This post is part of an Interise Insights series, sharing findings from our most recent 2021 Annual Assessment survey with 1,164 responses from established small businesses across race, ethnicity, and place. All graduates of Interise’s flagship StreetWise ‘MBA’ program from the past three years, their responses represent a unique firm-level dataset. These latest outcomes are from the 2020 business year, and reflect the first year of the COVID-19 pandemic and its multifaceted health, economic, and social effects.
The rapid changes people, communities, and businesses experienced in 2020 were profound. The pandemic only clarified and made more urgent Interise’s mission calling for an inclusive economy that all people can contribute to and benefit from. In the wake of economic shutdowns and recession, small businesses closed at rates above historic levels. Minority-owned firms were disproportionately vulnerable and hurt by pandemic-induced changes. In the first few months of the pandemic, Interise wrote about the acute challenges BIPOC business owners faced in financial health and capital access, employee health and financial well-being, and turning crisis into opportunity.
Business owners in Interise’s network faced the pandemic just like their counterparts across the country, but with additional capacity built from access to knowledge, networks, and know-how. They demonstrated resilience, leaning on their training to pivot and persevere. Comparing graduate outcomes across the 2019 and 2020 business years sheds light on how Interise businesses fared as profound changes reverberated throughout the economy.
Interise businesses continued to grow in terms of revenue, albeit less so than previously. From 2019 to 2020, the average revenue growth rate dropped from 21% to 13% and the median similarly fell from 8% to 3%. While so many businesses nationwide experienced revenue declines, 54% or more than half of respondents increased their annual revenue in 2020, compared with 63% in 2019.
A 60% majority of businesses added to or maintained their employee count in 2020, down slightly from 63% in 2019. This metric was likely bolstered by the SBA’s Paycheck Protection Program (PPP) designed to incentivize small businesses keeping employees on payroll. As shown in the table below, more respondents added jobs than lost jobs in 2020 and the changes year-over-year was not as stark as one might expect.
In 2019, Interise businesses had a job creation rate of 6.3%, over four times higher than the national private sector as a whole. Interise businesses collectively experienced job loss in 2020, however to a lesser extent than the private sector as a whole. During this first year of the COVID-19 pandemic, the alumni job creation rate was -3.5% compared to -8% for the private sector.
One fifth or 20% of all respondents secured new contracts in 2020, down from 24% in 2019. Declines were seen across the three contract sources we asked about: government, institutional or anchor, and corporate. While the dollar value of new contracting secured declined substantially from $729 million to $434 million over that time, those new contracts supported many businesses with more diversified and dependable income streams during such an unpredictable time. For those that were awarded contracts, the median number secured remained unchanged at five per business while the average size of new contracts rose 40% from $117,000 to $163,000.
The share of respondents that secured new financing jumped from 30% in 2019 to 55% in 2020, almost certainly due to the proliferation of emergency federal loan programs such as PPP and Economic Injury Disaster Loans (EIDL), along with other state and local relief funds.[a] The total dollar value of new financing received stayed relatively consistent, $118 million in 2019 and $117 million in 2020, while the average amount of new financing dropped by 24% from $245,000 to $187,000.
These comparisons between the 2019 and 2020 business years help us interpret alumni business outcomes during the first years of the COVID-19 pandemic. We will continue exploring the data through more Interise Insights blog posts, analyzing various demographic segments of the network and more specific impact metrics.