The Industries With the Most Struggling Small Business Owners

Manufacturing was hit especially hard by supply chain problems – many of the industry’s input materials are shipped in from across the globe, and finished products are shipped back out worldwide. The semiconductor chip shortage alone has caused massive production delays, especially for automobile manufacturing. Further, the extra cost of gas has driven up the prices of receiving and shipping goods. Many manufacturing employees retired or left the workforce during the pandemic, and finding and training new workers has not been easy, industry experts told The Hartford.

The travel industry was hit particularly hard during the height of the pandemic. International tourist arrivals worldwide plunged 73% in 2020. By 2022, however, the industry rebounded significantly compared to 2021, but still not fully, with international arrivals reaching 57% of pre-pandemic levels in the first seven months of 2022. The travel industry’s rent delinquency rate is 3 percentage points below the national average, but high inflation and recessionary fears may mean people are less likely to spend money on luxuries like travel going forward.

The rent delinquency rate dropped 1 percentage point from September to October for the arts industry. During the pandemic, artists that made their income off live performances and shows saw their income suffer. They were able to bounce back somewhat, but small music and arts businesses have an estimated national average delinquency rate of 37%.

The real estate industry has been on a roller coaster ride since the start of the pandemic. At the beginning of 2021, 30-year fixed mortgage rates dipped under 3%, helping to drive up demand for houses. The housing market became red hot, and housing prices and sales shot up. Lately, the Federal Reserve has been raising interest rates in an attempt to bring down inflation. This has caused mortgage rates to increase to around 7%, significantly driving up the cost of borrowing when buying a home with financing. In turn, the housing market has slowed.

Beauty salons were some of the earliest businesses to close during the pandemic, and many regular beauty salon customers turned to at-home alternatives like dying and cutting their own hair. Customers may continue this trend, especially as inflation and a looming recession have people saving money where they can.

The recent increase in mortgage rates has caused demand for homes to decrease. New housing starts were nearly 9% lower from October 2021, according to the U.S. Census Bureau. Further, the construction industry is still dealing with skilled labor shortage reported earlier this year by the trade group Associated Builders and Contractors. This can lead to less projects and project delays.

Although there was a slight decline in the rent delinquency rate for gyms from September to October, the rate remains above the national average of 37%. Gyms were among the worst hit businesses during the pandemic. Industry revenue declined by over $10 billion, or 26%, in 2021 compared to 2019, according to marketing research firm IBISWorld, even as at-home exercise equipment company Peloton’s revenue increased by nearly six times in that time. The gym industry continued to rebound in 2022, but inflationary pressures and a possible recession could put the breaks on the recovery.

There was a massive increase in online shopping during the pandemic. Some customers have returned to brick-and-mortar retail stores, but the shift to e-commerce began before the pandemic and is likely to continue. Many retailers are hoping for a fruitful holiday season, but customers may also be cutting back on non-necessities because of inflation.

Transportation includes personal transportation like taxis and private drivers and services that transport goods. While companies have begun shifting to electric vehicles, most vehicles remain non-electric, and the industry has been struggling with increased gas prices. Trucking companies have also been especially hard hit by labor shortages, which has been easing recently, according to the American Trucking Associations.

Rent delinquency rates for the automotive industry posted the highest jump, soaring by 21 percentage points. Car repair garages and auto dealerships continue to be plagued by supply chain issues that have affected everything from parts and tools to completed vehicles. Used car demand, which shot up in 2020 and 2021, has also begun to slow. Online car retailer Carvana recently announced it sold 8% fewer cars in the third quarter compared to the same period in 2021.

Restaurants have also been struggling, with nearly half of all small restaurants unable to pay rent. They are caught in a difficult place where inflation has driven up the costs of ingredients and they must decide whether to raise prices and risk losing customers or try to make do with less revenue. In the third quarter of 2022, 41% of customers reported dining out less, and 82% reported being concerned about prices, according to restaurant industry analysts Dinova and Technomic.

Small businesses in the education industry, like tutoring and SAT prep centers, have the highest rate of rent delinquency. The education industry has been rapidly reshaping in the past few years. From 2017 to 2021, venture capital investment in education technology increased from $1 billion to $8 billion, and online learning exploded in popularity during the pandemic, accelerating an already existing trend. E-learning company Coursera saw its number of enrollments more than double from 2019 to 2021. After becoming accustomed to online learning during the pandemic, students may now see it as a viable alternative to in-person educational services that have expensive brick-and-mortar costs.