The last time we covered small business was in May 2020. What’s happening now?
A report by Yelp found 163,735 businesses listed on Yelp that were open in April 2020 had closed by September. That averages out to more than 800 closures per day. Politicians, pundits and the press are using the number of 800 closures a day as a benchmark and a rallying cry, but in actuality the number might be much higher. Not every small business is listed on Yelp. And since when is Yelp the arbiter of accurate information?
The damage to small businesses across America due to the Covid-19 Pandemic is not yet fully known.
Other data from the University of California Santa Cruz indicates that the number of small business closures could be much higher than 800 a day. The university's data show nearly 317,000 businesses closed between February and September—that’s closer to 1,500 closures a day. As of this month, government sources like the Bureau of Labor Statistics and the Small Business Administration do not have current business closure data available—to date for 2020. And it will take more time and research to gather year-end totals for 2020. In fact, the damage to small businesses might take years to accurately report the complete impact of the pandemic.
With this said, it is important to keep in mind an important factor: Pre-pandemic, small business has been on the decline since 2008. As a point of reference, in 2008 53% of the US economy was produced by small business. A new report issued by the Small Business Administration (SBA) in January 2019 (pre-pandemic) shows that small businesses accounted for 44 percent of U.S. economic activity.
It’s clear that for over 12 years, small business has not been getting the necessary financial, regulatory and political support to thrive as a sector.
Historically, going all the way back to 1974, the three main issues negatively impacting small business were healthcare, taxes and regulatory issues. Nearly fifty years later, these same three issues that negatively impact small businesses have actually grown worse—a reality that needs to be examined during 2021 and the years ahead. It is also important to consider that the largest chunk of Trump’s tax cuts went to large corporations and the top 1%, throwing small businesses under the bus. Trump claimed his tax cuts were meant to expand and generate business activity, but large corporations used the money to buy back stocks and intentionally leveraged themselves to increase their debt. Today corporate debt is at an all-time high.
Government isn’t doing what small businesses need, not only to start up, but also to thrive and prosper. The Trump administration’s Paycheck Protection Program that was designed for small businesses has allowed large companies to be the first in line to receive the funds, thus draining resources. The resources made available by government, foundations and NGOs were inadequate prior to the global disaster of a pandemic. Today, they do not have the resources to struggle with a tsunami of unprecedented and unimaginable need.
Yet there is a light at the end of the tunnel. New businesses are often born at exactly the right time. General Motors, Burger King, CNN, Uber and Airbnb were all founded during economic downturns. One pundit, Dane Strangler, a fellow at the Bipartisan Policy Centre in Washington D.C., told the BBC “that the difficult economic backdrop makes them both tougher and more nimble for years to come.”
This is not entirely true. Businesses like Uber and Airbnb, restaurants, bars and small retailers can be tough as nails and will still be devastated by the pandemic. Small businesses who startup in times of extreme adversity, though, are both opportunistic and lucky. They spot a need in the marketplace and are able to fill it. Often, they are just in the right place at the right time.
Small Business has always been, is, and always will be, the backbone of America. In the coming year, we expect many new small businesses to come out of the gate. And we will be here, cheering them on. We are committed to telling the stories of small businesses who are pressing on in the face of great adversity.