A recent report on the Kabbage Small Business Revenue Index showed small businesses in the US. achieved revenue growth across every state and industry in the first half of 2019. The Kabbage Index Value (KIV), a value used to track revenue growth of small businesses, increased almost 22 points, from 136.8 to 158.4, indicating U.S. small businesses’ median revenue grew 15.7% in the first six months of this year. This is a large contrast from the second half of 2018 when small business revenue only grew 1.8%.
Drawing from real-time revenue data of more than 200,000 truly small businesses in the U.S., the Kabbage Small Business Revenue Index is an aggregated and anonymized analysis of small business performance. Of all businesses evaluated, 83% have fewer than 10 employees with median annual revenues of $280,000.
For its report, Kabbage grouped small businesses’ revenue growth by NAICS industry classification as well as by state. To analyze revenue trends by state, all 50 states and D.C. were categorized into three groups: large, medium and small states, based on the volume of small businesses in each state according to the SBA. The data revealed every cohort of small businesses by industry and state showed healthy revenue growth, indicating continued economic growth through the end of 2019.
First Half of 2019 Trends:
The construction sector led small business revenue growth among all U.S. industries, growing 23.3% with a KIV increase of more than 32 points from 138.6 to 170.9 for the first half of 2019.
Since December 2016, which is as far back as the Kabbage Small Business Revenue Index goes, the construction sector saw a 70.9% increase in revenue growth, compared to the 58.4% increase of the overall Index. This upwards trend in the construction industry has continuously endured despite the sector experiencing a KIV decrease in both the second half of 2017 and second half of 2018. Also reflecting the seasonality of the industry, in both years, the construction industry saw sharp increases in month-to-month revenue growth from May to June.
The revenue growth in the Kabbage Small Business Revenue Index is in line with the overall health of the construction industry as unemployment rates decreased year-over-year, spurring a boost of optimism in the industry.
The large state group is made up of states that have more than 580K small businesses. Within this group, Ohio saw the highest KIV increase in 1H 2019 by 26 points, from 126.4 to 152.4. Ohio and Tennessee were neck-to-neck with 20.6% and 20% growth, respectively.
This data is in line with recent economic developments in Ohio. A recent report noted that the number of small businesses with five or fewer employees in Ohio is rising and driving an increase in the number of business establishments for the state. The number of business locations in Ohio “is back to record levels” with 284,074 business locations. As small mom-and-pop shops make up about half of all business locations in Ohio, the Kabbage Small Business Revenue Index reflects a positive uptick in revenue growth in relation to the increase of businesses in the state.
Tennessee, which was a close second in terms of revenue growth, logged the highest KIV among the large states between January and June 2019 with a peak KIV of 202.4 points. The growth is in line with PayChex’s Index which reports Tennessee now leads the nation in small business job growth.
The medium states group is made up of states that have between 250-580K small businesses. Among this group, Alabama’s KIV increased the most in 1H 2019 by almost 45 points, rising from 160.1 to 204.7, recording a 27.9% increase.
Alabama’s economic health and growth in the first half of 2019 is represented by several indicators: job growth picked up this year, hitting 1.8%—the fastest growth since 2005—and Alabama’s unemployment rate hit a new record low of 3% in September 2019.
The small states group is made up of states with less than 250K small businesses. Alaska led revenue growth, increasing 55 points from 141.8 to 196.9, and ending the first half of 2019 with a 38.8% increase.
“The closure of several large retailers due to national financial issues may have helped drive revenue to the small business level,” says Jon Bittner, Executive Director of the Alaska Small Business Development Center. “The tourism, construction and healthcare industries have been outliers in their success even in the face of the economic troubles Alaska has been facing. It’s great to see Alaskan businesses thriving even in the face of adverse economic conditions.”
David Snitkof is the Head of Data Analytics and Strategy at Kabbage, a data and technology platform that provides small businesses automated cash flow solutions, including its online lending platform which allows small businesses to quickly access ongoing lines of credit up to $250,000. Previously Snitkof co-founded Orchard Platform where he held the role of Chief Analytics Officer. Prior to Orchard, he served at Citi, first as Vice President of Small Business Banking and later as Senior Vice President of Analytics and Strategy, Small Business & Commercial Banking. He also has worked in management roles at Oyster.com and American Express.