While nearly every aspect of life in the U.S. has been disrupted by the COVID-19 outbreak, small businesses are one of the groups most severely affected by the pandemic and subsequent containment measures.
Partnering with YouGov, a recognized authority in public opinion data, we surveyed 510 small businesses with 100 employees or less and found that interrupted operations and declining revenues are causing significant anxiety, and forcing owners to make tough choices about the future of their businesses. The majority of survey respondents expressed concerns about going out of business or needing to file for bankruptcy due to the COVID-19 outbreak and quarantine.
Although 16.1 percent of respondents said that the COVID-19 outbreak has actually had a positive impact on their business, negative effects are far more prevalent. More than 36 percent of respondents said the pandemic is somewhat negatively affecting their business, while 29.6 percent said that their business is being very negatively affected.
Geography seems to play a role in the severity of the virus’s impact on businesses. In the Northeast, the epicenter of the U.S. outbreak, 77.5 percent of respondents said their businesses are being negatively impacted, compared to 59.2 percent of respondents in the West, a region that has not been as hard-hit by COVID-19.
Closures and bankruptcy are the two primary concerns for small business owners as the pandemic and safety measures extend into a third month.
Overall, 41.3 percent of business owners are worried that they will have to temporarily shut down, although that number is higher in the Northeast, where 51.1 percent of owners expressed anxiety about temporary closures.
For Midwestern businesses, temporary closures are less of a concern than going out of business permanently. While 34.9 percent of Midwestern business owners said they are worried about temporary closures, 26.5 percent said they worry that the pandemic will force them out of business entirely. By comparison, permanent closures are a concern for 20.9 percent of businesses in the Northeast; 15.7 percent of businesses in the South, and 15.4 percent of businesses in the West.
Bankruptcy concerns are also most prevalent among Midwestern business owners. Just over 23 percent of respondents from this region said they worried about going bankrupt, compared to businesses in the West (19.6 percent), the South (18.9 percent), and the Northeast (17.8 percent).
These concerns are valid when understanding that most small businesses have limited cash reserves. One out of four business owners only have enough cash on hand to keep them afloat for 1-3 months, while over 50 percent have cash reserves to last them six months or less.
Limited amounts of liquid cash have already forced some small business owners to dip into their own pockets to keep their businesses afloat during the pandemic. Our survey found that Hispanic business owners are the most impacted by this. More than 42 percent of Hispanic business owners have already had to use personal resources to keep their businesses running, compared to 32.9 percent of Black business owners, and 29.9 percent of White business owners.
More than 66 percent of businesses have experienced a revenue drop in the last few weeks. Meanwhile, just 12.7 percent of respondents said they have seen an increase in net revenue, and 16.8 percent said their revenue has not been affected by the outbreak.
Revenues for businesses located in the Western U.S. have fared the best. Fifteen percent of businesses in this region have seen net revenues increase, while 24 percent of businesses have not seen any change in revenue. Things have been much tougher for businesses in the Northeast, where 78.3 percent of businesses are experiencing decreases in net revenue. In this region, net revenue has increased for only 7.4 percent of businesses, and net revenues have remained steady for only 9.1 percent of businesses.
Nearly two-thirds of owners surveyed said they have lost at least half of their business. Eighteen percent of respondents said they lost between 50 and 75 percent of business, and just over 12 percent said they have lost 75 to 100 percent of their business.
Besides creating anxiety about closures and bankruptcy, COVID-19-related disruptions are forcing small business owners to make tough decisions about their employees. Almost half of the business owners surveyed said they have reduced staffing hours as a result of the outbreak. That number is even higher in the Northeast, where 58.4 percent of businesses have cut hours for staff. Nationwide, Hispanic-owned businesses have been particularly hard-hit; 62.6 percent of Hispanic business owners said they have had to reduce hours for staff.
As the pandemic continues to unfold, the long-term effects of the illness on small businesses throughout the country remain to be seen.