Biz2Credit report shows sharp decline in small business earnings in fourth quarter of 2024
In the most recent report released by Biz2Credit for December 2024, it was discovered that small business earnings experienced a significant decline during the final quarter of 2024, after analyzing three years of financial data. The report, which focused on companies applying for financing through Biz2Credit, revealed that there was a noticeable decrease in average monthly earnings, with expenses showing a continuous rise throughout the year, while revenues fluctuated. The average monthly earnings were reported to be $83,083 in 2024, showcasing a significant decrease compared to $150,917 in 2023 and $87,550 in 2022.
Rohit Arora, the CEO and co-founder of Biz2Credit, highlighted the struggles faced by small businesses during 2024 as rising costs began to outpace revenues. The financial roller coaster experienced by small business owners was evident as earnings saw growth until July, followed by a decline in every subsequent month through December. The average monthly earnings dropped by nearly $68,000 compared to 2023 and were also lower than in 2022.
Throughout the year, there were fluctuating trends in different financial aspects. The average monthly revenue in 2024 was noted to be $747,608, showing an increase from previous years, while the average monthly expenses also rose steadily to $664,525. Despite the increase in expenses, earnings showed a consistent decline, indicating the financial challenges faced by small businesses during this period.
The highest average earnings in 2024 were recorded in July at $136,800, a significant decrease from the best month in the last three years, September 2023, where earnings peaked at $237,700. The summer months of 2024 saw earnings exceeding $100,000 in June ($128,900), July ($136,800), August ($130,000), and September ($105,400). However, this upward trend was short-lived, as earnings began to decline from July through December, reaching an average of $42,100 by the end of the year.
Additionally, average revenues peaked in July 2024 at $824,700 but saw fluctuations throughout the year, with January recording the lowest revenue at $588,500. Meanwhile, expenses steadily increased from $512,000 in January to $709,000 in October, before dipping slightly in November and ending the year at $705,400 in December.
Despite a decreasing trend in inflation rates since 2022, small businesses continued to face challenges as costs rose, including rents, insurance, equipment, and labor. Businesses that borrowed money at variable rates also felt the impact, with high costs of capital affecting profitability. While the Federal Reserve began lowering interest rates, small businesses remained under financial pressure, experiencing a steady decline in profitability during the latter half of 2024.
Looking ahead to 2025, there are concerns regarding the potential economic impact, with uncertainties surrounding inflation and interest rates. The start of the new year may prove to be challenging for small businesses, requiring careful economic management to navigate these financial uncertainties. As Biz2Credit continues to monitor the financial health of thousands of companies, the future remains uncertain for small businesses as they strive to adapt and thrive in an ever-changing economic landscape.
