Examination of three consecutive years of financial data from 100,000 small enterprises shows a steep drop in the final quarter of 2024.

Biz2Credit disclosed its December 2024 Small Business Earnings Report this week, which studied financial records spanning three years and uncovered that the average monthly earnings in 2024 were $83,083, a significant decrease from the previous year.

The rise in expenditures greatly exceeded the increase in revenue in 2024, especially during the latter half of the year. From January, small businesses saw a continuous climb in average monthly expenses, while revenue saw ups and downs. Revenue climbed steadily in the first six months, but saw a decline from August to December.

The December 2024 report painted a full portrait of the challenges faced by small businesses, particularly struggling during the fourth quarter as increasing costs surpassed revenues. Small business owners endured a turbulent year, with average monthly earnings plummeting significantly compared to 2023 and even below those in 2022.

Principal Insights from the Small Business Earnings Report

  • Average Monthly Earnings in 2024: $83,083. (2023: $150,917. 2022: $87,550)

  • Average Monthly Revenue in 2024: $747,608. (2023: $515,208. 2022: $298,658)

  • Average Monthly Expenses in 2024: $664,525. (2023: $364,292. 2022: $211,108)

Average Earnings reached their peak in July 2024 at $136,800, significantly lower than September 2023’s high of $237,700, the most prosperous month for small businesses in the past three years.

Earnings surpassed $100,000 during the summer of 2024: June ($128,900), July ($136,800), August ($130,000), and September ($105,400). The earnings began to decline starting in July, continuing through October ($68,200), November ($49,200), and December ($42,100).

Average Revenues peaked in July 2024 at $824,700, with the lowest in January at $588,500.

Average Expenses increased consistently throughout 2024, starting at $512,000 in January and reaching a high of $709,000 in October. Expenses decreased in November before rising again, finishing the year at $705,400 in December.

Monthly Inflation *Revenues *Expenses *Earnings

Jan. 3.1 $588,500 $512,000 $76,500

Feb. 3.2 $651,500 $586,700 $64,800

Mar. 3.5 $692,900 $651,200 $41,700

Apr. 3.4 $748,900 $687,500 $61,400

May 3.3 $781,500 $689,500 $92,000

Jun. 3.0 $808,900 $680,000 $128,900

Jul. 2.9 $824,700 $687,900 $136,800

Aug. 2.5 $813,600 $683,600 $130,000

Sep. 2.4 $795,800 $690,400 $105,400

Oct. 2.6 $777,200 $709,000 $68,200

Nov. 2.7 $740,300 $691,100 $49,200

Dec. 2.9 $747,500 $705,400 $42,100

2024 average $747,608 $664,525 $83,083

*Revenues, Expenses and Earnings represent a three-month average for each month.

Despite a downward trend in inflation since 2022, overall costs for small businesses have escalated, and they struggle to raise their prices sufficiently to compensate. Costs such as rent, insurance, equipment, and labor have surged. Additionally, businesses that borrowed money often faced higher capital costs in 2024 due to variable interest rates. Luckily, the Federal Reserve has started to reduce rates, though it’s uncertain if this trend will persist into 2025.

Even with reduced interest payments, small businesses continue to face several financial pressures, with profitability declining over the past six months.

Strategies to Counteract Rising Costs

To combat the surge in labor costs, small businesses might consider several strategies:

1. Implementing AI and productivity-enhancing technologies. While initially more beneficial to larger corporations, small businesses can also gain by integrating technology in areas like accounting, payroll, and customer management to boost productivity and efficiency.

2. Emphasizing Revenue Growth. Although revenue growth has helped mitigate some cost pressures in the past three years, maintaining this growth will be challenging due to persistent high input costs like rent and labor.

3. Exploring Ways to Cut Other Costs. Small businesses might find some relief through lower fuel costs, potential tax reductions, and eased geopolitical tensions that affect supply chains and freight costs. If the Federal Reserve continues to cut interest rates, those with variable rate loans may benefit.

4. Adapting Business Models for Greater Efficiency. Many small businesses may need to rethink their operations to survive in the changing economic landscape.

It’s crucial for small businesses to employ a mix of strategies to lessen the impact of rising labor costs, including leveraging technology, driving revenue growth, and exploring cost-cutting measures.

Can The Trump Administration Revitalize The Economy?

Donald Trump, who was elected with promises to rejuvenate the economy, has stated that this will be his focus from the outset. His strategy includes not just reducing interest rates but ensuring it doesn’t lead to increased inflation in 2025. According to the Biz2Credit Small Business Earnings Report, based on data from late 2024, the beginning of 2025 may be challenging for small businesses.