The small to mid-sized businesses (SMBs) on Main Street, USA, are showing their grit. Revenues for more than half of these SMBs are growing faster than the nominal GDP growth in the last quarter. Mom-and-pop shops are on an upward trajectory, with revenues growing by 6% and GDP increasing by 5.7%.1 For most Main Street SMBs, the steady increase in growth has been consistent since April 2021, suggesting that consumers are spending a lot at Main Street SMBs. Consumers are clearly investing in dining out, leisure and travel pursuits, as 72% of hospitality SMBs report growing revenues in the last year.
What’s at Stake
While sectors such as hospitality continue to grow, some SMBs report decreasing revenues and face more of a struggle. With less cash on hand, SMBs with declining revenues are likely to rely more on credit. Conversely, those SMBs with growing revenue are more cash-rich. Sixty-three percent of SMBs with increasing revenues report access to cash on hand and 50% report access to financing sources.
These are some of the findings in “Main Street SMBs’ Revenues Grow Faster than GDP,” a PYMNTS Intelligence exclusive report. This edition examines how Main Street SMBs are performing relative to the economy, the differences in SMB growth and where these businesses get funding. It draws on insights from a survey of 524 Main Street SMBs in the U.S. generating revenues of $10 million or less, conducted from Jan. 15 to Jan. 23. It also draws on insights from data from the U.S. Bureau of Economic Analysis.
Key Findings
Main Street SMBs are showing their grit with solid growth for more than half in the past year — ahead of nominal GDP growth rates. The rise of mom-and-pop shops is on an upward trajectory. Revenues for these businesses grew by 6%, ahead of the GDP, which increased by 5.7%, comparatively. For most SMBs, the steady increase in growth has been consistent since April 2021, suggesting that consumer spending is strong among Main Street SMBs. While sectors such as hospitality continue to grow, some SMBs report decreasing revenue growth and face more of a struggle.
Main Street SMBs’ revenue growth exceeded nominal GDP growth in 2023 — reversing a yearslong trend.
SMB growth in 2023 markedly reversed a two-year trend in which nominal GDP growth outpaced that of SMBs. In 2021, SMBs reported a 3.2% growth rate while nominal GDP grew by 12%. In 2022, SMBs reported a 5.5% growth rate, and nominal GDP rose 7.1%. SMBs are also at less risk of failure, as measured by the risk of bankruptcy. Last year, the rate of business bankruptcies increased by 40%.2 SMBs reported a 2% increase in the risk of closing in that span. This trajectory suggests that since pandemic-related restrictions have lifted, consumers strongly support Main Street SMBs, and a more optimistic outlook on the economy also gradually increases.
Data shows that growth was most significant in hospitality. SMBs in this sector reported an 11% increase in revenues in 2023, up from 1.5% in 2022. This growth suggests that consumers are embracing leisure spending, such as dining out and taking breaks and vacations, amid a growing focus on living for the moment after the collective experience of the pandemic.
Most Main Street SMBs report stable or increasing revenues.
In January 2024, more than half of Main Street SMBs reported growing revenues in the last year. Many SMBs have reported increasing revenue growth since April 2021. Consumers are investing in leisure and travel pursuits. Hospitality SMBs are the most likely to report growing revenues in the past year, at 72%. While consumers spend more time dining out, traveling and staying at hotels, work-related businesses are having a more challenging time. Main Street SMBs in the professional services sector are the least likely to report growing revenues, at 30%. This suggests that automation and changing work-related norms impact these SMBs.
Older small businesses show a clear exception to growing revenues. Main Street SMBs that have been in business for more than 20 years are experiencing a decline in growth compared to younger businesses. In 2024, just 27% of Main Street SMBs that have been in business for more than 20 years reported an increase in revenues. This compares to 67% for those that have been in business for less than five years. The lack of growth among older businesses suggests that there is room for them to learn to innovate to attract more consumer spending and mirror the trajectory of younger businesses.
Although Main Street SMBs with decreasing revenue have less access to cash than those with stable or increasing revenues, they have similar access to financing.
Many Main Street SMBs experiencing declining revenues struggle to keep their businesses running due to a lack of cash. While 46% of Main Street SMBs with decreasing revenue say they have cash on hand, 63% of SMBs with increasing revenues say the same. However, half of SMBs with decreasing revenues report having access to financing sources. Half of SMBs with growing revenues say the same. With less cash on hand than SMBs with growing revenues, SMBs with decreasing revenues are likely more reliant on credit funding resources and daily sales. Conversely, SMBs with growing revenue are more cash-rich and may be less reliant on daily sales to keep running.
Main Street SMBs with growing revenues report having more credit and financing sources available, with access to 1.8 types of credit, on average. SMBs with decreasing and stable revenue report access to 1.5 types of credit on average. Whether increasing or decreasing in revenue, all Main Street SMBs have similar access to credit options. Their similar access to credit sources indicates that other factors such as revenue and risk of survival are more important predictors of credit access.
The differences in access to credit sources emerge when examining differences in access to personal and business credit sources. Main Street SMBs with decreasing revenues report less access to some types of personal sources of credit than SMBs with stable or increasing revenues. While 25% of SMBs with decreasing revenues say they have access to personal credit cards, 31% of those with stable or increasing revenues have access to them.
SMBs with increasing revenue accept more types of payments in-store and online than those with decreasing revenue.
Consumers frequenting Main Street SMBs with growing revenues can look forward to more flexibility. Data reveals that these SMBs accept more forms of payment than SMBs with decreasing revenue. Growing businesses accept an average of 6.4 payment types. Those with decreasing revenue accept 4.7. For shoppers visiting these businesses, whether physical locations or shopping online, the most frequently accepted forms of payment are credit and debit cards, as well as cash for in-store purchases.
The data suggests that Main Street SMBs with increasing revenue are more likely to innovate and are the most likely to accept digital wallets and offer buy now, pay later options. Consumers can also benefit from SMBs that are increasing in revenue when they shop in-store, as 65% of these SMBs accept PayPal, compared to 53% of those with stable revenues and 47% of those with decreasing revenue.
Main Street SMBs that offer more sales channels are more likely to experience increasing revenues.
Consumers frequenting Main Street SMBs with increasing revenue have more ways of spending their money. SMBs with increasing revenues are more likely to offer shopping via websites and social media channels in addition to in-person retail locations, giving consumers access to their business offerings regardless of where they may be. The efforts of SMBs to focus on selling online are paying off: Online sales account for 55% of Main Street SMBs’ sales since January 2023.
Main Street SMBs with increasing revenues are more likely to sell their products online than those businesses with decreasing revenues. Businesses with growing revenues are more likely to reach their customers via social media (68%), mobile apps (27%) and websites (60%) than businesses with stagnating or decreasing revenues. Social media selling is prominent among SMBs with increasing revenue, perhaps indicating that SMBs are innovating to catch the perpetually online consumer.
Conclusion
Main Street SMBs are showing their grit. In the past year, SMBs have grown revenues outpacing that of nominal GDP. More SMBs report revenue growth in the past year, suggesting consumer spending is rebounding among Main Street SMBs. While sectors such as hospitality continue to grow, some SMBs report decreasing revenue and face more of a struggle. Growing revenues are good news for consumers frequenting Main Street SMBs, as more cash on hand spells more innovation and ways to shop.
Methodology
“Small Main Street Businesses: Growing Fast Ahead of the Economy” is based on a survey of 524 Main Street SMBs in the U.S. generating annual revenues of $10 million or less conducted from Jan. 15 to Jan. 23. The SMBs analyzed represent various industries, including retail, professional services, construction or utilities, personal and consumer services, and hospitality. The report explores how Main Street SMBs are performing relative to the economy, differences in growth and financing sources available to them.
1. [Gross Domestic Product (Third Estimate), Corporate Profits, and GDP by Industry, Fourth Quarter and Year 2023. https://www.bea.gov/sites/default/files/2024-03/gdp4q23-3rd.pdf. U.S. Bureau of Economic Analysis. Accessed April 2024.]↩
2. [Author unknown. Bankruptcy Filings Rise 16.8 Percent. United States Courts. 2024. https://www.uscourts.gov/news/2024/01/26/bankruptcy-filings-rise-168-percent. Accessed April 2024.]↩
