What Kinds of Businesses Have the Best Chances?

The fact that there is room enough for new businesses needs perhaps to be emphasized a little more. During the last hundred years many prophets have assured us with what sounded like undeniable logic and evidence that the future lay in the hands of the great unit, that the little firm would first be wiped out, and that then the middle-sized one would vanish.

These men looked back to the days when there were few or no large businesses, when everything was produced, moved, or distributed on a small scale. Then they looked at the industrial Revolution and its results. They saw how the coming of machines, steam engines, applied science, railroads, steamships, and all the other new devices played into the hands of men who could get hold of large sums of capital, could gather together a lot of workers, and could produce, transport, or distribute a lot of goods more cheaply over a wider area at a lower cost.

In that revolution countless little fellows were swept aside. The spinster’s spinning wheel was no match for the spinning machine. The hand-loom weaver in his cottage could not compete with the power loom in a vast textile mill. The freight wagon or pack horse which moved a small load at less than three miles an hour was helpless when the freight train came to move large loads at thirty. The stagecoach driver who was liable to be fined for reckless driving if he rushed his dozen passengers along the highway at more than ten miles an hour had to quit business when the passenger train began to move little mobs at twenty, forty, or sixty. Even the biggest sailing ship which boasted that it could cross the Atlantic westward in thirty days was doomed when the first primitive steamship did the trip in two weeks. And so it seemed that everything was destined to be sacrificed to size and speed.

The story has not, however, worked out its plot quite as the prophets of doom foresaw it. The large enterprises have destroyed or swallowed up many smaller ones, but not all of them. In one whole field, that of agriculture, the giants have had a lean time in most parts of the world, and the typical land worker is still the family farmer. In manufacturing there is evidently a place for the large and small alike. In fact the rise of every large-scale industry creates a need for a lot of new kinds of small and medium businesses. In transportation the same is true; the big railroad, steamship line, highway or air corporation cannot do the whole job, and each has brought into being a host of small supplementary or service firms. So it is also with distribution—in spite of the apparently irresistible march of chain stores, mail-order houses, department stores, and supermarkets.

The chance to be of service

There will be an ample supply of "sharpers" waiting to welcome you!When we talk about business and the chances for enterprises or jobs there is one whole field that we usually forget. This is the field of service occupations—domestic, personal, commercial, professional, and public. Domestic and public service do not concern us here, since they involve employment by others rather than self-employment; but of course they are very important to those of you who do not intend to set up your own business. All forms of service have grown greatly in recent decades, ministering to our wants, absorbing more and more of our incomes, and providing opportunities for starting new enterprises.

Within your lifetime the number and variety of such service occupations has increased greatly. The coming of the automobile gave us power to “go places,” so we began to get more places—movie houses, restaurants, night clubs, dance halls, tourist resorts, and so on—to which we could go. That in turn started a demand for bands, entertainers, service stations, overnight cabins, and shops for the sale of records, cameras, and auto supplies. The mechanical gadgets which invaded our houses called for the rise of new kinds of servicemen to fix the refrigerator, radio, or oil burner As we became more health-conscious, we needed more doctors and dentists. As our taxes became heavier and more complicated, we required more experts to help us fill out the blanks. As we grew more risk-conscious, more sellers of insurance appeared to protect us.

In short, the higher standard of living that we enjoyed meant that we had money to spare for a wider range of services, and we certainly spent it. By so doing we brought into being a whole new army of enterprises—many of them small—to cater to our wants. It is unlikely that recruiting for that army has ended.

The extent of small businesses before the war

It is said that statistics can be used to prove anything. Yet we have enough reliable figures to give us a general idea of the extent to which self-employers and small employers were doing the country’s work before the war. The greatest field of small enterprise is agriculture. Of our 6,000,000 farms, 95 percent were officially called small in 1939, on the ground that their individual annual product was worth less than $4,000 a year. Yet many of those which produced more than $4,000 employed little or no hired help. There was only one hired hand for every three farms, and he was steadily growing scarcer.

Retailing comes a good second. Of 1,770,000 retail businesses in 1939, over 1,600,000—91 percent—were classified as small, since their net sales were less than $50,000 a year. Yet if you talk to the owner of what you would regard as a flourishing little family-operated neighborhood grocery store, you may find that his turnover is more than this figure, and that he therefore is not counted as small. Almost half of all our retail establishments have no employees. It is true that there was a whirlwind spread of chain stores during the 1920’s. By 1933 these stores were handling about 25 percent of the retail business, but there has since been a halt and some retreat. In your lifetime Main Street has become Chain Street—but we don’t do all our shopping on that thoroughfare.

Third in number come what the statisticians call service establishments, which look after you and your garments from head to foot, your car, watch, radio, and so forth. There were about 650,000 of them in 1939, and 99 percent were classed as small. Over half the barbershops, laundries, beauty parlors, and auto repair shops were operated by only one person. In the personal or professional service fields we find that 90 percent of the hotels, places of amusement, and banks were labeled small; also that three-fourths to nine-tenths of our dentists, lawyers, doctors, and veterinarians were self-employed, often on a modest scale.

Fourth in the fields of vigorous small enterprise is construction. On the ground that they did less than $50,000 of work in a year, 93 percent of 215,000 firms were counted as small in 1939. These were not the builders of skyscrapers or of superhighways; but they did erect the houses and shops of our spreading suburbs, or they remodeled older dwellings or stores or cafes. Because they were out of operation during hostilities, builders have a vast backlog of construction work to do now that peace has returned.

Rail transportation is dominated by giants, but motor transport is not, for nineteen out of twenty firms engaged in this work rank as small. Wholesale trade has a surprising amount of room for the small firm, and three-fourths of the businesses engaged in it are not large.

The greatest surprise comes when we look at the various forms of manufacturing industry. The figures may seem a bit unreal, because those who produced them regarded any manufacturing plant as small if it had less than 100 employees. To any veteran wishing to start out on his own, a firm with anywhere near 99 employees might well look like a fairly big show. Hence when he is told that 92 percent out of 184,000 manufacturing plants in operation in 1939 were small, he may wonder how many of them were in the lower and how many in the higher brackets of smallness.

Fortunately we can break the figures down a bit. Over 8,000 were one-man plants, yet each produced more than $5,000 of goods annually. About 76,000 had from 1 to 5 employees, while a further 49,000 employed from 6 to 20 workers. Add these figures together, and you discover that 133,000 out of the 184,000 plants—over 70 percent—were small by any layman’s standards. This left 35,000 with between 20 and 100 workers, and 16,000 with more than 100 on the payroll.

Small cogs are important, too

Combining all the businesses officially described as small, we get a total of 2,800,000 out of the 3,300,000 enterprises in existence in 1939. In other words, 85 percent of our non-farming firms were “small”—some of them large-small but many just ordinary small. They employed about 45 percent of the people, including proprietors, engaged by the 3,300,000 firms and produced about a third of the goods and services.

As we have seen already, a lot of small businesses closed down during the war and not enough new ones were established to replace them. At the same time, many quite small plants have flourished and expanded because they were able to make some of the parts required by the big firms to which the government gave orders for large, costly kinds of war equipment.

There are many remarkable instances of this dependence of the big producer, who assembles the final product, on the outside small plants, which make the thousands of different parts. The president of one of the largest corporations confessed recently: “Without the more than 500 subcontractors, suppliers, and the thousands of men and women in garages, machine shops, and small manufacturing plants we could not have done our part of the job. ... The majority of our subcontractors and suppliers are small shops—many of them with 5 to 15 workers and most of them with less than 200.”

Only time can tell whether these war-stimulated small producers will be able to adjust themselves for survival in the years of peace. For them and for those of you who want to start out on your own, success and survival depend in large measure on two factors. In the first place, your enterprise must be in a field in which the advantages of large-scale operation over small-scale are not too great. In the second place, it should be of a kind in which the little fellow can get some of the benefits of large-scale operation by banding together, by government aid, or in some other way.