As macroeconomic conditions continue to impact Americans (even though the numbers are improving) there are tangible signs of a rebound. Yelp reports in its New Business Openings Report that 2023 saw a record number of SMBs open in the U.S. – always a strong indicator for economic health.
In total, new openings were up 20 percent year over year. And there’s momentum as each month in 2023 set a new all-time high when compared to the corresponding month in 2019. Why 2019? That’s the pre-Covid era. Eliminating outliers – in this case, a global pandemic – is the best way to compare data.
This growth was fairly consistent, not only in months of the year but in geography. Every U.S. state surpassed its pre-pandemic levels of new business openings in 2023. Growth also occurred across Yelp business categories, the leader being home services, as well as diversity among new SMB proprietors.
By the Numbers
Drilling down into the data, here are additional highlights we pulled from the report.
– Entrepreneurs are opening more businesses than pre-pandemic, as 2023 business openings set a new all-time high on Yelp (beating 2022’s record).
– Each month in 2023 set a new all-time high in business openings for its respective month since 2019.
– For the first time, new business openings in every state surpassed pre-pandemic levels (2019).
– The top five states with the most percentage growth in new businesses compared to 2022 were West Virginia (37%), Wyoming (35%), Rhode Island (35%), Delaware (32%), and Idaho (29%).
– 2023 business growth is seen across categories on Yelp.
– Home services saw the highest new business growth (up 32% compared to 2022) and the highest total business openings (278,000).
– Hotels and travel business openings saw significant growth (up 28%) compared to 2022.
– The restaurant industry exceeds pre-pandemic new business growth.
– When comparing 2023 business openings to both 2022 and 2019 respectively, food businesses (up 16% and 28%), nightlife businesses (up 11% and 7%), and restaurants (up 10% and 2%) all show strong signs of growth.
– A “golden handcuff” phenomenon can be seen in the data, given homeowners who are locked in by pandemic-era mortgage rates.
– Home service providers opened new businesses across categories such as carpenters (up 54%), masonry and concrete services (up 40%), contractors (up 33%), drywall installation and repair (up 30%), and demolition services (up 27%).
– There was a decrease in new business openings for mortgage lenders (down 8%) and mortgage brokers (down 16%), potentially signaling a cooling of the real estate market.
– Diverse entrepreneurs opened more businesses in 2023 than in 2022.
– LGBTQ-owned (up 29%), Latinx-owned (up 28%), and Black-owned (up 24%) businesses saw growth above the national average compared to 2022. Women-owned (up 17%) and Asian-owned businesses (up 16%) also saw significant business openings across the country.
Turnover Cycle
Stepping back, these figures are an encouraging sign for the SMB sector, which is often deemed the heartbeat of the U.S. economy. Beyond the sheer number of business openings, there are qualitative factors at play. Specifically, businesses opening in the current environment are fire-tested.
As we’ve discussed with Yelp’s Chad Richard on the page and on the stage, any business opening during or since the pandemic has its work cut out for it. This includes dealing with Covid and non-Covid headwinds including volatility in closures, mandates, 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 the pre-Covid era. This Darwinian dynamic could in turn raise the bar in terms of competitive skill sets for SMB survival.
Altogether there’s a new face of the American SMB. It’s savvier and more digitally native than its forbearers. The latter is partly a function of proprietor age, as it advances in the turnover cycle of new businesses. We’ll continue to track these trends on macro and micro levels to see if they bear out.
