Nearly Half of Small Business Owners Fear They Will Have to Close Permanently
According to a recent survey, 48% of small business owners fear they will have to shut down permanently before the end of the year. That was a jump from 42% just two months ago.
Alignable surveyed 9,201 small business owners. Analysts based their results on the answer to two questions.
- What percentage of Q4 2019 revenue/sales are you anticipating for Q4 2020?
- What percentage of Q4 2019 revenue/sales do you need to achieve in Q4 2020 to stay in business?
New lockdowns in response to the rise in COVID-19 cases, along with elevated consumer uncertainty and a shift to online shopping have put additional pressure on small businesses already reeling from the economic impacts of the government response to the pandemic.
One quote recorded by a surveyor sums up the desperation felt by small business owners.
COVID has raised its ugly head again. I’m a caterer and I’ve had no work in November and my clients are canceling for Dec. This is so sad. I have worked so hard to build my business the last 14 years. My business has gone from half a million to not even 200,000. This is devastating for any business.”
Another small business owner lamented, “COVID closings are killing this country! My business is on hold — no art walks or gallery openings, and I can’t even open my studio. Everything’s online.”
Breaking the trends down by industry, a staggering 62% of travel and hospitality business owners said they anticipate Q4 revenues below what they need to stay afloat. Sixty-one percent of gym owners, 60% of health and wellness shops, 46% of spas, and 45% of restaurants face similar revenue shortfalls.
Small businesses employ 58.9 million Americans, making up 47.5% of the country’s total employee workforce.
The pandemic has already decimated America’s small businesses. According to a study by Brookings released in September, more than 420,000 small businesses had closed their doors permanently since the beginning of the pandemic. That represents 7.1% of all small businesses.
Many small businesses were still closed long after governments began allowing the economy to open up. As of August, more than 18% of all US small businesses, and more than 27% of those in leisure and hospitality, had still not reopened.
Brookings estimates that through August, the US economy had lost some 4 million jobs in the small business sector “that will only return with the creation of new businesses.”
Back in September, Brookings said even with businesses slowly reopening and absent a new wave of shutdowns (which we have seen), we shouldn’t expect a quick bounceback.
Even if for the remainder of the year losses simply keep pace with those in previous years, we will see a doubling of the ordinary annual rate of small business losses to more than 700,000 (or 12 percent). That likely optimistic scenario would see around 50 percent more business losses than at the peak of the Great Recession, and the largest loss of small businesses since records began in 1977.
Large corporations with deep pockets and access to low interest loans can weather these lockdowns but small businesses don’t have many options other than to simply shut down.
Alignable’s Co-Founder and CEO Eric Groves called for more federal assistance for small businesses. But this merely papers over the problem. Driving small business owners deeper into debt hardly solves the problem, not to mention the pernicious effects of all the money printing the Federal Reserve has done already.
With vaccines rolling out this week, many people are optimistic that the economy is about to quickly bounce back. But it will still be months before vaccines are available for the general population and the deep damage done to the economy by months of shutdowns won’t heal quickly.