Proof: Pandemic wrecked Texas small businesses in 2020

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The state of Texas Comptroller’s office offered a fascinating look at the impact of the pandemic on the Texas economy in 2020, and some of the numbers are staggering, especially as they relate to small businesses.

You can read the full report (highly encouraged) of the edition of “Fiscal Notes” by clicking HERE. In the meantime, here are some of the key findings and why they’re important to small business owners and operators.

 

Tax Receipts Down

One of the things a comptroller of any state measures is the sales tax receipts by industry. It’s a good barometer for how industries have performed, and it really shows you which ones have struggled the most. As detailed in this report, some of the most important industry sectors in Texas were crushed in 2020. For instance:

  • Oil production tax was down 45%
  • Natural gas production tax was down 25%
  • Alcoholic beverage tax was down 28.5%
  • Hotel occupancy tax was down 48.5%

If you apply those sectors to small businesses across the state, the oil and natural gas decreases are a blow for obvious reasons. The cyclical nature of the energy sector has a very direct impact on other businesses, especially small businesses. When revenues are down in that industry, everyone in Texas (no matter how diversified we are as a state) is impacted. Jobs are lost, wages are down, fewer workers come to our small businesses to shop. It’s a cycle the state knows well from previous busts, but the impact of COVID on the energy industry hurt us all in 2020.

 

Specific to Small Business

Within the report, you can find a section on the direct impact of the pandemic to small businesses (largely from what is detailed above). But here are those numbers:

  • Total small business revenues fell by 39.1% in 2020
  • Total small businesses that were open last year declined by 31.5%
  • Small businesses categorized in the leisure and hospitality sector saw revenue decline by an astounding 74.3%
  • The number of small businesses open in leisure and hospitality dropped more than half last year (57.7%)

The impact on leisure and hospitality businesses is also directly related to the small business climate in Texas. As the report says, “[The Texas Restaurant Association] estimates that 70 percent of Texas restaurants are independent operators that often lack access [to resources of large chains.”

 

Brewing Blues

On that note, one of the fast-growing businesses across Texas (especially in metro areas like Houston, Dallas and Austin) is the craft beer breweries. They were absolutely devastated, according to the comptroller’s report.

According to the Texas Craft Brewers Guild, their members “had seen a 71 percent decline in revenue since COVID-19 restrictions began.” As the article states, many of these breweries tried to take advantage of to-go orders allowed by state government, but that did not make up for in-person sales, which are part of the craft beer experience.

 

Most Devastating of All

While small businesses were obviously devastated throughout 2020, the statistics shared in the report paint a dire picture of the lowest wage earners in Texas.

Based on research from a group called Opportunity Insights, a Harvard-based research and policy institute, those who brought home the least earnings were the hardest hit. Here’s what the report says:

“…Employment among Texans making less than $27,000 per year fell by 17 percent from January through Oct. 22, 2020. Employment for middle-wage workers ($27,000 to $60,000 per year) declined by just 3.6 percent; for workers earning more than $60,000, employment actually rose, though only slightly (0.5 percent).”

In nearly every economic policy discussion for decades, the rising gap between the low-wage earners and the upper class is of dire concern. The pandemic, and the restrictions placed on businesses, did not hurt the upper class, at all. In fact, these numbers suggest the upper class benefited. Meanwhile, 17 percent of all low-wage earners lost their jobs.

 

 

Jonathan McElvy is the CEO of McElvy Partners. His company includes the Greensheet, The Leader, Fort Bend Star, Charlotte Media Group, Coastal Bend Publishing and Texas Printers. He has managed and owned small businesses for 20 years. If your business would like to talk more about your individual needs, click HERE for contact information. You can follow him on Twitter @mcelvy.

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