Comparing SMB Health Across 50 U.S. Cities

Comparing SMB Health Across 50 U.S. Cities | EnigmaAcross the country, 2020 was a difficult year for small businesses. But as the pandemic tore through the United States, it didn’t impact every city equally. Some areas saw higher rates of infection. Some states imposed stricter regulations on small businesses as they tried to limit the spread of COVID-19.

At Enigma, we were interested in understanding how small businesses fared across the country. We analyzed key health metrics for millions of businesses in 50 U.S. cities for the full year of 2020. Our findings? While businesses everywhere were hard-hit, some cities were hit almost twice as hard as others.

While businesses everywhere were hard-hit, some cities were hit almost twice as hard as others.

Many common economic indicators, from GDP to the performance of the S&P 500, hide what’s happening with small businesses. We leveraged the power of Enigma’s Merchant Transaction Signals to look at card revenue trends on a business-by-business level. Card revenue trends are especially powerful for consumer-facing businesses like restaurants and retail stores - industries highly impacted by the pandemic.

We examined the 50 cities with the highest number of small businesses, and looked at three key indicators:

1. How many business stopped operating?
2. How many business had growing revenues in 2020 compared to 2019?
3. How many business had declining revenues in 2020 compared to 2019?

Full list of cities at bottom of article.

How many businesses stopped operating?

We started by looking at how many businesses stopped operating in 2020. To do this, we looked at businesses who had some revenue during 2020 but did not have any revenue during the final 3 months of the year.

In every city we analyzed, at least 20% of businesses stopped operating. In Chicago, more than one-third of all businesses ceased operations in Q4, either temporarily or permanently.

Around 40% of businesses saw revenues grow

Next, we looked at how many businesses experienced revenue growth in 2020. We found that no area escaped unscathed - across all 50 cities, a minority of businesses saw card revenues grow in 2020 compared to 2019. In the city with the fewest growing businesses, San Jose, only 31% of businesses saw revenues grow. Across New York City, around 45% of businesses saw card revenues grow.

A Q4 recovery, especially in the sun belt

The silver lining? Almost all cities saw an uptick in revenues in the final quarter of 2020. Sunny cities in areas with low levels of pandemic restrictions led the pack. In Orlando, Miami, Tucson, and Phoenix more than 60% of businesses saw card revenues grow in the final three months of the year compared to the previous 3 months. Houston, Tampa, and San Antonio were just behind with around 58% of businesses showing card revenue growth.

2021: a dynamic time for small businesses

Our analysis shows how diverse the effects of 2020 were on small businesses. Around one-fifth of businesses ceased operations entirely, while 40% actually saw revenues grow.

With economic recovery on the horizon, in 2021 it will be crucial for lenders to understand which businesses are poised to grow and in need of capital. To learn more about how Enigma can help, get in touch.