Barriers to Entry
If you're going to start a business, it's important to realize that there are specific forces acting upon each industry that affect profit. Industries with a high concentration of small and medium-sized businesses (SMBs) generally do not require an enormous amount of capital investment up front. The point here is that barriers to entry are central factors in determining the feasibility of the average business owner entering a given industry.
For example, it is not likely that you would start a company to build airplanes, as that would take a large investment of capital for property, plant, equipment, and labor. Many restaurants and bars, however, require simple premises and easy to find, local ingredients. This is a smaller barrier to entry, thus there are more SMBs in the restaurant industry than in the aerospace industry.
Goods or Services?
When thinking about businesses, it can be helpful to divide them into two sections: goods producers and service providers. Goods producers make and sell some sort of physical product or material, while service providers don't make tangible goods. The service industry tends to be more SMB-friendly, as it (generally) requires fewer assets.
In the United States, roughly 20% of SMBs are concentrated in the goods-producing sector. The 80% of SMBs that reside in the service-providing sector is largely a reflection of the overall U.S. economy (services over goods), as well as the greater feasibility of service industries for small-scale entry.
The high concentration of SMBs in the service-providing sector also reflects a few realities of business. In a global economy, manufacturing goods competitively involves being able to do so in high volumes in order to remain cost efficient. This requires a large initial investment of capital and access to low-cost labor, which are both tough for SMBs to access domestically. Maintaining quality across hundreds of locations in the service-providing sector is also, as you might imagine, not an easy task.
Small-business owner
Small businesses often begin in the services sector due to a number of factors.