Blog

COVID’s Impact on Small Businesses

We can all probably think of a small business in our neighborhood that either closed during COVID-19 or came dangerously close to closing. Mantra Coffee, one of my favorite coffee shops in Azusa, California, turned to the crowdfunding platform GoFundMe in late 2020 in order to keep their doors open.

America’s failures in public health emerged during the coronavirus pandemic, putting a strain not only on individual well-being but also on the economy at large. Although there is no all-encompassing narrative, large corporations like Amazon and Walmart have profited beyond imagination, while small businesses have suffered immensely. Early on, many small businesses looked to government protection programs for help, but faced challenges wading through bureaucratic hassles and establishing eligibility.

Trends & Themes Among Small Businesses During the Pandemic

CBIZ, Inc. conducted a survey in fall 2020 that collected data from over 1,600 businesses across the U.S. and within more than 30 industries. “Over half (51%) of respondents reported a significant decrease in sales due to the pandemic. More than 17% said they are seeking extensions on recurring payments like rent, and less than 60% of these businesses have been granted such extensions. Notably, smaller businesses, those with 1-4 employees, were most severely affected by the pandemic” (Business Wire). 

Below are other themes that emerged among small businesses, as documented by the Proceedings of the National Academy of Sciences of the United States of America (PNAS): 

  • Mass layoffs and closures occurred within a few weeks of the crisis
  • Businesses had widely varying beliefs concerning the length of COVID-related disruptions
  • Many small businesses are financially fragile: the median business with more than $10,000 in monthly expenses had only about two weeks of cash on hand 

Small Business Relief Options 

The majority of businesses leveraged the Paycheck Protection Program (PPP), which was enacted in June 2020 to pay up to eight weeks of payroll costs including benefits (Business Wire). The authors of Has the Paycheck Protection Program Succeeded? flag concerns about the design and implementation of PPP, arguing that it should have focused more on replacing lost revenue and less on assisting businesses to meet their payrolls. However, it “succeeded in its short-run goals, including helping smaller firms withstand sharp revenue declines during the shutdown and keeping workers connected to their employers” (Brookings).  

In addition to PPP, the Small Business Association (SBA) offered the COVID-19 EIDL, which provided economic relief to small businesses and non-profit organizations experiencing a temporary loss of revenue. There was also a restaurant revitalization fund and a grant program for venues such as concert halls that were forced to close. 

Common Traits of Businesses that Thrived During the Pandemic  

Running a small business during a global pandemic is a formidable task, but there are a few common characteristics among businesses that have stayed afloat or even flourished the past year. The first is flexibility. When COVID-19 regulations were set for businesses, retailers implemented contact-free pickup, home-shopping, and delivery options to “stay in the game” (Score). The second trait is excellent communication: making sure that all stakeholders are kept in the loop across multiple communication channels. For example, an early stage start-up called Dadventures that I worked for in 2020 sent out an email blast to all of our subscribers to inform them of how our content might evolve in the weeks and months to come. 

The remaining three traits are social responsibility, creativity, and using technology to overcome obstacles. Proper cleaning and sanitizing procedures are a major part of being socially responsible. Creativity can come in numerous forms, including out-of-the-box solutions for customers and ways to enhance the supply chain. Brick-and-mortar businesses can integrate technology into physical stores to simulate in-person services.

The Future of Small Businesses and American Innovation

The Wall Street Journal notes that “much of the contrast in the fortunes of small and large businesses has been driven by differences in the financial resources available to them.” Small businesses rely on bank loans, some of which have been difficult to get since COVID hit. Moreover, much of the funds from the federal government’s Paycheck Protection Program has likely been spent. On the other hand, large public companies have been able to more easily secure funding and capitalize on hefty stock market levels.  

As the pandemic runs its course, fewer small companies are left standing. Economic recovery, as a result, may be a faraway reality. However, in lieu of robust governmental safeguards, what we have seen is ingenuity and resilience on the part of small business owners as well as an outpouring of support from the individuals and communities that patronize them. 

by Elena D. 

Sources:

https://www.businesswire.com/news/home/20201008005232/en/Small-Businesses-

https://www.pnas.org/content/117/30/17656

https://www.sba.gov/funding-programs/loans/covid-19-relief-options

https://advocacy.sba.gov/2021/03/02/the-effects-of-the-covid-19-pandemic-on-small-businesses/

https://www.score.org/blog/covid-19-impact-and-future-small-business

https://www.wsj.com/articles/covid-is-crushing-small-businesses-thats-bad-news-for-american-innovation-11602235804

https://www.brookings.edu/bpea-articles/has-the-paycheck-protection-program-succeeded/

Leave a Reply

Your email address will not be published. Required fields are marked *