New Revenue Lows: 50% Make Less Now Than In Their Pre-COVID Days, Reflecting Highest Monthly Surge, While 39% Can't Pay Rent

REVENUE & RENT REPORT | DATA INSIGHTS | BOSTON, MA -- August 31, 2023: Fifty percent of small business owners polled by Alignable in August say they're only earning  half or less of what they generated monthly prior to the pandemic, breaking a 2023 record. 

This also reflects the largest monthly surge in the number of pre-COVID small businesses affected by significant revenue declines this year -- up 10 percentage points from 40% in July. 

This chart reflects the revenue roller-coaster ride many Mom & Pops and other small or solo operations have been riding this year. 

And newer businesses -- founded between April 2020 and July 2022 -- are in even tougher shape this month, as 53% of them are only earning half or less of what they generated this time last year.  

Given the ongoing struggles small businesses are having in generating more revenues this summer, it's also not a surprise that 39% couldn't afford to pay their rent in full and on time in August, tying April and June for 2023's U.S. small business rent delinquency record. 

This marks an increase of two percentage points over July, and the sixth month in a row that nearly 40% of SMB owners couldn't afford their rent. 

New Poll Shows What's Elevating The Problems

Factors weighing heavily on small business owners include the cumulative effects of high inflation (including rising gas costs this summer), 17 months of climbing interest rates, a drop in consumer spending, rent spikes, and ongoing labor struggles, among other challenges. 

These findings are part of Alignable's August Revenue & Rent Report, released today.  

The report is based on a new poll of 4,898 randomly selected small business owners conducted from 8/5/23 to 8/30/23, along with over 35,000 responses from past studies this year. 

Surge In SMBs With Reduced Revenues

Let's address more details of the record-breaking revenue issues, before we tackle the latest rent problems.

Throughout the past 18 months, small business owners have cited inflation as their No. 1 concern and impediment to recovery and growth. While it remains the top concern for 26% polled this month, ramping up revenue is the leading worry for 24%. 

Reflecting that sentiment, small business owners in many industries are reporting challenging revenue figures in August.  

Gym owners topped the list with 64% telling us that they only earned half or less of what they generated each month pre-COVID. 

Hopefully, there's some seasonality reflected in those numbers and they will improve in the fall. That said, many gym owners report in poll comments that they still haven't recovered from the past few years.

Many of their peers up and down Main Street aren't far behind in terms of their sagging revenue numbers:

• 58% of beauty salon and barber shop owners said they're making 50% or less in August, compared to their monthly earnings prior to COVID. (And that 58% figure is up a discouraging 22 percentage points from July). 
• 57% of those in education say August was a rough month, including tutors. While summer vacations might influence both the numbers for beauty shops and educators, these figures are still quite high for this time of year.
• For real estate (55%), and construction firms (53%), August revenue numbers took a real hit, too, and summer can be a busy time for both sectors. In survey comments, rising interest rates are cited as the cause of significant dismay in these professions, or others related to them, including home inspectors, general contractors, and mortgage brokers.
• Half of all retailers said they're only earning 50% or less than they did on a monthly basis prior to COVID, jumping eight percentage points from July. Those are brow-raising numbers that, we hope, improve during Q4, but there's no guarantee, as Q4 2022 was very disappointing for many independent retailers.
• Nearly half (49%) of all restaurant owners reported the same problem, but their surge was much smaller and their August numbers are a little bit better than June's. However, the idea that such a large percentage of restaurant owners still haven't regained the same level of income earned prior to COVID is beyond worrisome.
• A 24-percentage-point lift in the number of SMBs in transportation struggling with revenue numbers in August (42%) was among the surprises in this poll. However, many have said their margins are shrinking because of elevated gas prices this summer.  
• SMB owners in other industries (automotive, manufacturing, travel, the arts, and the sciences) also reported some surges and that at least one-third of them have yet to reach their pre-COVID financial health. But those in the arts and sciences actually fared better than most in terms of their August numbers. 

Similar to most industries, the figures across many states show major increases in August's percentage of small businesses earning half or less than their monthly, pre-pandemic revenues. 

Not only were most surges between August and July concerning, the total percentages in many cases demonstrate indicators of potential economic instability in many states, at least within local small business economies.

IL, MA, MN, MD, & VA Top The List Of States Suffering

While the small business economy was looking up in highly populated states like Illinois, Massachusetts, California, and New York for a month or two, much of that progress was reversed in August.

Illinois tops the list with 61% of its small business owners reporting that they are making half or less than they earned monthly prior to COVID. That's more than six out of 10! 

The surge between July and August was huge, as well, up 24 percentage points.

Close behind, 60% of small business owners in both Massachusetts and Minnesota tell us that they're making a lot less than they did prior to COVID -- a daunting figure for anyone claiming that businesses are starting to rebound from COVID, inflation, interest rates, rent spikes and more. 

And the surges between July and August for these states were worse than what was reported in Illinois -- 27% and 29%, respectively. 

Here's the rundown in terms of the percentages of small businesses earning less than they did prior to COVID in other key states. Most percentages are staggering, except there's a silver lining evidenced with figures from Georgia and Ohio, and a bit of improvement in Michigan and Colorado. 

• Maryland: 58% (up 2% from July)
• Virginia: 54% (up 7%)
• Arizona: 50% (up 13%)
• California: 50% (up 8%)
• Michigan: 50% (down 4%)
• Florida: 49% (up 18%)
• New York: 46% (up 19%)
• Colorado: 44% (down 3%)
• Pennsylvania: 44% (up 18%)
• Texas: 41% (no change from July)
• New Jersey: 40% (up 8%)
• Georgia: 38% (down 16%)
• Ohio: 26% (down 14%)

As the rest of the report indicates, many of the revenue figures are reflected in the rent delinquency rates for August, too. But there are a few exceptions.

August -- Tied For Top Rent Delinquency Month in 2023

While we have another record-breaking month for national rent delinquency among small business owners (similar to April and June), some industries broke or nearly matched their own highs, as well. 

Reflecting increased struggles with high interest rates, rent hikes, and ramping up their income, independent retailers saw a jump of eight percentage points in terms of their rent delinquency rates, landing at 39% from just 31% in July. 

But 41% of car dealers and repair shop owners topped the chart, with those in construction just under them with a rent delinquency rate of 40%. 

While 38% of gym owners couldn't cover rent this month, ranking in the top four industries, the same percentage of fitness enthusiasts/experts had trouble in July, too. 

Some 37% of restaurant owners couldn't cover rent, up one percentage point from July. 

And 35% of those in real estate were right behind them, but their rent delinquency rate surged eight percentage points from just 27% in July. 

Beyond that, the 35% rate was the highest it's been for those in real estate all year, reflecting not just reduced revenues, but also the negative effects of rising interest rates on home listings and purchases. 

Rent Delinquency In IL, NY, AZ, PA, CO, VA, & NC 

While Illinois-based SMBs are having more revenue struggles than their peers in other states, they're also ranked No. 1 for rent delinquency in August. 

After experiencing decreases in delinquency rates two months in a row, now Illinois is back on top with 52% of its small business owners saying they couldn't cover August rent in full and on time. 

Illinois businesses also reflected the most significant surge -- doubling their numbers from just 26% in July to 52% in August. 

But several other larger states are in the Top 10 when it comes to SMB rent delinquency rates, a few with major surges from July (in bold), too:

• Texas: 47% (for the second month in a row)
• Arizona: 47% (up 7%)
• Minnesota: 45% (up 16%)
• New York: 43% (up 20%)
• Maryland: 42% (down 13%)
• Pennsylvania: 42% (up 21%)
• New Jersey: 39% (up 1%)
• Colorado: 37% (up 16%)
• Massachusetts: 34% (down 1%)
  

At the other end of the spectrum, we're seeing the largest decline in rent delinquency rates from small businesses in Georgia (down 26 percentage points), landing at just 11%.  

Looking at the revenue numbers earlier in the report, Georgia also had one of the best showings among key states we focused on for this report. 

Ask Us About Other Specific Findings

To see more detailed findings from Alignable's August Revenue & Rent Report covering other industries, states, provinces, 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 online referral network for small businesses with 8 million+ members across North America.

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.