The Small Business Economy: A Report to the President was prepared by the U.S. Small Business Administration, Office of Advocacy.

In this fourth edition of The Small Business Economy, the Office of Advocacy reviews the economic environment for small businesses in the year 2004, as well as the financial and federal procurement marketplaces.

New research on minority and veteran entrepreneurship are the subjects of Chapters 4 and 5. Chapter 6 takes a new look at tax issues affecting small firms. In 2005, the Office of Advocacy marks 25 years of working to improve the regulatory environment for small businesses through the Regulatory Flexibility Act of 1980 and its subsequent improvements. Chapter 7 summarizes recent developments in that arena, including Advocacy’s initiative to carry regulatory flexibility successes to the state level. Chapter 8 examines the critical role of small businesses in market-driven innovation. Appendices provide additional data on small businesses and background information on the Regulatory Flexibility Act.

Asiaing Links:

SBA Official Website

Download Full Report (Pdf, 887KB)

Dear President:

The Office of Advocacy of the U.S. Small Business Administration is pleased to present The Small Business Economy: A Report to the President. In 2004, the overall economic indicators improved as the recovery gained momentum, and small businesses led the way. Continued strong growth requires an environment that fosters ongoing small business activity.

Small businesses were active in the economy of 2004, which was characterized by stable prices and healthy increases in output, productivity, and private sector employment. Financial market conditions favored continued growth, and small business borrowing increased. Small businesses also continued to benefit from federal government acquisition of goods and services in 2004.

In March 2005, Economic Development Administration Assistant Secretary David A. Sampson talked about the importance of small business at the Office of Advocacy’s conference on Putting it Together: The Role of Entrepreneurship in Economic Development. He said, “Entrepreneurs are the engines of economic vitality and job creation because they are committed to tapping in and leveraging the power and the opportunities that private markets provide. We need to increase the number of entrepreneurs and spread the spirit of innovation and enterprise all across our country—even to regions that are less vibrant than the rest of the country.”

This year’s report focuses a spotlight on the contributions and challenges of entrepreneurs in several demographic groups, namely minorities and veterans. A review of literature by Robert Fairlie pulls together the findings of a number of studies on minorities, including African Americans, Asians, and Hispanics—their involvement in entrepreneurship, including current trends, and the challenges that stand in the way of even more impressive achievements.

A report on veteran business ownership draws together a wealth of information from various studies on veteran business ownership published by the Office of Advocacy. It also reports on the results of a survey administered to a residential population of post-Korean conflict veterans and to a population of veteran business owners from all conflicts and peacetime periods.

Also featured is a report on federal and state agencies’ efforts to make regulations less burdensome for small businesses. This year is the 25th anniversary of the enactment of the federal Regulatory Flexibility Act of 1980 (RFA), and over its history, the Office of Advocacy has worked diligently to monitor federal agency compliance with the law. The Small Business Regulatory Enforcement Fairness Act, passed in 1996, strengthened its provisions, and your Executive Order 13272 of August 2002 was crucial in fostering an environment in which agencies take small firms into account when drafting new federal rules. We continue to work to ensure that small business owners have a say in the regulatory process. In fiscal year 2004, Advocacy’s involvement resulted in more than $17 billion in regulatory cost savings and more than $2 billion in recurring annual savings.

Small firms also face regulatory burdens at the state level. The Office of Advocacy’s model legislation, developed in 2002, is designed to encourage states to adopt regulatory flexibility laws. The initiative has received a great deal of support from governors and state legislators, resulting in the adoption of similar legislation or executive orders that attempt to minimize regulatory burden on small business.

As the economy continues to improve, with an active and innovative small business sector leading the way, we will continue to focus on issues designed to create an environment where entrepreneurship
can flourish. Your administration’s leadership and support for America’s dynamic small business sector continues to be critical.

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