Impact of COVID-19 on Small Businesses – Where Is It Worst?

Impact of Coronavirus on Small Businesses

The impact of COVID 19 is felt by all businesses, large and small. Which small businesses are most affected?

In late March, the SMB (Small and Medium Business) Group surveyed more than 500 businesses. The SMB survey found out which small businesses were most impacted and outlined expected changes that will be part of economic recovery.

Which Small Businesses Are Most Impacted?

The COVID-19 impact varies by type of business, with these three categories most affected: personal service, hospitality and retail. The smaller the company, the harder the hit, with companies with fewer than 20 employees most affected.

Why? Because a small business with fewer than 20 employees typically lacks cash flow and capital. Those companies were the first to reduce hours for employees or lay off employees. Those businesses were also the first to stop hiring subcontractors.

“Those businesses had a challenge, and will experience the most extreme negative impact,” said Laurie McCabe, SMB’s cofounder and partner. “They had to learn how to serve customers in the new stay-at-home environment.”

McCabe said that continuing to operate has been impossible for small businesses which provide hands-on services, such as hair salons and spas, home improvement and repair contractors, and for many dental and medical offices.

Impact of Coronavirus on Small Businesses

image: SMB Group
For others, such as those in retail who relied on in-store traffic, small business owners had to find new ways to get their product to the customers. They may have revamped websites and/or Facebook pages, to switch the emphasis to online ordering.

The Lasting Effects of the New Normal

“There will be a new normal, where people learned to do business in different ways,” McCabe said. “Maybe your business was a law firm or financial planning, and everybody used to come to the office.”

“So, you offered them a way to talk to you using face time or video conferencing,” she said. “And this is likely something you’ll continue to offer to customers going forward.”

Meetings between staff and clients, as well as meetings between staff and management, became virtual, as companies turned to video conferencing and conference calls to conduct meetings.

“That’s something that was done out of necessity,” McCabe said. “But as a cost-saving measure, it may continue in the future.”

Working from Home

Many businesses from small to large have allowed employees to work from home. McCabe said that employers and employees are seeing this change as a benefit. Both employers and employees are finding they can be very productive in the home environment.

Allowing employees to work from home may have another benefit, as small businesses attempt to recoup loss of income.

“In the survey, we asked employers where they hope to cut costs going forward, and 40 percent said cuts would be made in what’s called non-employee spending.”

Non-employee spending includes things such as office supplies and specific capital equipment. The big-ticket item for non-employee spending is the overhead cost of maintaining the workplace, whether it’s an office or retail space.

“If employees can work from home and be very productive, maybe you would be fine with a smaller office,” McCabe said.

Steps to Recovery

Survey respondents said they expected to spend money on upgrades to business communications, such as computer hardware, business software and telecommunication equipment.

“It will never be like it (COVID-19) never happened,” McCabe said. “Small business owners who found out just how creative they could be, will be ready to take advantage of new opportunities.”

Going forward, having a responsive and effective web and social media presence will be very important, she said. Employers who lack the resources and expertise to do so should consider hiring someone part-time to lay the groundwork for such a presence.

“If you’re a small business owner, you already knew that you could never drop the ball, not even when times were good,” she added. “Going forward it’s time to take a look at everything that happened and say to yourself, what did I learn?”

McCabe predicted that in addition to an increase in the number of employees who work from home, at least some days out of every week, there will be an increase in the number of people who put money into home improvements, so they can enjoy more of leisure time at home.

“I think that in the landscaping business, you’re going to see an emphasis on at-home entertainment,” she said. “People are going to finally put in that pool, do some remodeling, put money into all kinds of projects to enhance their homes.”

She said that at the same time some businesses are struggling to survive, there will be growth in “accidental entrepreneurs.”

“They may be people who lost their jobs or were laid off, who saw a need and started a business,” McCabe said. “Or they may be people who had a small business but found a way to reinvent how their business operates.”

Mental Recovery

Late in 2019, SMB conducted a separate survey and asked small and medium business owners how they felt about 2020. More than 60 percent of respondents said they were optimistic that their revenues would increase.

In the survey conducted in late March 2020, small and medium business owners were again asked how they felt about revenues. More than 60 percent said they felt their revenues would shrink for the next 6 months.

Loss of revenue is bad by itself. Many small and medium business owners also felt a great sadness and regret over how that loss of revenue affected their employees. Not being able to pay good employees may have been the bitterest pill to swallow.

McCabe said that by nature, those who launch and operate a small business have what it takes to recover.

“People who start small businesses are, by nature, optimistic,” McCabe said. “The odds that they will be able to bounce back are strong.”

“The hardest thing is that we don’t know when we’re going to start to recover and what it will be like,” she added. “I think that it will work like a dimmer switch, in reverse, that it will start to get brighter and we’ll adapt and adjust as it does.”

About the Survey

For the survey, the SMB got responses from more than 500 businesses. The size range of the businesses was small (1 to 1,000) and medium (1,000-2,500). About 30 percent of the respondents were in the 100-499 category. Nearly all the respondents, 95%, were from the United States.

Go here to learn more about the survey.

Impact of Coronavirus on Small Businesses

image: SMB Group
SMB is a research, analysis and consulting firm which focuses on technology adoption and trends in the small and medium business market.


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Lisa Price Lisa Price is a freelance writer living in Barnesville, Pennsylvania. She has a B.A. in English with a minor in journalism from Shippensburg State College (Pennsylvania). She has worked as a trucking company dock supervisor, newspaper circulation district manager, radio station commercial writer, assistant manager of a veterinary pharmaceutical warehouse and newspaper reporter.

13 Reactions
  1. Somehow testing needs to be greatly expanded. Think of how helpful it would be to a dentist to be able to confidently say they’ve tested COVID negative? Or a hair stylist? But somehow we’ve spend trillions of dollars on recovery without funding widespread testing.

  2. I guess personal service businesses got hit the most for they can no longer operate while people are on quarantine. The industry is changing and so is lifestyle.

  3. This pandemic greatly affects businesses around the world. The operations of many sectors are standstill until the lockdown is lifted. Insightful article. Thanks For sharing.

    Thanks & Regards
    Aria Mathew

  4. My guess is that we will see huge impact over the years to come. It will create some kind of economical bust cycle, over a long period of time. But it will also occur opportunities due to the current situation for small businesses.

  5. Yes now a days most small business impacted by corona virus..but now solution is revealed small business owners use smart POS app which helps them a lot in business.

  6. I really feel bad for new restaurateurs.

    These folks have put their time, money and energy into their “dream.”

    I hope more new restaurants can hang in there and somehow recover from the pandemic!

    The Franchise King®
    Joel Libava

  7. Being an accountant and having knowledge about financial things and stuff, many small businesses have been badly affected by COVID-19. The tourism sector, countries that were dependent upon tourism for finances. Rightly said hospitality sector such as restaurant owners are among the top hit by COVID-19. Hope governments find some way out and vaccine is available as soon as possible. thanks for sharing vital information.

  8. The food industry has been hit. The pandemic has restricted traveling to your favorite restaurant. Most of these restaurants are own by the middle class who are trying to make a name for themselves. The workers in these restaurants are part of the lower wage class and immigrants. The closure of businesses means they are left without a paycheck and do not have the necessary skills to work from home.

  9. The COVID-19 Pandemic has affected almost everyone around the world. It creates food insecurity in several countries.
    Doctors are trying their best to save the lives of COVID positive patients. They are the real heroes. Also, it has affected the economy, GDP, and economy of various nations. I hope that the government will find some way to tackle this problem and then everything will be fine as before.

  10. Great and rightful analysis. Governments and countries have been trying all out to increase testing testing and testing and also increasing hospital beds but all in all though being good these are all efforts to fight Covid-19 impact and no efforts are seen towards finding innovative ways to “let small businesses hold on”.

    There are numerous people who have not been affected as they already have antigens for fighting the corona virus. Governments can easily test and identity such small business owners and kind of certify them for such an ability which they can propagate and lift their businesses. This shall really help Salons, spas, dentists, retailers, grocers and many many other small businesses.

  11. Awesome post! Really enjoyed this post. But I want more information on such valuable topic.