How the COVID-19 Crisis Has Affected the Outcomes and the Expectations of Small Businesses


How Small Businesses Responded to the COVID-19 Distancing Measures and Lockdown

To provide you with a better understanding of the situation, we’ve grouped the results of our research into three categories. The first one assesses the impact of COVID-19 on employment and on regular business operations during the first stage of the pandemic. Next, we take a closer look into the financial fragility of these businesses, expressed by their cash flow situation and regular expenses. Third, we analyse their expectations about the duration of this health crisis and about their survival in such a difficult market.

The Effect of Temporary Closures on Employment

In the first survey, we asked small business owners, such as Serendipity, whether their business was still operational or not. We offered our subjects three answer variants: operational, temporarily closed or permanently closed. We also invited them to share whether their business was closed because of the pandemic or another reason.

Out of all business owners included in our study, 41.3% shared that they were temporarily closed because of the pandemic. Only 1.3% stated that they were temporarily closed for reasons that had nothing to do with COVID-19. According to their statements, 55.5% of businesses included in the research were still open by the date of the survey.

We also asked the subjects to share with us the number of employees as of the date of the survey and by the end of January 2020. Overall, the number of full-time employees dropped by 32% from the last day of January 2020 to late March 2020. The number of part-time employees decreased by 57%. Overall employment saw a decline of 39% in March by comparison with the end of January 2020. These numbers took into consideration also those businesses that were temporarily closed. If we took into consideration only businesses that were still operational, we calculate that the number of full-time employees had decreased by 17.3%, while the number of part-time employees had decreased by 34%. Our estimates are in line with the ones of similar surveys conducted by other companies such as Atlanta Fed. Their survey included also larger businesses and it showed a 10% decrease in employment.

In addition, their survey only included a small sample of new businesses, which may have more significant employment variations. We can also compare our findings to the ADP public payroll data. ADP is a provider of human resources management software and their data shows a decline of employment in small businesses by 18% between January and April 2020. Nevertheless, their data considered all individuals that got paid in April as employed even if they were laid off either during this period of time or before it. Other pieces of research find that employment declined on average 27% for businesses with less than 500 employees and on average 28% for businesses with less than 50 employees. This research took into consideration the period between mid-February and mid-April. Their findings are a little smaller than the 39% estimation of the Atlanta Fed study.

Next, we take a look at the geographic variation of these outcomes. You can see the results across the 11 Census divisions, with the share of companies that had temporarily closed because of the pandemic. You can also see the decrease in total employment between the last day of January and the date of the survey. The results are not too different from one division to the other. Nevertheless, the disruptions are significant across almost all geographic areas, so we can safely say that all small businesses in the country were severely affected.

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