The surprising impact of hurricanes on local businesses

While Hurricane Harvey left some small businesses literally and figuratively under water, on average SMBs rebounded quickly. (Image courtesy CNBC.)

While Hurricane Harvey left some small businesses literally and figuratively under water, on average SMBs rebounded quickly. (Image courtesy CNBC.)

The 2017 hurricane season has been one for the ages. Through the end of September, it had already produced 13 named storms, 8 hurricanes, and 5 massive storms of Category 3 or higher, according to The Weather Channel. The combined damage of Hurricane Harvey in Texas and Hurricane Irma in Florida is expected to total between $150 million to $200 million, according to recent estimates

On an individual level, storms like these can destroy homes, families, and livelihoods. Certainly, some companies may never bounce back, as was the case for about one-quarter of businesses in the New Orleans area after Hurricane Katrina in 2005. Still, economists expect a fairly quick and complete recovery for the local and national economies. How can this be?

There are lots of reasons, but one factor is the uneven impact of hurricanes. While some businesses are devastated, others may be largely unaffected — or even see an economic benefit, in the case of hardware stores or hotels outside the storms' epicenters. We wanted to better understand the impact of the 2017 hurricane season on small businesses in the aggregate, so we analyzed transaction data for small, local businesses in Houston and Irma's path in Florida. 

Our data team normalized and averaged daily business revenue for companies in various industries during the three months prior to the hurricanes. Then, our team compared daily revenue trends for those businesses during the storm to those three-month averages. What we found was surprising. In both cases, the hurricanes led to swift and dramatic decreases in revenue. But then, local businesses bounced back in a big way. 

For starters, we looked at Hurricane Harvey's impact in Houston, Texas. We sampled 5,800 businesses in various industries. As you can see, revenue for most businesses dropped significantly between August 25 and August 31, in some cases falling to 7%-13% of average daily revenue.

For all business categories, however, daily earnings returned to normal levels within a week and maintained that performance with the exception of a brief dip on Labor Day. Notably, lodging businesses in the Houston area emerged relatively unscathed, never dipping below 80% of average daily revenue.

Take a look: 

hurricanes-harvey-irma-small-business-revenue

We were quite surprised by these findings and assumed they were an anomaly, specific to Houston's rebound from Hurricane Harvey. So, we turned our attention to analyzing Florida businesses impacted by Hurricane Irma. We analyzed revenue for 27,000 local businesses in Irma's path, following the same methodology as the Harvey analysis.

We fully expected this to reveal a longer and more dramatic revenue trough, particularly because reports that Florida businesses struggled to reopen due to prolonged periods without power. Imagine our surprise when, again, the data showed a trend similar to Harvey's. Florida businesses dipped dramatically around Irma's landfall and then returned to normal revenue levels within a week. Once again, lodging businesses were least affected, dipping to 50% of average daily earnings on September 11 but generally staying within 75% of normal revenue. 

Take a look: 

hurricane-irma-florida-small-business-revenue

Our conclusion is that at the macro level, hurricanes have a dramatic but short-lived impact on small business revenue. Of course, individual businesses may experience outsized damage and even shut down, and certain zip codes likely suffered disproportionately. But at a high level, local businesses are quite resilient to big storms. 

Take a look at our Small Business Threat Index to see how SMB owners rank natural disasters as business threats, and learn what they're doing (or not) to protect themselves against them. If you run a small business in a hurricane-prone region, take some simple steps to protect your business — namely, save more cash, and insure your business against physical damage and loss of revenue from business interruption.