Amidst a suffering economy, tripledemic, and other world volatility, Yelp brings us some good news. The firm reports in its 2022 New Business Openings Report that the past year saw a record number of SMBs open in the U.S.. Could this be a leading indicator for economic health and rebound on the horizon?
Diving into the numbers, 637,590 new businesses opened across the U.S. in 2022, which is up 12 percent from the 566,836 new business openings in 2019. This eliminates the outliers throughout the Covid era. It also importantly indicates that the SMB landscape is healthier than it was pre-pandemic.
On a quarterly basis, each period in 2022 exceeded 2019, with the biggest delta (15 percent) coming in Q3. As for verticals, aggregate growth was buoyed by SMB openings in home services (40 percent), local services (30 percent) hotels & travel (28 percent) auto (25 percent), and beauty (17 percent).
Geographically speaking, the south saw the greatest percentage growth in new business openings compared with 2019, including Mississippi, Alabama, South Carolina, and Louisiana. Densely populated U.S. states like California and Texas also outperformed, driven by major metros like LA and Dallas.
Data Dive
Drilling down into the granularities, here are the highlights we pulled from the report.
– 637,590 new businesses opened across the U.S. in 2022, compared to 566,836 new businesses in 2019.
– Leading business categories were home services (+40%), local services (+30%), hotels & travel (+28%), auto services (+25%) and beauty services (+17%), compared to 2019.
– 86% of states had more new business openings in 2022 versus 2019.
– The top five states with the highest percentage growth were Mississippi (+62%), Alabama (+54%), South Carolina (+48%), Louisiana (+37%) and Georgia (+37%).
– Major metros in these states drove the highest number of openings in 2022 – Los Angeles, CA; New York, NY; Miami, FL; Dallas, TX; Houston, TX; Atlanta, GA; Chicago, IL, and San Francisco, CA.
– States that did not surpass pre-pandemic levels were New Hampshire (-5%), Oregon (-4%), California (-4%), Colorado (-3%) and New York (-3%).
Darwinian Dynamic.
Stepping back, these figures are encouraging as a sign of health in the SMB sector, which is the heartbeat of the U.S. economy. But beyond the sheer number of new business openings, there are qualitative factors at play. Specifically, businesses opening in the current environment are fire tested.
As Yelp’s Chad Richard pointed out in a recent interview with Localogy Insider, any business opening between 2020 and 2022 has its work cut out for it. This includes dealing with Covid and non-Covid headwinds like volatility in closures and mandates, as well as inflation and the great resignation.
Speculating a bit, these factors mean that the new crop of businesses reflected in the above data could possess a greater degree of operational and digital marketing acumen than seen in past years. This Darwinian dynamic could in turn raise the bar in terms of competitive skill sets for SMB survival.
If that’s all true, it reflects a new face of the American SMB. That could be a persona that’s savvier and digitally native. The latter is partly a function of proprietor age, which naturally advances in the turnover cycle of new businesses. We’ll dive into this topic in a dedicated session at L23 in April.
