The Kabbage Small Business Revenue Index reports strong overall revenue growth in the first half (1H) of the calendar year 2019, with small businesses in the U.S. achieving revenue growth across every state and industry. 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 points, indicating U.S. small businesses’ median revenue grew 15.7% in the first six months of the year. This represents a 22% increase compared to the same time period in 2018 and a large contrast from the second half of 2018 when small business revenue only grew 1.8 percent.
Drawing from real-time revenue data of more than 200,000 small businesses throughout the U.S., the Kabbage Small Business Revenue Index is an aggregated and anonymized analysis of small business performance. To measure ongoing revenue growth, the Index identifies growth with a Kabbage Index Value (KIV), which adjusts accordingly to the monthly median-revenue growth of small businesses. With an initial Kabbage Index Value of 100 in January 2017, small businesses’ median revenue has grown a total of 58% through June 30, 2019.
Set apart from other small business research tools, the Kabbage Small Business Revenue Index tracks truly small businesses. Of all businesses evaluated, 83% have fewer than 10 employees with median annual revenues of $280,000.
For this report, Kabbage grouped small businesses’ revenue growth by their industry based on their NAICS industry classification as well as by state. To analyze revenue trends by state, all 50 states and the District of Columbia were sorted based on the volume of small businesses in each state according to the SBA and categorized into three groups, large, medium and small states. The data reveals every cohort of small businesses by industry and state showed healthy revenue growth, indicating continued economic growth across all small business sectors through the end of 2019.
First Half of 2019 Trends:
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, topping “the old peak of 280,775 set in 2008.” As small mom-and-pop shops, making 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’ Index reporting 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.
In Alabama, 99.4% of businesses are small businesses, with 393,000 small businesses employing more than 775,000 people. Alabama’s economic health and growth into the first half of 2019 can be seen in 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 was in the lead in terms of 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.”
The construction sector led small business revenue growth among all other 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. This is slightly down from the 24.1% increase in revenue growth experienced in the first half of 2018, when its KIV increased from 114.8 points in January 2018 to 142.5 points in June 2018. Both years, the construction industry saw a sharp increase in month-to-month revenue growth from May to June, reflecting the seasonality of the industry.
Small businesses in the agriculture, mining, and utilities sector saw the second greatest rate of growth among industries at a 19.1% increase.
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.
“Strong optimism continues in the small business sector,” said Holly Wade, NFIB’s Director, Research and Policy Analysis, “Last year was the most optimistic on record as measured by NFIB’s Small Business Economic Trends survey. Since then, we are still at strong levels in 2019 with small business owners reporting above-average optimism. Despite a slight slowdown in 2019, likely due to the government shutdown earlier this year and escalating tariffs, overall, the small business economy is roaring ahead with no sign of a near term recession.”