In this fifth edition of The Small Business Economy, the Office of Advocacy reviews the economic environment for small businesses in the year 2005, including the financial and federal procurement marketplaces in chapters 1-3. New research on women in business, education and entrepreneurship, and the approach to local and state economic development known as "economic gardening" are featured in chapters 4-6. Advocacy's annual report on implementation of the Regulatory Flexibility Act (RFA) and the results of Advocacy's initiative to carry regulatory flexibility successes to the state level are summarized in chapter 7. Appendices provide data on small businesses, as well as the key RFA law and executive order.
The Small Business Economy
Signs of economic progress continued in 2005.
Three economic indicators key to an analysis of the
economy's performance - output, productivity, and
unemployment - were up. Business starts totaled
671,800, above closures at 544,800, contributing
to a new high in employer firms of 5.99 million.
Nonemployer firms reached 19.86 million.
Small Business Financing in 2005
Favorable financial conditions supported U.S. economic
growth in 2005 despite hurricanes and energy
price increases. Real gross domestic product grew
at a rate of 3.1 percent. Net borrowing increased by
19 percent, a pace comparable to that in 2003-2004.
Commercial banks expanded lending and eased
terms on commercial and industrial loans.
Federal Procurement from Small Firms
Small businesses continued to benefit from the federal
acquisition of goods and services from small firms
in 2005, and also from changes that helped clarify
the federal procurement environment. Small firms
were awarded $79.6 billion in contracts, according
to data from the Federal Procurement Data System-Next Generation.
Women in Business
Research on women-owned businesses finds that
between 1997 and 2002, the number of women-owned
firms increased by 19.8 percent, and the
number of women-owned employer firms, by 8.3
percent. Women owned 6.5 million, or 28.2 percent
of nonfarm U.S. firms.
Education and Entrepreneurship: What is
Known and Not Known about the Links between
Education and Entrepreneurial Activity
Research on the impact of general education on
entrepreneurship suggests positive, but not linear
links. The highest levels of entrepreneurship
are found in individuals with at least a bachelor's
degree. Research also suggests a link between entrepreneurship
education and venture creation.
Economic Gardening: Next Generation
Applications for a Balanced Portfolio Approach
to Economic Growth
"Economic gardening" is an entrepreneur-centered
growth strategy pioneered in the city of Littleton,
Colorado. Its best practices emphasize 1) infrastructure
- building the community assets essential to
commerce and overall quality of life; 2) connectivity
- improving the interaction among business owners
and critical resource providers; and 3) market
information - accessing competitive intelligence on
markets, customers, and competitors comparable to
that historically available to larger firms.
An Overview of the Regulatory Flexibility Act
and Related Policy
In the 25th year of the Regulatory Flexibility Act
(RFA), the Small Business Administration, Office
of Advocacy's report shows RFA implementation
by federal agencies is improving. More agencies are
approaching the Office of Advocacy requesting training
or seeking advice early in the rulemaking process.
First-year cost savings achieved for small firms
through the RFA process totaled $6.6 billion in FY
2005. Also in 2005, 18 states introduced regulatory
flexibility and 7 states enacted regulatory flexibility
legislation or an executive order.
The Complete Report: The Small Business Economy - 2005 (pdf)
