Small businesses across the United States have been decimated by the COVID-19 pandemic. The winter months ahead—bringing predictions of a second wave of infections—won’t be any gentler, and without aid from the government, many businesses won’t be able to rebound, says Nada Sanders, distinguished professor of supply chain management at Northeastern.
Considered an essential source of employment, small businesses—those with fewer than 500 employees—account for nearly half of all private-sector jobs. A report from McKinsey & Company in May noted that 30 million small business jobs were vulnerable in the coronavirus crisis.
Small business closures by type
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The small businesses that have survived so far have had to get savvy amid extraordinary challenges. At the onset of the crisis, a number of distilleries and breweries began making and selling hand sanitizer. Some restaurants adapted their offerings and pivoted to delivery and takeout to sustain their businesses.
Measures such as these will be even more crucial in the months to come, says Sanders, especially as enhanced federal unemployment benefits and loans for small businesses remain in limbo.
“This is an extraordinarily difficult time for businesses—small and medium-sized, but especially for small ones,” Sanders says. “We’ve had these simultaneous shocks on both the demand and the supply side, and really over a very long period of time. That’s very different from any of the shocks economically we’ve ever seen in the past.”
Small business closures as of Nov. 4, 2020
Although smaller companies and start-ups were hit hardest by the crisis, some actually prospered, says Sanders. Companies that were already profitable and used technology to their advantage fared better than others in the early stages of the pandemic.
But even cash-strapped businesses, which tend to have lower administrative overhead costs, were at an advantage if they were able to be limber and flexible in their decision-making, or reinvent themselves altogether, Sanders says. Maintaining strong one-on-one-relationships with their suppliers and customers also positioned those businesses to do well.
COVID-19’s effect on year-over-year consumer spending
Jan. 5, 2020
Nov. 3, 2020
“Most small businesses and entrepreneurs have better visibility along their supply chain and closer relationships with their suppliers than large firms, simply by the nature of being small,” she says.
Businesses should be thinking strategically as winter approaches and the coronavirus continues to circulate widely across the globe. To further cut costs during this period, Sanders says smaller companies should identify what they’re about, narrowing their offerings to focus on products and services that ensure customer retention and maintain cash flow. Some online retailers and medium-sized businesses adopted this strategy even before the pandemic.
“We’ve seen restaurants that are small and financially strapped focusing on carry-out and delivery, and that requires a certain change in operations, but it’s also meant a narrowing down,” Sanders says.
Some grocery chains, small and large, are beginning to do this as the holidays approach, says Sanders. They have pared down their inventory so that they’re offering less variety but still meeting their customers’ needs.
Though consulting firms have encouraged businesses to embrace analytics and digital technologies in order to better understand the market and suppliers, Sanders says now is a time for businesses to work with what they have, do what works best for them, and not experiment with new methods or technologies.
Additional stimulus money from Washington will be necessary to support small businesses through the next three to four months, Sanders says. Without subsidies from the government, small businesses won’t be able to rebound, portending bankruptcies, unemployment, and even more economic damage as e-commerce behemoth Amazon broadens its reach.
“It would be economically devastating in terms of the number of people that will be unemployed and the businesses that we will lose,” Sanders says. “It would also be really devastating for consumer choices and what the entire economic landscape could potentially look like.”
Sanders says small business owners might take heart in the knowledge that COVID-19 shares similarities with the 1918 flu pandemic; both crises caused a significant shift in consumer behavior and market patterns that reverberated through the following decade, a period known as the Roaring Twenties. For some businesses, it may be a matter of riding it out until a vaccine is available, she says.
The U.S. stock market soared on the news that U.S. drug giant Pfizer and German drug firm BioNTech both claimed their coronavirus vaccines are more than 90 percent effective. White House coronavirus adviser Dr. Anthony Fauci has said that an acceptable vaccine could be merely 50 to 60 percent effective.
“If history is any indication of the future, then we can hope that the markets will come back,” Sanders says.