Solo Businesses Shook Off 2020 in a Year. 2023 Took Six Times the Hit.

Eleven years of IRS Schedule C tables show the pandemic shock to solo-business profits was steep and short. What came after it was slower, and by 2023 it had cost more.

The two years the profitable count fell

Every year, the IRS publishes a table of nonfarm sole proprietorship returns — the Schedule C filed by people who run a business on their own account — split into all returns and returns with net income. Subtract one year’s profitable count from the next and the decade reads as steady growth with two breaks. In 2020 the number reporting a profit fell by 91,950, from 20,068,698 to 19,976,748, while the total number of returns kept rising. In 2021 it jumped by 1,125,202, the largest gain in the series. The second break is 2023: down 555,991, to 21,411,462. Between 2020 and 2023 the count of returns without a profit rose from 8,376,619 to 9,714,447.

The shock everyone remembers was over in a year. The one that followed had no name, and it took more.

Where 2020 landed, and how fast it came back

The 2020 drop was not spread evenly. Across the 16 industries with enough returns to read, 11 saw their profitable share fall by a point or more, and six fell by three points or more: information, arts and entertainment, wholesale trade, food service and accommodation, manufacturing, and other services (repair, personal care and the like). Those six fell 5.6 points on average. Retail trade was the one industry whose share rose by more than a point that year. The recovery was fast. In 2021, the six hard-hit industries gained back 5.1 points on average. Every one of them recovered more than half of its loss within the year, and manufacturing and information ended 2021 above where they had been in 2019.

2023, measured against each industry’s own 2020

Set each industry’s 2023 share beside its own 2020 figure — the pandemic year — and the picture changes. Nine of the 16 are more than a point below it. Four are within a point either way. Three are more than a point above: information, educational services, and arts and entertainment, two of them from the hard-hit six. The largest gap is in real estate and rental, which lost only 0.9 points in 2020 and stood 8.2 points below its 2020 level by 2023, at 58.7%. Retail trade, the industry that rose in 2020, was 4.6 points below its 2020 level in 2023, at 51.9% — the lowest of the 16.

What to take from this if you run a business on your own

A shock with a name is easy to see and easy to rally against, and in this data the one in 2020 was largely repaired within a year. The slower squeeze that followed had no such moment, and by 2023 it had pushed the share of returns reporting a profit lower than the pandemic year had. The practical reading is to check your own numbers against your own last good year, not against the last crisis. A year that feels ordinary can still be a worse year than the one everyone remembers as bad.

Four limits worth holding. A Schedule C is filed by anyone with self-employment income, from a full-time contractor to a weekend side job, so these are returns, not companies. The IRS figures are estimates from a sample of returns, so a move of less than a point in one industry is treated here as no change. Net income is after deductions such as depreciation and vehicle costs, so a return can show a loss while the owner’s cash is fine. And the table says what happened, not why: nothing in it ties the 2020 or 2023 falls to any cause.

Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com

This article is for educational purposes and is not a substitute for professional financial or legal advice.