Small and very small businesses sprouted all across Alabama both before and after COVID-19, but in particular, in several rural counties.
Microbusinesses are important to the Alabama’s economy. They have more than 10 employees. But we don’t know how much of a part they play.
“They kind of get overlooked,” said Dr. Nyesha Black, Director of Socioeconomic Analysis & Demographics at the University of Alabama’s Center for Business and Economic Research. “The data on smaller businesses… There’s just not that much of it.”
But that’s changing. CBER and Venture Forward – an initiative of web hosting giant GoDaddy – collaborated to release a report earlier this year that focused on microbusinesses located in Alabama.
GoDaddy data shows that Alabama has added 12,000 micro-businesses between March 2020, just before pandemic started, and December 2022. That was an 8% increase during that time, bringing the state’s total to 157,000. According to data, the nation saw a similar pattern.
“It gives us a sense that the economy in Alabama and across the country is much more complex and dynamic than data currently captures,” Black said.
In some counties, the increase was even greater. Rural counties like two in particular have seen their number of microbusinesses more than double. Randolph County and Winston county each experienced 200% increases or more. The two counties were ranked in the top 20 fastest-growing counties across the country.
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Butler County in South Alabama saw an 116% growth in the number of microbusinesses in that period.
It’s no accident that a handful of rural counties led the state in small business growth. According to Black, this kind of entrepreneurship will be vital for Alabama’s rural areas going forward.
“At the state level we put a lot of effort into these economic development practices of trying to recruit big businesses,” she said. “Those are great, we should definitely go after those. But I do think that we don’t always put small business at the forefront of our discussions. Especially for our rural communities.”
She noted that rural Alabama has a hard time attracting large businesses. For example, she cited the difficulties in recruiting car companies like Toyota and Mazda in Limestone County as well as airplane makers such Airbus. But small businesses don’t need much to get going, and can be a boon both for local economies.
“The amount of money needed to start one of these small businesses is pretty small, but the money they can bring in is significant,” she said. “That’s important. People spend that money in our economy.”
Black research survey results of GoDaddy for hundreds of small business owners from Birmingham and Montgomery. The research found that 60% of the respondents required $5,000 or less in order to launch their small businesses.
Most respondents said they started these businesses for supplemental income, with many earning $1,000 or less per month, but even that is a substantial amount over the course of a year in a state like Alabama, where the median household income equates to around $4,600 per month, according to Black’s research.
Of those who responded, about 37% claimed that microbusinesses were the main source of their income. And a fifth reported making more than $7,000 a month, which is more than $84,000 yearly.
Data shows that more and more people of colour, young women and those from diverse backgrounds are starting businesses. The number of Millennials, Gen Z and other young people who have started businesses has almost doubled in the last two years. Women outnumber men in Alabama 2-to-1, and Black males, though still a tiny percentage, are the fastest growing microbusiness group.
GoDaddy measures microbusiness density, which is the number of such small businesses for every 100 adults 18 years and older.
Baldwin County in Alabama is the county with the most microbusinesses, 8.3 per 100 adult. According to GoDaddy, each single microbusiness per 100 adults in an area adds nearly $200 to that area’s median household income.
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Home to Alabama’s beaches, Baldwin County is a popular retirement destination, and Black said many of these retirees may have finished one career, but that doesn’t mean they’re done working.
“People are more active in retirement than what we’ve seen in recent years,” she said. “People are retiring to Baldwin County but have lots of good years left, lots of disposable income.”
Small businesses will increase. And what’s more, many retirees, and people in general, are much more tech savvy than previous generations, Black said. This is especially helpful when you only need a domain to begin a small business and the ability to accept payments online.
Pandemic Business
Black believes that the pandemic may have been a catalyst in many cases for these small-business owners. There are several possible explanations for this, he said.
The first is that the cash influx from stimulus payments might have been sufficient to kick-start some businesses. Black pointed out that other factors are at work.
“Socially, the pandemic allowed people to sort of hit pause and reset, and evaluate their aspirations,” she said. “If someone was sent home or laid off, the bills didn’t stop. They had to be resilient and innovative in how they were going to make money.”
Many people found that starting a small business is the best way to make money, regardless of whether it was an old hobby or a means to pay bills.
“It was definitely an optimal opportunity for a lot of people to take that chance.,” she said. “Why not now?”
Have you got an idea about a story based on data? Are there any data-related questions you would like to ask about Alabama? Email Ramsey Archibald [email protected]Follow him on twitter @RamseyArchibald. More Alabama Data Stories You can read more about it here.