As macroeconomic conditions and inflation continue to impact Americans, there’s some positive momentum. Propelling this, Yelp reports in its New Business Openings Report that the first half of 2023 saw a record number of SMBs open in the U.S. – a strong health indicator for the U.S. economy.
Among other positive signals, new business openings in the first half of the year surpassed the same period last year in the aggregate. This says a lot given that 2022 itself was a record-breaking year for new business openings in the U.S.. Moreover, this metric exceeds pre-pandemic levels (2019).
Buttressing these figures is the fact that they’re geographically consistent. Every U.S. state’s new business openings surpassed pre-pandemic levels. And the delta is meaningful, with each month in 2023 beating its year-ago period by at least 15 percent, with a 25 percent overall/average margin.
“Consumers and businesses have been on high alert for indicators of the economy’s health this year, and these early 2023 business openings numbers point to positive momentum for the rest of the year,” Yelp Data Science Manager Samantha Auerbach told Localogy Insider. “It’s especially encouraging to see entrepreneurs from underrepresented communities outperform an already strong national average. This summer has proven to be a fruitful time for business openings, with restaurants, food, nightlife, arts and entertainment, and auto businesses seeing their best month this July.”
Outpaced
Drilling down into the granularities, here are additional highlights we pulled from the report.
– 2023 full-year business openings on Yelp are on track to beat last year’s all-time high.
– The first seven months of 2023 have seen a 25 percent increase in new businesses compared to the same period in 2022, and a 46 percent increase compared to the same period in 2019.
– For the first time, every U.S. state, including DC, surpassed new business openings compared to pre-pandemic levels (2019).
– States on the East Coast are seeing the most significant percentage growth in new businesses compared to the same time period last year, with Rhode Island (up 46 percent), West Virginia (up 46 percent), Delaware (up 45 percent), and Vermont (up 38 percent) topping the list.
– When ranking all states by total number of new business openings, California, Florida, Texas, New York, and Georgia saw the largest number of new businesses.
– LGBTQ-owned (up 33 percent), Black-owned (up 28 percent), and Latinx-owned (up 28 percent) businesses saw growth above the national average, when comparing January through July 2023 to the same time period last year.
– Women-owned (up 19 percent) and Asian-owned businesses (up 13 percent) also saw significant business openings across the country.
– All categories this year have seen more national business openings than the same time period last year.
– Driving business opening growth nationally are hotels and travel (up 39 percent), home services (up 37 percent), auto (up 27 percent), event services (up 27 percent), and local services businesses (up 23 percent).
– In July 2023, restaurants, food, nightlife, arts and entertainment, auto service businesses had their best month for new business openings this year.
The New Face
Stepping back, these figures are an encouraging sign for the SMB sector, which is often called the heartbeat of the U.S. economy. Beyond the sheer number of business openings, there are qualitative factors. Specifically, businesses opening in the current environment are particularly emboldened.
As Yelp’s Chad Richard pointed out in a recent interview and L23 stage appearance, 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.
If that’s all true, it reflects the 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 continue to track aggregate SMB market health to see if this rings true.
