U.S. Micro Business Snapshot 2019 > Full Report
What invoicing trends since 2016 are telling us about the current state – and future – of the “Micro” SMB economy
April 18, 2019
Corporate giants may dominate the headlines and drive the stock market, but most experts believe it’s America’s small businesses, start-ups and even solo entrepreneurs that make up the backbone of the U.S. economy today. What’s happening on Main Street is as important, if not more important, than the numbers on Wall Street. Just in terms of jobs alone, 58.9 million people worked for small businesses in 2018, and 1.1 million new jobs were created in 2015 by companies with fewer than 20 employees (source: SBA 2018 Small Business Profile).
However, “small business” is a ridiculously broad label. According to the SBA, companies with 500 employees or fewer qualify for this designation — a whopping 30.2 million businesses. And this widely defined group is where nearly all of the research and economic indicators focus, for example the monthly Small Business Optimism Index.
But what’s happening farther down the chain, in the world of what’s been dubbed “Micro Business”– i.e., the sole proprietorships and 1-2-person companies that actually make up 92% of the official SMB sector? Generally defined as companies with fewer than five employees, “micro businesses” are responsible for more than 41 million jobs in this country, according to the Association for Enterprise Opportunity. This group also happens to be by far the largest user base for Invoice2go – one of the first and most popular mobile invoicing apps for small businesses, contractors and freelancers, with more than 250,000 users around the globe, 70% of which are 1-2-person businesses.
What are the actual numbers telling us and how are micro business owners feeling about the economy today? This is what we set out to learn with our recent study — which included both quantitative analysis (review of Invoice2go invoicing data from the same set of users from 2016 through Q1 2019) and qualitative (sentiment survey). The answers are as diverse as you might expect from a community that includes everything from plumbers, roofers and building contractors to piano teachers, photographers and dog walkers.
Reviewing invoiced dollar amounts from the same set of 31,500 Invoice2go users over the past three years, since 2016, reveals an unmistakable pattern across nearly all types of businesses we serve: significantly slowing growth in 2018 (as compared to 2017) and negative growth when comparing Q1 2019 to the same period in 2018.
Specifically, the YOY growth rate across industry sectors dropped from 14% in 2017 to about 3% in 2018. And numbers from Q1 2019 showed a (negative) -3% growth rate compared to about 4% growth in Q1 2018.
Such negative growth raises concerns for the small business economy especially if the downward trend continues through Q2 2019 and beyond. A recession is defined as two consecutive quarters of negative growth.
While our goal was to uncover a story primarily told by the numbers – actual billings among micro businesses – we also thought it might be useful to take a temperature check on sentiment and confidence levels among users going into 2019. The findings of a March 2019 survey – particularly among the micro business users – seem to show some reticence about business in the year ahead, fewer than one in three users polled saying they plan to hire any new employees or add any subcontractors in 2019.
Notably, confidence levels correspond with the size of a respondent’s company, i.e., the more employees a respondent’s company has, the more bullish that business owner is on 2019. For example, 52% of respondents with 1-2 employees predicted they would see growth this year, as compared to 72% of those employing 3-5 people and 74% of those employing 5-10 people.
Overall, only 7% are expecting a decline in revenues this year, while 58% expect to grow. Almost half of those polled (49%) said the current administration’s policies have been “positive for my business,” slightly higher than the 39% who said they had had “no effect” on their business.
Which micro business sectors grew the most among Invoice2go users since 2016 (in terms of invoiced dollar amounts 2016-2018)? Outdoor Services (e.g.,landscaping, gardening, pest control), up 11%, followed by Construction (up 10%) and Home and Building Maintenance, which grew by 9%.
Conversely, the categories that grew the least in invoiced dollars were Educational Services, which declined by -1%, Arts & Recreation (2% growth) and Technical Services (2% growth).
While you might expect the highest growth rates for Invoice2go users in states with booming commerce centers or hot startup hubs (New York, California, etc.) , that’s not exactly how the numbers played out. Actually, the biggest growth rates among existing users since 2016 were in Rhode Island, which grew 18%, followed by Hawaii and Idaho (both up 15% since 2016).
With more than 50% of Invoice2go’s customers in the construction, home maintenance and outdoors services sectors specifically, we also took a closer look at specifically where these building and home-related services pros were experiencing the greatest growth. Perhaps not surprisingly, (U.S. territory) Puerto Rico saw a 22% jump since 2016, likely pegged to rebuilding efforts post Hurricane Maria, and similarly hurricane-ravaged states of Florida and North Carolina each increased 12%. However, neither Florida nor two other states hit hard by natural disasters in the past few years – Texas (Hurricane Harvey) and California (wildfires, mudslides and flooding) – turned up in the top 10, suggesting rebuilding efforts may not have begun or provided the business stimulus you might expect in these areas.
On the flip side for construction/home services businesses, declines or nearly flat growth characterized Arkansas (1% growth), Kentucky (up only 3% since 2016) and Nevada (up only 4%).
Analysis is based on a comparison of total dollar amounts of invoices sent year-over-year by the same sample set of 31,427 US-based Invoice2go users over 3-year period, January 1, 2016 to December 31, 2018. We also looked at YOY data for Q1 2016-2019. Data is aggregated, anonymized and winsorized at account level, to remove outliers in the top and bottom 2%.
In addition, data was cross-referenced by user’s industry category and state to identify regional trends and trends by category of business. Rankings included only states with at least 100 active users. Review included invoiced data from users primarily in the following business industry categories: Accommodation and Food Services, Arts and Recreation, Construction, Consulting, Educational Services, Event Services, Health and Personal Care, Home and Building Maintenance, Outdoor Services, Retail Trade, Technological Services, and Transportation and Warehousing.
The findings on sentiment and confidence about the economy and their businesses is based on 545 responses to a survey emailed March 13, 2019 to randomly selected US-based Invoice2go users.
Invoice2go is the top-selling invoicing app, giving small businesses control over their time and business. Bringing together all the tools needed to get the job done, Invoice2go helps people win jobs, track payments, and offer their clients the ability to pay any way. The company was started by a small business owner who came from a family of tradespeople, and wanted to help them streamline their invoicing. Today, Invoice2go’s popularity has spread around the globe, with more than 250,000 small business owners in 160+ countries using the app to send $24 billion in invoices every year.
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