Did you know that nearly half of all US employees work for a small business? In fact, from law firms to real estate organizations and medical practices, there are currently 32.5 million small businesses in the US and 61.2 million small business employees.
But with the dominant presence that small businesses take on in our lives, we can easily forget how long these cornerstones have acted as the core of our society. So, come along with us as we wind our way through the past 100 years of small business in the United States to see how things have changed.
Small businesses in the 1920s
President Calvin Coolidge’s public claim that “the chief business of the American people is business” is the phrase that came to define the entrepreneurial attitude of the United States during the 1920s.
Despite a recession in the early years of the decade, the latter half of this period saw rapid economic growth and the advancement of the newly created automobile and airline industries. Thus, the life of small business in the 1920s was one of promise, as business owners saw the economy grow by a whopping 42%.
However, as anyone with little history knowledge knows, this sadly wasn’t to last.
Doing business in the 1930s
With the infamous stock market crash of 1929, the United States was catapulted into the Great Depression, which has long been considered the greatest economic downturn of all time.
As a result, many small businesses suffered immensely, with supporting banks failing and the savings of many people being wiped out entirely while attempting to pay back their loans.
Thousands of small business owners were forced to close their doors for good in the first few years of the decade, and by 1933, unemployment was at “about 25%, which equated to roughly 13 million people.”
What was small business like in the 1940s?
Although the 1930s may have been the downfall of many small businesses in the United States, the 1940s brought their revival with a bang. With World War II came an industry boom that led to a flood of new businesses.
In fact, the Department of Commerce estimated in June 1943, that there were about 2,750,000 small business establishments in the United States, comprising some 93% of the total number of establishments in the country.
Many now-global brands got their start in the 40s, including the American Broadcasting Company (ABC), Coach, and McDonald’s. It may seem impossible to imagine these entities as small businesses based on their size today, but everyone starts somewhere!
How was business in the 1950s?
The midpoint of the 20th century saw small businesses continue to flourish under steady economic growth and additional support from agencies like the Small Business Administration (SBA).
Founded in 1953, the SBA was created to “aid, counsel, assist and protect the interests of small business concerns, preserve free competitive enterprise and maintain and strengthen the overall economy of our nation.”
Small business loans, specialized grants, procurement and management programs, and more from the SBA allowed hundreds of thousands of small business owners to grow their companies and provide stable employment for their employees.
Small businesses in the 1960s
The 1960s experienced a huge stock market boom that, unlike the 1920s several decades earlier, was not followed by a major financial depression. There were a few stock market declines capping each end of the decade, however, on the whole, small businesses saw continued success in the 60s.
However, while no economic downturn lay on the horizon, the latter half of the 1960s did see the start of The Great Inflation, a period of rising prices and an inability for wages to keep up with demand.
Moving into the 1970s businesses
While the preceding few decades showed economic progress and a clear path forward for the average small business owner, the 1970s suffered from a severe case of “stagflation,” a term coined to describe the combination of high inflation and slow economic growth that plagued this era of market history.
This was then exacerbated by high unemployment rates, which turned out to be a key component of the 70s, as this dip forced small business owners to scale back staff or face closing down entirely.
What about business in the infamous 1980s?
The impact stagflation had on the state of small business in the United States during the 70s certainly carried into the early 80s, and by 1982, the national unemployment rate had reached a peak of 10.8%.
Inflation rates were similarly higher than they had been in decades, and the remainder of the 1980s saw success and failure come in waves, as recessions alternated with periods of steady, albeit slow, economic growth.
Back to the 1990s
Compared to the 70s and 80s, the 90s were once again a bright time for small businesses. The late 90s were especially profitable for new entrepreneurs, as the web startup era was just beginning.
90s brands like Amazon, eBay, and Match.com are still around today, while 90s startups like AltaVista, AskJeeves, and Netscape provided ample employment in their day but have since faded out over time.
This tech boom was, in general, hugely beneficial to small businesses as the market exited the 20th century on a positive note. According to this report from the Clinton-Gore administration, “small business bankruptcies decreased by 17.9% between 1998 and 1999, to the lowest level in over 18 years.”
The small business world in the 2000s
The first decade of the 21st century began with the bursting of the dot-com bubble. Also known as the “dot-com boom” or the “tech bubble,” this phenomenon was “the unprecedented rise in equity valuations of internet-based tech companies during the bull market of the late 1990s.
The dot-com bubble burst bankrupted a number of eagerly founded 90s tech startups and caused significant losses for those who survived. Following the burst, small business owners in the 2000s faced additional obstacles like the 2002 recession and the 2008 housing crisis with little forward momentum in between to balance out these hardships.
Our most recent decade of the 2010s
Following the great recession of the previous decade, the 2010s went through one of the lowest rates of new business formation in recent history due to a multitude of varying factors.
The 2010s were extremely tough on small businesses, as banks became far more hesitant to give out loans post-2008. While the 90s saw an influx of new businesses being created, 2010-2019 saw a mere trickle of new business creation.
Current small business trends in the 2020s
With the onset of the COVID-19 pandemic in 2020, it’s since been necessary for small businesses to pivot their strategy. For those who have been able to shift to a far more remote system for conducting business, sustaining, and even growing their small business has been possible.
Unfortunately, businesses that have not been able to make the transition to online operations have been hit incredibly hard. However, the good news is that this decade is far from over, meaning there’s still ample opportunity for small businesses to increase once again.
So, there we have it: the history of American business since 1920!
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And if you’re interested in other similar articles to this one, why not read our pieces on the benefits of remote employees.