Recession Brought a Small-Business Boom

The number of small business that provide services to other businesses grew during the recession, while consumer-facing businesses declined.

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Here’s a counterintuitive take on the Great Recession for you. There are actually more small businesses now than there were in 2006, when the recession began.

That’s according to Dun & Bradstreet, which released a report on the state of small business this week. The trend follows a deep trough through the recession, but a steep climb as the economy has slowly recovered.

“Compared to 2007, there was a huge increase in the number of business failures in 2008, 2009, and 2010. In fact, the number of business failures in 2009 was almost twice that of the amount of failures in 2007,” writes Byron Vielehr, president of global risk and analytics at D&B, in response to questions emailed by Portfolio.com. “However, 2009 and 2010 bore witness to the highest percentage of startups in more than a decade. The rate of new businesses had also been steadily climbing since 2006. As a result, the number of businesses in 2010 compared to 2007 is higher.”

As of 2010, D&B estimates, there were about 23 million small businesses in the United States, employing nearly 81 million workers.

But the kinds of businesses that are thriving in this economy are very different from those that were booming before the housing bubble burst and the economy slid into recession.

In 2007, businesses classified as providing “other services,” or services to consumers, were the top category of small business. There were roughly 3.2 million businesses in that category then. At the same time, there were about 3 million businesses involved in providing business services.

Fast forward to 2010, and the positions had reversed. Six million small businesses were working in the business services sector, while 3.3 million were providing other services. The number of small retailers were hit hard by the recession and haven’t recovered, with that number falling to about 2.1 million in 2010 from about 2.5 million in 2007.

“During the recession, consumers significantly cut off their spending, so services oriented to businesses were positioned better than services for consumers,” Vielehr wrote. “The growth of business services can also be attributed to companies outsourcing specific functions of their business like advertising, marketing, accounting, etc. Companies were looking for high efficiencies while also reducing the costs associated with full-time employees.”

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