It’s no secret that COVID-19 has made a huge impact on small businesses. A recent survey from SCORE outlines just how big the effects have been so far.
Overall, the report, which included responses from 3,500 diverse business owners, found that more businesses are struggling financially. And many Black and Hispanic owned businesses face even greater challenges. However, it also found that businesses have been able to quickly pivot in key areas. And many are still feeling optimistic about the future.
SCORE Survey – COVID Impact on Small Business
More specifically, the report found that a majority of businesses were not able to turn a profit this year. In fact, just 34 percent of small business owners said that their operations are currently profitable. But 55 percent were profitable at this point last year.
Businesses related to travel, arts, and culture experienced the biggest losses this year. But construction firms, restaurants, professional services, health services, and retail also struggled.
Many of these industries were most affected by state shutdowns. But they also tend to be areas that have been deemed “non-essential.” So consumers with less disposable income may also simply be choosing to re-allocate their income. And of course, many of these industries require at least some in-person interaction, which many consumers choose to avoid.
Struggles for Minority Owned Businesses
Those numbers are even more pronounced for Black and Hispanic owned businesses. Just 26.5% of Black business owners said that their businesses are currently profitable. That’s down from 40% in 2019. Among Hispanic business owners, 29.2% said their business was profitable this year. And 51.2% of them had profitable businesses in 2019.
So why is this disparity present? Much of the answer may lie in access to resources. Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL) served as a lifeline for many businesses. But white business owners were three times more likely to receive these funds than Black and Hispanic business owners. These business owners have also been more likely to struggle with credit and securing investors. And COVID-19 infections, remote work, and lack of childcare also affected these companies more in 2020.
There were certainly inequities in business ownership and access to resources before COVID. But the pandemic has highlighted them even more. Additionally, business ownership among Black and Hispanic individuals has been on the rise in recent years. So addressing these inequities may be key to helping the small business economy recover quickly.
Businesses Adjust Due to COVID
Even though many struggled with profits this year, small businesses are still fighting. Many have been able to stay afloat and keep customers and employees safe with a few changes. Specifically, 43 percent provided PPP to employees, 34 percent allowed teleworking, and 29 percent updated policies.
Additionally, 20 percent of companies added new services to help their communities during this time. Some of these may have simply been to show support. But other companies clearly identified needs with their target customers. And this ability to pivot quickly may have helped a small amount of companies stay profitable or at least avoid huge losses.
Unfortunately, one of the areas where businesses had to adjust most this year was in HR. About 12 percent said they had to permanently lay off employees. And 56 percent either had to furlough employees or cut their hours to make ends meet. These changes allowed many businesses to stay above water. But it almost certainly hindered operations for many. And it could have a long-lasting impact on the economy as a whole.
However, 20 percent did hire new employees during the pandemic. And 41 percent expect to hire more team members within the next year. So with a bit of hard work and careful planning, many teams may be able to rebound quickly. An increase in hiring can help businesses increase output in the coming years and give more individuals access to regular paychecks. And that’s one of the biggest things that is going to help small companies thrive going forward.
How Businesses Feel About the Future
It’s not all bad news for small businesses this year. Despite the financial challenges, 22 percent of small businesses currently feel very optimistic about the future. And another 33 percent feel somewhat optimistic.
Of course, some policy changes may help small businesses even more. Some are hoping for more PPP loans and enhanced unemployment benefits. But 66 percent agree that stimulus checks for individuals make the biggest impact. Putting money in the hands of small business customers may be the most impactful way to help moving forward.
Overall, there’s no denying the negative economic impacts of the pandemic. And the exaggerated effects on minority owned businesses highlight even more problems. But there are some bright spots in the report as well. Small businesses that pivot quickly can help people stay safe and keep their operations running. Ideally, this will all lead to a fast recovery in 2021 — at least many business owners seem to think so.