The majority of small businesses (57%) report they are optimistic or extremely optimistic about the future of their businesses despite the COVID-19 crisis, according to a survey released today. The State of Small Business Report, issued by Facebook and the Small Business Roundtable, surveyed 86,000 small business people. The report focused on the COVID-19 situation.
This positive outlook is remarkable when you consider that almost one third of small businesses said they were not operational as of April 2020. They’d shut down due to the crisis.
While there’s no shortage of small businesses hurt by COVID-19, the impact by industry varies. One thing is clear: small businesses need the economy to open up quickly before more lasting harm is done.
31% Shut Down: Industries Hurt by COVID-19
Thirty-one percent (31%) of small businesses had stopped operating during the crisis, as of April 2020. The reason? About 62% of those surveyed said the main reason was government orders. Just 9% said financial challenges and 7% gave lack of customer demand as their reason.
When it comes to geography, businesses in the northeast were more likely to be shut down. Those in the southeast were less likely.
However, when it comes to types of businesses and industries, the small businesses hurt by COVID-19 the most include:
- Personal businesses, which include self-employed individuals: 52% closed.
- Hospitality and restaurants: 43% shut down.
- Service businesses such as fitness, salons and professional services: 41% closed.
Those more likely to remain open are in agriculture, and information and communications. See the chart above.
Small Businesses Adapt Where Possible
Small businesses have an advantage with their agility and nimbleness. And that advantage has helped owners pivot and adapt.
The Internet has been a lifeline. About 79% have changed and adapted in some way to cope.
- Many have employees working at home and are using tech tools to operate.
- 36% are doing all sales online. They are using e-commerce, digital payments, digital advertising and service delivery tools.
- But not all small businesses can get by with working online entirely. About half of businesses (51%) reported that a majority of interactions still need to be conducted in a physical location.
Those Still Open Face a Lean Quarter
Of the small businesses that are operational, it’s going to be a lean summer. One study participant said, “Despite the 50% decline in sales we still have to pay 100% of our fixed costs. This is impossible. Rent was already high. Now it makes up 50% of our gross income.”
Of the small businesses that are still open 76% of the owners worry about cash flow. About 41% of owners saying they plan to tap into personal savings to keep the business afloat. Another 39% do not know where they will get the money.
About 11% of the small businesses that are still operational expect to fail in the next three months if conditions persist.
Clearly, small businesses hurt by COVID-19 need the economy opening.
As one business owner said, “My business needs the economy opened up. Small businesses are suffering and no amount of stimulus money can replace a thriving and functional business.”
Facebook COO Sheryl Sandberg, and John Stanford and Rhett Buttle the Co-Executive Directors, Small Business Roundtable, summed up the study. The “… people who operate, manage and work for SMBs are resilient; among them, there is hope and optimism about the future of their businesses. They’re finding new ways to reach their customers online, they’re making adjustments to how and when they do business, and they’re working hard to meet their family obligations at the same time,” they said. See the study.
This article, “57% of Small Businesses are Optimistic Despite COVID-19” was first published on Small Business Trends