Small businesses are an important part of our economy from both an employment perspective and from an economic activity perspective. One of the best measures of small business health is to look at small business revenue. There has been a lot of coverage of how difficult the pandemic related closures have been on small businesses. Still, other than restaurant closures, the information has been a bit limited.
As a part-two of our previous article on US Consumer Spending, we will look at how small business revenue has trended since the pandemic hit in March 2020. The source of the data used in this article is the same as the last one – TrackTheRecovery.org. The small business revenue data is updated through the end of December 2020 and is indexed and compared to data for January 2020.
As the title states, small businesses’ current level of revenue is down by nearly 1/3. As of the end of December, small business revenue is down 32.1%; see the chart below.
The data in the chart above illustrates that the revenue going into small businesses hit bottom at the end of March with a decline of 50.2%. The second bottom of -49.2% was hit on the 13th of April, 2 days before the stimulus payments started to go out. This started a recovery through the end of May of being down roughly 22-23%. This was really a plateau that lasted through the end of July.
For August, small business revenue levels were down roughly 30% from January’s levels. At the beginning of November, the revenue spent at small businesses declined below 30% with a one-week “black-Friday/Cyber-Monday” recovery that lasted about a week. This short spike moved to spend up 5%, to a level of 25% below January. Another low was established on December 20th at -36.6%.
These are details of a ruthless economic condition inflicted on small businesses because of the closures and restrictions on people’s activity related to the pandemic.
No Industries Are Immune to Reduced Revenue
The data on tracktherecovery.org is broken out into 4 different segments to describe the types of businesses we are looking at. Only two of these industry segments have recovered to a concise term return to near-January levels, but the other three have been hit very hard.
The best performing small business segment that has performed ‘less bad’ than the other two has been the Professional & Business services segment. These small businesses are currently 13.2% below the revenue levels achieved in January. There was a short-term spike where spending went up above the levels seen in January 2020, but that lasted a week and was largely related to the Black-Friday/Cyber-Monday holiday sales. Revenue to this segment of small businesses was largely between 10-15% since the stimulus payments went out in the middle of April. The bottom was achieved on April 13th, 2 days before the stimulus payments started.
The other industry that has, I guess you’d call it, “less bad” is the Retail & Transportation industries. The chart below illustrates the revenue received by these businesses. The post-pandemic peak has been a return to within 0.6% of the January level of small business revenue. This segment of businesses is currently down 20.5% after dropping below 20% at the beginning of November. This segment was typically between 10-15% below January revenue levels the rest of the year.
The best performing small business segment that has performed ‘less bad’ than the other two has been the Professional & Business services segment. These small businesses are currently 13.2% below the revenue levels achieved in January.
The Two Hardest Hit Segments: Leisure/Hospitality and Health & Education Services
The end of the school year coincided with a turn for the Education & Health Services segment of small businesses. Currently, small business revenue in this segment is down 24.1% from January 2020 (compared to -32% overall, see above). As with most small businesses, the revenue received bottomed in this segment right before the stimulus checks went out. This segment bottomed out at -58.7% below January revenue levels. After the stimulus checks went out, the revenue levels leveled out from June to November at around -25% before slipping down to current levels.
We Saved The Worst For Last
By far, the worst-performing segment of the small business universe has received the most press. This is the leisure and hospitality segment. This covers restaurants, casinos, hotels, and related businesses. Small business revenue in this segment is currently down 64.5% from January 2020 levels. This isn’t much better than the -72% level seen at the end of March 2020. The majority of the year revenue was down by 50% and started to decline in the middle of October.
This segment has been truly decimated. As Yelp reported, restaurant closures are currently over 100,000, with the majority of these closures being classified as permanent.
What’s Next For Small Businesses
There’s a lot that’s still up in the air with a week to go before the Biden administration takes over. How much and how many stimulus payments will happen? Will there be further economic shut-downs due to the spike in coronavirus cases and deaths? Will we have enough vaccines to get to herd immunity levels that will allow more of the economy to reopen? Will people accept further shut-downs?
There are so many unknowns at this point that there’s no telling where things will end up. The reality is that small business revenue has declined so much that many businesses will find it difficult to reopen and grow to levels before 2019. We are all hopeful, particularly us at Stavera, since we are a small business.