A Short History of the Evolution of Small Businesses in the United States

For centuries, America has been considered the land of opportunity; a place where any person with a pursuit in mind and a substantial work ethic can create a business and make it flourish. It’s been a place where dreams come alive and anyone can prosper as big as they dream. With the American Dream in mind, let’s dive into how small businesses and entrepreneurship evolved throughout our history and became an essential part of our nation’s economic health.

Over many era’s, the meaning of small business took many forms dating back as far as the 1600s. The 17th century was a time when informal “small businesses” included farmers and landowners who bartered their supplies and services. There was no automated manufacturing at the time. So, everything traded was created or performed in person, by hand.

During the industrial revolution “Big Business” thrived and small businesses were forced to adapt. The companies changed their focus to places where the demand for large factory production was not necessary. In this niche, small businesses like Buckeye Steel Castings Company of Columbus, clothing companies with seasonal lines, and other family-owned textile companies did well for themselves.

Following the Industrial Revolution in 1760, America continued to set preliminary plans for things like taxes and financial institutions, such as banks and loans, that would further facilitate independent business endeavors and enable them to thrive. Small businesses had their struggles throughout our history, but after becoming an independent nation, these plans became a reality and our financial systems expanded into a flourishing economy. This allowed businesses to present a more diverse array of goods and services and the people’s interest in these items grew in parallel. Here, came the era of invention and creation.

Italian Harlem – photo by italianharlem.com

The more Americans had access to supplies from the merchants, craftsmen, and self-reliant professionals of the 19th century, the more requests were made for efficiency and comfort. All of this brought out the entrepreneur spirit of the late 1800 inventors.

To demonstrate how extreme the inventing frenzy was, let us take a look at the number of patents in 1790, the first decade that the U.S. patent office existed vs. the late 19th century.

The Number of Patents and Year:

  • 1790 – 276

“The first patent was granted on July 31, 1790, to Samuel Hopkins for his invention of “Making Pot and Pearl Ashes.” Potash was used as an ingredient in several fields of manufacturing, such as making glass and soap, dying cloth, and producing both saltpeter and gunpowder.” (en.wikipedia.org)

  • 1860 – 60,000

1804 Freidrich Winzer (Winsor) was the first person to patent gaslighting
1829 American, W.A. Burt invents a typewriter
1839 Kirkpatrick Macmillan invents a bicycle
Joel Houghton was granted the first dishwasher patent in 1850. The machine was made of wood and required you to hand-turn a wheel that caused water to splash on the dishes

  • Between 1860-1890 – 450,000

Sewing Machine Patent War (1852 – 1856)
Telephone Patent War (1876 – 1880)
Incandescent Light Bulb (1877-1889) – “To all whom it may concern: Be it known that I, Thomas Alva Edison, of Menlo Park, in the State of New Jersey, United States of America, have invented an improvement on Electric Lamps, and in the method of manufacturing the same, (Case No. 186,) of which the following is a specification…

*that’s over 1500x increase since the first decade the Patent Office was open

With the number of amazing inventions steadily increasing, the 19th century was known as the “Entrepreneur Era,” a time full of craftsmen and self-sufficient professionals and a free-market economy. During this era, people traded goods and services but did not always have something to barter with and so developed credit coins. Following the success and popularity of these coins, we would see the modern computerized credit card be developed.


Come the 20th century, between the 1970s & 1980s, the stability of small businesses grew along with America.

Key Developments:

  • Organizations created to aid small business owners – U.S. Small Business Administration & Small Business Development Centers (inspired from the RFC created by Hoover in the Great Depression to help guide small businesses and provide support with loans)
  • Universities developed majors for business entrepreneurship
  • 22.5 million people were independent entrepreneurs
  • Marketing Era – heavy investments in commercials, ads, and word of mouth
  • International Trade made it easier to outsource production and increase global communication


Now, the 2000s ramped up opportunities for small businesses to grow when the internet and social media emerged. The worldwide web and social media combined allowed small companies to compete with big-business corporations through the availability of consistent marketing and instant communication. Over time, America really lived up to being the “Land of Opportunity,” especially for those with a great idea and a substantial work ethic.

Fun Fact: We even have National Small Business Week, which is a national recognition event to honor the United States’ top entrepreneurs each year.

After seeing the evolution of business, global communication development, and outsourcing realized you cannot deny that small businesses are the engine of our economy. Bottom-line, all big-business corporations started small making independent enterprises essential to our nation’s health.

Note to all up and coming small business owners:

We, at Small Business Accounting, will work with you one on one to create a personal strategic plan for managing every aspect of your business finances and aid in planning the foundation of your business idea – this will help you take your small business to the next level and continue to grow and adapt with the times.


Small Business Accounting is here for you.

We want you to take advantage of the information era and succeed! With Over 20 Years of Experience, Our Team has the Knowledge and Expertise to Ensure Professional, Accurate, High-Quality Service. Contact us for your free consultation – christy@lookatmybooks.com or 434-239-1989