015 Small Business Credit Survey: Report on Nonemployer Firms.

This report, jointly produced by the Federal Reserve banks of St. Louis, Atlanta, Boston, Cleveland, New York, Philadelphia and Richmond, examined trends in businesses with no employees other than the owners. As the report noted, these businesses make up nearly 80 percent of all U.S. firms.

“Yet, little is known about the performance or the financing needs and decisions of these 23 million businesses. The few sources that provide insight on small business credit conditions do not distinguish the experiences of nonemployers from small employer firms, which may differ significantly.”

Profitability of Nonemployer Firms

The figure below shows the profitability of nonemployer firms as of the end of 2014.

small business profitability

As the figure shows, more than 40 percent of nonemployer businesses operated at a loss, while 35 percent showed a profit and the remainder broke even.

However, the size of the firm may play a role in profitability. The figure below shows the profitability of nonemployer firms by revenue size.

small business profitability by firm size

Firms that generated more revenue were also more likely to be profitable, rising from 14 percent of firms with less than $25,000 in revenue to 58 percent of firms with greater than $100,000 in revenue.

Firm age may also play a role in larger-revenue firms being more likely to generate a profit. The report noted that firms with less than $25,000 in annual revenue also tended to be young: “Three-quarters are less than six years old, and 39 percent are new firms (0-1 years).”

Top Business Challenges

Still, generating revenue was the top response given when asked about nonemployer firms’ top business challenge, as seen in the table below.

small business top challenges

Younger and smaller-revenue firms more often responded with revenues and sales as the top business challenge than did nonemployer firms as a whole. These firms also cited the costs of running a business as the top challenge more often than nonemployer firms as a whole.

Additional Resources

Posted In FinancialCommunity Development  |  Tagged small business credit surveysmall businessnonemployer firmscommunity development
Commenting Policy: We encourage comments and discussions on our posts, even those that disagree with conclusions, if they are done in a respectful and courteous manner. All comments posted to our blog go through a moderator, so they won't appear immediately after being submitted. We reserve the right to remove or not publish inappropriate comments. This includes, but is not limited to, comments that are:
  • Vulgar, obscene, profane or otherwise disrespectful or discourteous
  • For commercial use, including spam
  • Threatening, harassing or constituting personal attacks
  • Violating copyright or otherwise infringing on third-party rights
  • Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.
comments powered by Disqus

The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.

Subscribe to
On the Economy

Get notified when new content is available on our On the Economy blog.

Subscribe

Feedspot blog award

The On the Economy blog recently ranked in the top 20 on Feedspot’s list of top bank blogs.

About the Blog

The St. Louis Fed On the Economy blog features relevant commentary, analysis, research and data from our economists and other St. Louis Fed experts.


Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

Contact Us

For media-related questions, email mediainquiries@stls.frb.org. For all other blog-related questions or comments, email on-the-economy@stls.frb.org.

Categories