No. 217

September 2002

SMALL BUSINESS

RESEARCH

SUMMARY

Estimation of Small Business Wealth 

by Joel Popkin and Company

2002. [46 pages].Washington, D.C. 20005

under contract no. SBA-HQ-00-M-0715

This Small Business Research Summary (ISSN 1076-8904) summarizes one of a series of research papers prepared under contracts

issued by the U.S. Small Business Administration’s Office of Advocacy. The opinions and recommendations of the authors of this study do

not necessarily reflect official policies of the SBA or other agencies of the U.S. government. For more information, write to the Office of

Advocacy at 409 Third Street S.W., Washington, DC 20416, or visit the office’s Internet site at www.sba.gov/advo.

Purpose

This research is the first-ever attempt at estimating

the portion of total private business wealth represented by small businesses (those with fewer than 500

employees). Having a measure of the share of the

nation’s wealth by business size gives a better picture of the structure of the U.S. economy and small

firms’ role in it.

Scope and Methodology

After examining alternate definitions of wealth and

their relationship to each other, the authors adopted

the equity market valuation as their measure of U.S.

business wealth. The authors made a single estimate

of total business wealth by combining wealth estimates of two forms of business organization: noncorporate and corporate sectors. The authors used the

estimates for noncorporate wealth provided in the

Federal Reserve’s Flow of Funds data. They considered all noncorporate businesses to be small businesses. The authors derived the shares of total corporate wealth attributable to large and small businesses

using the relative shares of net income and the

appropriate price-to-earnings ratios. They applied

these shares to the total corporate wealth estimates

provided in the Flow of Funds data to arrive at the

small and large business shares of corporate wealth. 

Table 1. Estimates of Business Wealth by Firm Size, Selected Years

(Market Value of Corporate Wealth and Net Worth of Noncorporate Business in Billions of Dollars)

Year Corporate Noncorporate Total Total Small Small Business Small Business

Wealth Wealth Business Business Share of Share of Total 

Small Large Wealth Wealth Corporate Wealth Business Wealth

(Percent) (Percent)

1990 909 2,328 2,478 5,716 3,387 28.1 59.3 

1992 1,764 3,214 2,404 7,381 4,168 35.4 56.5 

1997 3,920 7,876 3,176 14,972 7,096 33.2 47.4 

1998 3,751 0,026 3,508 17,285 7,259 27.2 42.0 

1999 5,369 11,827 3,757 20,953 9,126 31.2 43.6 

2000 4,288 11,108 4,039 19,434 8,327 27.9 42.8 

Source: Estimation of Small Business Wealth, Joel Popkin and Company. Produced under contract to the U.S. Small Business

Administration, Office of Advocacy, 2002.
Highlights

The authors’ estimates of small businesses’ share

of corporate wealth and total business wealth appear

in Table 1.

• Total small business wealth amounted to $8.3

trillion, accounting for 42.8 percent of total business

wealth of $19.4 trillion in 2000. 

• Small businesses’ share of corporate wealth was

28 percent in both 1990 and 2000. 

• Corporate wealth grew nearly fourfold from

1990 to 2000 as the stock market boomed and the

tax code changed in favor of corporate status. 

• Because small firms are often privately owned,

stock market expansion was of little consequence to

their growth or expansion. Hence, the small business

share of wealth declined from around 56 percent in

the early 1990s to around 43 percent during the late

1990s, despite substantial increases in the level of

small business wealth.

• Total small business wealth more than doubled

from 1990 to 2000 from $3.4 trillion to $8.3 trillion

and was led by the growth in the corporate sector. 

Conclusion

This report estimates that the small business sector’s share of total business wealth was 43 percent in

2000. The share declined steadily during the 1990s,

mainly because of the massive growth over the period in the corporate sector, which is large businessdominated.

This report is the first attempt at estimating the

small business share of total business wealth, and as

such, the development of the methodology presented

a challenge because of data limitations and conceptual issues in valuating financial assets versus real

assets. Nevertheless, it represents a contribution to

the dialogue on the relative share of small firms in

the U.S. economy.

Ordering Information

The full text of this report and summaries of other

studies performed under contract to the U.S. Small

Business Administration’s Office of Advocacy are

available on the Internet at www.sba.gov/advo/research.

Printed copies are available for purchase from:

National Technical Information Service

5285 Port Royal Road

Springfield, VA 22161

Tel. (800) 553-6847

TDD: (703) 487-4639

www.ntis.gov

Order number: PB2002-108706

To receive email notices of new Advocacy

research, press releases, regulatory communiciations,

and publications, including the latest issue of The

Advocate newsletter, visit http://web.sba.gov/list.