The novel coronavirus and resulting disease of COVID-19 have had a significant impact on public health in the United States since developing into a pandemic in the spring of 2020. But it has also radiated major economic shockwaves throughout the small business environment. Small businesses across the country have responded to the COVID-19 pandemic based on effects to overall business operations and employment, with financial stability at the forefront of concerns. Hopefully, this brief discussion of the vulnerability of small businesses in this time of economic crisis will lead to a better understanding of how a small business can respond to prevail over the pandemic.
Small businesses were hit particularly hard at the start of the pandemic. While some remained fully operational, many were forced to close temporarily. As the pandemic rages on, many still have had to close permanently. And the number of people employed by small businesses decreased as well—overall employment is down with the number of full-time workers dropping substantially and that of part-time workers decreasing almost double.
Of course, the impacts of the pandemic have varied from one small business to another, depending on the business sector or industry. Disruptions due to COVID-19 affect all businesses differently, and in many cases, disproportionately. Some small businesses viewed as essential were able to remain open, while others were required by government mandate to close their offices and other business locations. Some were able to pivot in terms of employment, authorizing many employees to work from home or other off-site locations; while others were unable to make a smooth transition to remote work. The COVID-19 pandemic has served to shine a bright light on the vulnerability of small businesses.
The most vulnerable small businesses have turned out to be in industries that rely on consumer traffic. Those in the sectors of arts and entertainment, personal services (e.g. pet sitters, doulas, food deliverers, personal assistants, etc.), and hospitality (including restaurants, tourism-based businesses, and hotels and lodging). Small businesses with limited financial resources have the greatest vulnerability and will likely find it difficult to survive a long-lasting pandemic, but all small businesses are susceptible to the impacts of COVID-19. Only time will tell if the response of each business will be effective for survival.
So how have small businesses been responding to the effects of the pandemic? Some have had more success than others in navigating the current business climate under the sway of COVID-19. Identifying key strategies that underlie their survival could help other small businesses stay the course or rebound.
The three main principles upon which small businesses have scaffolded their approach to survival thus far are securing liquidity, ensuring the availability of and access to capital, and engaging policymakers to acquire other support. First, making sure there is cash on hand or assets that can be quickly and easily converted to cash (e.g. stocks, mutual funds, inventory, etc.) is important because a small business with liquid assets has the greatest capability of paying debts in the short-term. Secondly, ensuring access to capital (e.g. loans, grants, investor funding, etc.) is critical because it helps small businesses pay their staff and cover daily business expenses while seeking to create a profit from services rendered or products provided. And finally, engagement of policymakers by way of all possible means (e.g. phone calls, letters and emails, social media contact, etc.) is necessary because small business voices are often drowned out by those of big business; so it is crucial to reach out directly so that the federal government considers small businesses when drafting emergency stimulus packages or other economic policies that could impact their survival. Part two of this series will discuss some of the relief options and resources available to small businesses in this time of the COVID-19 pandemic.
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