Small business revenue grows, employment decline slows in Q3-2024

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Quarterly revenue grows to more than $155K per small business, on average

In the third quarter of 2024 (July to September), quarterly revenue for small businesses with 1 to 9 employees increased by $1,300 per business to $155,530, on average, adjusted for inflation. The 0.84% quarterly increase is the second consecutive quarter of growth —reversing two consecutive quarterly declines in Q4-2023 and Q1-2024. This is also the fastest quarterly growth since Q1-2023.

Despite the recent growth, average annualized revenue remains $10,950 below where it was a year ago, in Q3-2023, at $618,440 per small business. That’s an annual decrease of 1.76%. See chart below for details.

Please note: All revenue values shown in the Small Business Index are adjusted to 2017 dollars to show real increases by removing the impact of inflation. The data is also seasonally adjusted.

By sector: revenue is up in all 12 sectors

All 12 sectors had higher quarterly revenue in Q3-2024 compared to Q2-2024. The fastest growing was the finance and real estate sector (NAICS 52-53), with quarterly growth of 3.41%—the fourth fastest since 2019. The extra $4,740 of revenue per small business, on average, took the quarterly total to $141,480. See table below for details. 

Small businesses in the wholesale trade sector (NAICS 41-42) earned the most quarterly revenue on average in Q3-2024, at $795,700 per business. In fact, the sector’s small businesses have been the highest earners overall in every quarter since 2019, when the Index’s records begin. For comparison, small businesses in the leisure and hospitality sector (NAICS 71-72) had average quarterly revenue of $92,880 in Q3-2024.

By region: revenue is up in all 8 regions

Small businesses in all 8 regions of the US had higher average revenue in Q3-2024 compared to Q2-2024. The fastest growing was the Great Lakes region (Illinois, Indiana, Michigan, Ohio, Wisconsin), with quarterly growth of 1.96%. This is equivalent to an extra $2,990 per business, taking the quarterly total to $153,830, on average. The size of this increase is notable. Since 2019, the region has only seen faster growth in two other quarters: Q3-2020 and Q2-2021. Use the chart below to find out how small businesses performed in other regions.

Small businesses in the Far West region (Alaska, California, Hawaii, Nevada, Oregon, Washington) had the highest average quarterly revenue in Q3-2024, at $165,190. The region has held the top spot since Q2-2023, when it surpassed the Mideast. See table below for details.

On an annual basis, the only region showing higher average revenue from its small businesses year-over-year is the Rocky Mountain region (Colorado, Idaho, Montana, Utah, Wyoming). Annualized revenue now stands at $528,950 per small business, thanks to an average annual increase of 2.94%, or $15,340. See “annual” tab on table above for details.

By state: revenue is up in 13 out of 20 states

In Q3-2024, average quarterly revenue for small businesses increased in 13 of 20 states currently tracked by the Index, as the table below shows. 

Georgia’s small businesses had the fastest quarterly growth: up by 1.81%, or $2,710, compared to Q2-2024. This took the quarterly average to $151,270 per small business. This is the second consecutive quarter of growth in Georgia, following three consecutive quarterly declines.

Small businesses in Minnesota experienced the fastest decline in average quarterly revenue in Q3-2024. The decrease of 1.22%, or $2,130, took the quarterly average to $173,600 per small business. This is the fourth consecutive quarterly decline in Minnesota—part of a longer-term negative trend that began in Q1-2022.

Small business employment decline slows to -0.01%

At the end of the third quarter of 2024, US small businesses with 1-9 employees employed 12,977,300 people. This is 1,100 fewer than at the end of Q2-2024. As the chart below shows, the quarterly rate of decline has slowed considerably through 2024: from -0.26% in Q1 to -0.14% in Q2 to -0.01% in Q3.

The downward trend contrasts with recent official statistics for employment at all US businesses (including both small and large businesses). These statistics show steady growth through 2024, including an extra 557,000 jobs in Q3-2024. When overall employment is up and the Small Business Index shows declining employment, this indicates jobs are moving from small to larger businesses.

The next official statistics that will include jobs data for small businesses are scheduled for release on October 30. These will cover Q1-2024 but not Q2 or Q3. Looking back to 2023, the Small Business Index’s estimates for small business employment turned out to be largely consistent with official statistics, which show an annual decline of more than 52,000 jobs at US small businesses last year. By rolling these predictions forward to the end of Q3-2024, the Index’s current estimate is that small business employment declined by 47,500 jobs in the 12 months prior to October 2024, an annual decrease of -0.37%. Despite this decline, small business employment remains above the pre-pandemic growth trend (see chart above).

Below we look at which sectors, regions, and states have created the most and least jobs at small businesses in Q3-2024.

By sector: leisure and hospitality sector has largest decline but construction sector grows

Overall, 7 out 12 sectors had declining small business employment in Q3-2024, including the leisure and hospitality sector (NAICS 71-72), the manufacturing sector (NAICS 31-33), and the retail sector (NAICS 44-45). Four sectors had rising employment, including the construction sector (NAICS 23) and the finance and real estate sector (NAICS 52-53).

As the chart above shows, small businesses in the construction sector had the largest quarterly increase in small business employment in Q3-2024, adding 4,500 jobs. After consistent quarterly growth throughout 2024, the sector’s small businesses now employ 776,700 people. Similarly, official statistics for businesses of all sizes in the sector show overall construction employment grew by 70,000 jobs in Q3-2024.

The leisure and hospitality sector had the largest decline in small business employment in Q3-2024, with 6,400 fewer jobs compared to Q2-2024. After four consecutive quarterly declines, small businesses in the sector now employ 1,583,700 people—the fewest since March 2022. At the same time, official statistics for businesses of all sizes in the sector show overall employment increased by 74,000 jobs in Q3-2024, maintaining a longer-term growth trend. As noted earlier, this indicates jobs have moved from small businesses to larger businesses.

By region: Far West has largest decline but Great Lakes region grows

Overall, small business employment increased in 4 out of 8 regions in Q3-2024. The Far West region (Alaska, California, Hawaii, Nevada, Oregon, Washington) had the largest decline in small business employment in Q3-2024, down by 7,900 jobs to 2,156,600 (see chart below). Further analysis of the Small Business Index shows this decline can be attributed to national rather than local factors because regional trends reflect what’s happening in each sector across the US as a whole.¹

The Great Lakes region (Illinois, Indiana, Michigan, Ohio, Wisconsin) had the largest increase in small business employment in Q3-2024, up by 7,100 jobs (see table below). As with the Far West, employment trends in the region are close to the national sector averages.1 But in the Great Lakes region, small business employment is rising, while nationally, it’s not. So in this case, the increase can be attributed to the region having higher concentrations of high-growth sectors.

By state: California lags behind, but Wisconsin and Texas see strong growth

Among the 20 states tracked by the Small Business Index, 9 had rising quarterly employment at small businesses in Q3-2024 while 8 had declining employment. The other 3 registered no change. See table below for details. 

California, New York, and Washington accounted for the largest share of small business job losses in Q3-2024 (see table below). California had the largest decline overall, where small business employment fell by 4,000 jobs.

There’s better news from small businesses in Wisconsin and Texas, where small business employment grew by 1,200 and 1,300 jobs respectively. Deeper analysis of the Q3-2024 data reveals that small businesses in these states are currently outperforming national sector averages—creating more jobs than their peers in the same sectors in other states.¹

Expert analysis by Professor Ufuk Akcigit

Ufuk Akcigit is the Arnold C. Harberger Professor of Economics at the University of Chicago. He leads the international team of economists working with Intuit QuickBooks on the Small Business Index.

“Since April 2024, inflation in the US has been on a steady decline, dropping from 3.5% to 2.4%. For small businesses, this is a welcome shift, as rising costs have consistently been their top concern. According to a recent Intuit QuickBooks Small Business Insights survey, small business owners have been feeling the pinch, making inflation one of the biggest hurdles to growth and stability. Now, with inflation easing, there’s hope that this could fuel a significant revival in small business activities.

“The Q3-2024 Intuit QuickBooks Small Business Index reflects this optimism. Revenue numbers for small businesses have shown a strong increase, signaling a clear resurgence. However, the employment data presents a different story. Despite higher revenues, employment saw a slight decline of 0.01%, indicating that small businesses are still cautious when it comes to hiring or finding it hard to hire the people they need.

“Why the hesitation? After a long period of economic uncertainty, many small business owners appear to be acting risk-averse. Hiring new employees is a significant commitment, often seen as a fixed, long-term cost. For now, many businesses may prefer to wait until they feel more confident that their revenue growth is sustainable before expanding their workforce.

“This cautious approach isn’t surprising given the challenging times many small businesses have faced in recent years. While declining inflation is a positive sign, it may take more than a few months of favorable conditions for business owners to fully regain their confidence. The ongoing decline in interest rates and a continued drop in inflation could be the factors that finally tip the scale toward increased hiring.

“But there's another piece to this puzzle: communication from policymakers. For small business owners to feel secure enough to start hiring, clear and consistent communication about the expected path of inflation is crucial. If business owners are confident that inflation will remain low and stable, they will be more likely to make the long-term investments needed to expand their teams.

“In short, while the decline in inflation is a promising sign, small businesses are still in a wait-and-see mode when it comes to hiring. For a true recovery in employment, it will take sustained economic stability, favorable monetary policy, and clear signals from policymakers that the inflation outlook is on solid ground.”

Note

1. This is based on an Analysis of Variance (ANOVA) test of the Intuit QuickBooks Small Business Index’s latest quarterly data to identify if regional trends by sector reflect national trends by sector. The result of this test can reveal one of two things:

• If regional employment trends do not reflect the national averages in each sector, the local increase or decrease in employment can be attributed to local influences such as regional investment or a natural disaster, to use an extreme example.
• Conversely, if regional trends do reflect the national averages in each sector, they can be attributed to these national trends, rather than local influences like the examples used above.