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Small businesses reeling; 10 to 50 percent may go out of business

June 04, 2020
By: Ellen Marrison

A trio of recent reports reflect the pernicious effects the pandemic is having on small businesses. Last month, a survey from the Society for Human Resource Management (SHRM) found that 52 percent of small businesses expected to be out of business within six months. SHRM President and CEO Johnny C. Taylor, Jr., called it “the most alarming findings to date.” The Census Bureau has also developed a new survey intended to measure the effect of the pandemic on small businesses, which is running from April 26 to June 27. Its results are being published weekly and it, too, has revealed large to moderate negative effects of COVID-19 on small businesses, but noted that “the majority expect to return to usual level of operations within the next six months.” And a new report from Facebook and the Small Business Roundtable reflects which businesses are still operational and which are not.

The Census Bureau’s Small Business Pulse Survey (SBPS) was designed to be useful to governmental and agency stakeholders, and the businesses and policymakers they serve, while also being short and simple to accommodate businesses and encourage a robust response rate.

The content of the SBPS falls into four categories: operations, challenges, finance and expectations. In Week 4 of the survey (May 17 to May 23), a national average of 41.8 percent of small business respondents indicated they believed it would be more than six months before their business would return to its normal level of operations relative to one year ago. However, 10 percent indicated they did not believe the business would return to its normal level of operations, an increase over the 6.2 percent who had indicated the same in the first week of the survey.

While the national average of respondents saying their business had experienced a large negative effect from the pandemic has decreased over the first four weeks of the survey (from 51.4 percent in the first week, collected from April 26 to May 2, to 45 percent in week four [May 17 to May 23]), the number saying it has had a moderate effect has increased, from 38.5 percent to 41.5 percent over that same period. Those saying it had little or no effect has also increased, from 7.6 percent to 10.1 percent.

The survey results are broken out by sector, with those in the accommodation and food services sector having the bleakest outlook, and results are also available by state.

In another look at the effects of the pandemic on small businesses, Facebook and the Small Business Roundtable released the State of Small Business Report last month, which found that 31 percent of the small and medium business (SMB) respondents to their survey reported that their SMB was not currently operating. Another 11 percent of operating businesses said they expected to fail in the next three months if current conditions persist. However, 57 percent of respondents indicated they were optimistic or extremely optimistic about the future of their businesses.

While the SHRM survey is set to recur on June 17, the findings of the first survey revealed that 21 percent were unfamiliar with the Paycheck Protection Program, a federal programs intended to help small business that still has funds available.

small business, coronavirus