Small businesses – very small businesses, actually – sprouted up all over Alabama during and after the COVID-19 pandemic, but especially in a handful of rural counties.

Those microbusinesses – firms with 10 or fewer employees – are a big part of the Alabama economy, especially at the Alabama coast, but it turns out we might not know exactly how big a role 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 from web hosting giant GoDaddy, joined on a report released earlier this year highlighting microbusinesses in Alabama.

Data from GoDaddy shows Alabama added nearly 12,000 of these microbusinesses from March 2020 – just before the pandemic began – to December of 2022. That was an 8% increase during that time, bringing the state’s total to 157,000. The nation as a whole saw a similar trend, according to the data.

“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.

Some Alabama counties saw much more significant increases. Two counties in particular, both of them rural, more than tripled their microbusiness counts. Randolph and Winston counties each saw 200% or higher increases. Both ranked inside the top 20 for the fastest growth among all counties in the nation.

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Butler County, another rural county in south Alabama, saw a 116% increase in microbusinesses during that time.

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. However, I think we tend to not have small businesses at the head of the discussion… Especially for our rural communities.”

She said many rural areas in Alabama have trouble recruiting big businesses – think car manufacturers like Toyota-Mazda in Limestone County, or airplane manufacturers like Airbus in Mobile. 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 researched survey results from GoDaddy of hundreds of these small business owners in Birmingham and Montgomery. That research showed more than 60% of respondents needed $5,000 or less to get their businesses off the ground.

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.

Still, some 37% of respondents said these microbusinesses were their main source of income, and a fifth of those said they make more than $7,000 per month, or more than $84,000 per year.

And these businesses are increasingly being started by young people, women and people of color, according to the data. Entrepreneurship among Millennials and Gen Z nearly doubled since the start of 2020. Female microbusiness owners outnumber men 2-to-1 in Alabama, and Black men, while still making up a small percentage of all microbusiness owners, were the fastest growing group in the state.

One Alabama county stood out from the rest in terms of microbusiness density – a measure used by GoDaddy that shows the number of these small businesses per 100 residents 18 and older.

Baldwin County, one of the fastest-growing counties in Alabama, led the state with 8.3 microbusinesses for every 100 adults. 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.”

All that leads to more small businesses. And what’s more, many retirees, and people in general, are much more tech savvy than previous generations, Black said. That helps when most of what you need to start a business these days is just a domain name and a way to accept online payment.

Pandemic Businesses

The pandemic was a catalyst for many of these new small business owners, and there are a number of possible reasons for that, Black said.

One is that a surge of cash from stimulus payments may have been enough to get some burgeoning businesses off the ground. But there are other factors at play, Black said.

“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.”

Starting a business turned out to be the answer for many people, whether that business was a lifelong hobby turned money maker, or just a way to pay the bills.

“It was definitely an optimal opportunity for a lot of people to take that chance.,” she said. “Why not now?”

Do you have an idea for a data story about Alabama? Or questions about Alabama that data may be able to answer? Email Ramsey Archibald at [email protected], and follow him on Twitter @RamseyArchibald. Read more Alabama data stories here.