New Record: 73% Of SMBs Make Less Now Than They Did In '23 -- Plus 41% Can't Pay The Rent

TREND TRACKER | DATA INSIGHTS | SMALL BUSINESS REVENUE LOSS CLIMBS TO A NEW HIGH | BOSTON, MA -- August 16, 2024 -- More small business owners are finding it harder than ever this year to generate the same income they earned in 2023. 

And despite news from the Feds noting decreasing inflation rates, the cumulative effects of inflation -- rising supply, labor and rent costs -- and still-high interest rates weigh heavily on more small business owners as 2024 proceeds. And 41% say they couldn't pay their July rent in full and on time.

In fact, 2024 has been marked by increased worries over inflation almost every month this year among small business owners, reaching a record high in July. 

According to Alignable's Summer Revenue Report, released today, 73% of small business owners report that they're falling short of what they generated last year, up eight percentage points from March. 

And of that group, 51% are making half or less of what they generated a year previously, up four percentage points from June, and up nine percentage points from March. 

In both cases, these figures mark new revenue loss records for 2024,  representing trajectories that help explain growing financial anxiety among many small business owners.  

Comparing Pre-Pandemic Revenues

The picture is nearly identical for businesses founded prior to March 2020. For the second month in a row, 72% of those SMBs are making less monthly than they did before the pandemic -- more than four years ago. 

That means only 28% of those businesses have financially recovered from the COVID Era, as well as the financially challenging period that many small businesses are still experiencing, punctuated by much higher prices and interest rates than they had four years ago -- two factors eating away at their margins, growth, and progress.

Digging deeper, in July, 45% of businesses formed prior to the pandemic generated half or less than what they earned monthly prior to COVID. And that figure is up three percentage points from June.

These findings are based on 6,155 survey responses from randomly selected small business owners polled by Alignable from 7/1/24 to 7/31/24, as well as 54,000+ responses from past surveys over the past year. 

Alignable's Revenue & Rent Reports have been widely used as a barometer of the overall health of the small business economy by national media, legislators, and other influencers, since they were first released in April 2020. 

Other Economic Ups & Downs

Rising Prices Hurt More SMBs As Year Goes On

As the chart above clearly shows, for all of 2024, inflationary woes have actually grown among a larger percentage of small business owners, despite reports of lower inflation rates and predictions of a soft landing for the U.S. economy. 

In July, 37% said inflation and rising prices constituted their biggest worry, up 13 percentage points from December 2023. That 37% figure is the highest it's been in at least a year. 

Summing up countless comments from poll participants, most vehemently oppose the notion that inflation's becoming less of a problem, just because inflation rates are lower. 

The real world effects of cumulative inflation over the past couple of years continue to drag down growth, margins, and the overall livelihood of the majority of small business owners polled. 

Here are some direct quotes to further illustrate the issues:

• "We're busier than ever, but that's not good when you're a food bank."
• "Business is bad. I am going to sell my freestanding office building. I'm going to downsize and rent shared space with a conference room."
• "The economy is hurting my customers, especially those who were laid off. So it's impacting my business, too."
  
• "Inflation, in general, has reduced my business. People do not have the additional income to spend on themselves when monthly expenditures are so high, so that means I have fewer customers."
  
• "High interest rates are hurting my ability to grow."
• "As a therapist, I find that bad times tend to cause folks to seek more direction in life, so I would say this economy is actually helpful to my business."
• "Current economic policies are hurting many small businesses, including mine."

1 In 4 SMBs Are Making As Much Or More Than Last Year 

Just over one-quarter of those polled in July (26%) say their businesses are faring well in our current economy: 9% are making as much as they did this time last year, and 17% are growing, earning more than they did in 2023.  That is certainly great news. 

But, mirroring our other statistics above, 47% say the current economy has not been helpful to their businesses at all. Of that 47%, 35% said the economy has been quite damaging to their business success.

Rounding out this part of the survey, 27% say the economy has been "okay, but not great." 

Looking closely at other indicators, economic struggles remain high across the board. 

• 52% are faced with higher rent requirements than they had just six months ago & as we mentioned above, 41% couldn't pay July rent in full and on time.
  • Several states show very high delinquency rates: Washington State (53%), California (43%), and New York (43%) top the list. 
  • The most-affected industries are: Automotive (54%), Beauty (52%), and Construction (45%). 
• Nearly half (49%) say they are negatively affected by the still-high interest rates, as their margins are shrinking and it's harder to pay off loans or secure new ones.  
• 66% of SMB employers say their labor costs are higher than this time last year, which is a daunting number. But, there's a silver lining here, as that figure is 13 percentage points lower than it was in June at 79%. We'll be watching closely to see if this is a blip, or if it becomes a trend.

Examining statistics in various sectors and states will show us more dimensions of the challenges facing small businesses, as well as a few preliminary "partial wins" evident in the data. 

It's Even Worse In Some States & Sectors 

Looking at key states and industries, the situation is even more pronounced.

• Revenue loss was up across many sectors in July, but those leading the pack were manufacturing, beauty salons, and real estate. 
• More than 80% of the SMBs in these industries are having revenue troubles, which is an alarming statistic.
  
• States where SMBs are suffering the most from revenue loss include Virginia, California, Arizona, Michigan, New Jersey and New York. 
• More than 75% of the small business owners polled from these states say their revenues are decreasing. 

That's just a snapshot of what's happening, with more details to follow.

9 Industries Are Losing More Money During The Summer

Every month, we see some major swings looking at industry and state data, so we've added a column on our charts also noting averages over 2024 to provide a broader perspective. 

That said, what's most notable and concerning on this chart has nothing to do with the industries that are suffering the most -- but how much the percentage of businesses complaining of lost revenue has risen between June and July.  Nine industries we track closely had major increases in the number of SMB owners losing money. 

The largest spike was seen among manufacturers -- up 17 percentage points from June to July. And a whopping 85% reported losing revenue -- a new and disturbing high for 2024. 

Other industries with over 80% of SMB owners saying it's harder to drive revenue include: 

• Beauty salons & barber shops: 82%, up seven percentage points from June. 
• Real estate: Also, at 82%, but up 10 percentage points. And also with a 2024 high.
• Transportation: 81%, up 11 percentage points from June.
• The Arts (musicians & artists): 80%, up three percentage points.

Sectors at or above 70% are also quite notable:

• Automotive: 74%, up five percentage points from June.
• Construction: Also, 74%, up 11 percentage points.
• Retail -- 70%, also up 11 percentage points from the month previously.

And restaurants aren't far behind at 67%, up eight percentage points. 

However, there were a few improvements, though overall percentages remain high. Fewer gym owners (by 20 percentage points) complained about lower revenues, as did those in finance and science/technology. 

Based on comments posted by survey participants, many manufacturers say rising costs of supplies and labor are hurting them, while consumer spending is down making it harder for them to sell the goods they make. The last time their revenue issues were much more stable was in March, when only 31% reported difficulty in driving income.

Shifting gears, let's look more closely at which states are having the roughest time with revenue creation. 

50%+ Of SMBs In Several States Have Decreased Revenues

Of the states we watch most closely, all of them report that more than half of the SMB owners that live and work there are suffering from revenue loss. (Please note, if your state is not in this chart, reach out and we will share your statistics). 

Leading the pack with over 70% of their SMB owners making less this year are the following states:

1. Virginia -- 79%, up 16 percentage points from June. 
2. California -- 78%, up eight percentage points. 
3. Arizona -- 77%, up 21 percentage points.
4. Michigan -- 76%, down 12 percentage points.
5. New Jersey -- 76%, up 24 percentage points. 
6. New York -- 76%, down one percentage point from June.
7. Washington State -- 75%, down five percentage points.
8. Texas -- 74%, down two percentage points from 76% in June.
9. Florida -- 72%, down one percentage point from 73%.
10. Massachusetts -- 71%, down six percentage points. 
    

Beyond Virginia, California, Arizona, and New Jersey, other states that saw an increase in their SMB owners reporting revenue losses include Illinois at 58%, up seven percentage points from June, and Pennsylvania at 66%, up five percentage points from 61% in June. 

To see more detailed findings from Alignable's Summer Revenue Report covering other states, industries, or demographic groups, please contact me at chuck@alignable.com. 

To review past poll results, go here or to the Alignable Research Center.

About The Alignable Research Center

Alignable is the largest, AI-powered business networking platform for small business owners in the U.S. and Canada with 9 million+ members.

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.