Running a small business is something that always comes with a certain aura of uncertainty. In these trying times, however, the risk is even greater. Seeing as how we’re already well into the pandemic, the first results are starting to show and things are definitely not looking optimistic. Still, not every area and not every industry is equally endangered. With that in mind and without further ado, here are several things you need to know about the impact of COVID-19 on small businesses, as well as the outcomes and expectations of phenomena that are currently taking place.
Small businesses are financially fragile
Even without the global pandemic and alterations that it has introduced to the customer behaviour patterns, it’s important to mention that small businesses are quite fragile, to begin with. First, you have employee turnover. Then, you have problems with finances and time management, that the majority of first-time entrepreneurs are ill-equipped to handle. These aside, you also have the issue of marketing costs and access to new technologies, which is an area in which some of these small businesses tend to lag behind. Now add to this the COVID-19 pandemics and what you’ll see is no short of a disaster.
Mass layoffs and closures
While there are some people who are afraid of the potential economic toll of COVID-19, it’s important to mention that some of these effects can already be seen. Mass layoffs and closures are already here. In order to somewhat minimize these effects, governments and governing bodies all over the globe are giving their best to remedy the situation. Still, we’ll have to wait and see what kind of positive effect this can achieve.
Types of businesses that are at risk
When it comes to examining the pattern of which businesses fail and which of them thrive, it’s important to mention that not all industries are affected to the same degree. For instance, while accommodation and food services (mostly the hospitality industry) are quite affected, they are quite resilient. This is because they can transition into a door-to-door delivery service, quite easily. Arts, entertainment and recreation on the other hand, as well as educational services have it the worst. Even they are trying to adapt by going online, yet, this has given limited success, so far.
During the thorough examination of this list, some may assume that why some businesses fail while others prosper is completely random, while nothing could be further from the truth. Businesses who have taken necessary financial precautions and have a stronger foundation are the ones who are bound to make it. One tip that could help out is for all entrepreneurs out there to focus on what they do best, which are mostly small administrative tasks and networking. Other than this, things like HR and finances should be left to professionals. So, finding and hiring a personal accountant may turn out to be lifesaving in these trying times.
Vulnerable sectors employ so many people
The problem is probably even bigger than you think. According to some of the most recent stats, these sectors that are seen as vulnerable are far more important than was initially thought. In the US alone, they employ about 20 million workers and are, on their own, responsible for as much as 12 percent of total revenue in the US. In other words, any upset here will have a major effect on life in the US in the following period.
Essential vs. non-essential
Previously, we’ve mentioned that some types of businesses are more at risk than others. For instance, the food industry seems to be quite safe, while the clothing and fashion industry is not doing so great right now. Why is that so? Well, the main reason is the fact that some of these are deemed as essential while others were not. It’s not just about the fact that the average consumer purchasing power is dropping, it’s about the fact that people have no idea how low it can drop. So, they are less prone to impulse purchases and tend to stick to their hard-earned cash as much as they can. Also, businesses that are more willing to self-improve tend to be more resilient.
Geographical location is also a factor
One more thing worth mentioning is the fact that some areas are just more exposed than others. First of all, this depends on the potential outbreak of COVID-19, seeing as how not all measures are spread nation-wide. Some smaller countries have opted for a complete lockdown as a safety measure but the correlation between the number of diseased in certain areas and the local economy is more than obvious. Moreover, we’ve already mentioned that some industries are more endangered. Well, there are some areas that specialize in these exact industries. This adds one more risk factor to the mix.
While the majority of people are living in the present and tend to worry about the day-to-day consequences of this pandemic, the phenomenon may have long-lasting effects on the business world. According to some estimates, a quarter of small businesses may permanently close, which would have a crushing effect on both the global and local economies. Sure, the global economy is bound to recover (it has recovered after every single disaster), however, to some, this seems as too far in the future. It is also quite clear that those small businesses that are capable to adapt have the best odds of making it.