COVID-19's Impact on Small Businesses
Wed, April 21, 2021

COVID-19's Impact on Small Businesses


The COVID-19 pandemic has severely disrupted global markets. Businesses—small, medium, and large—are forced to shut down and explore innovative solutions to overcome the growing negative implications of this unprecedented crisis. Many of them have laid off employees due to the risks presented by the virus and subsequent containment measures. As a result, business activity in many parts of the world has dramatically reduced.

Small Businesses Are Vulnerable

The spread of COVID-19 is having a devastating impact on small businesses across the world. Many entrepreneurs remain positive that this pandemic will come to an end. But until we get there, many businesses need to protect their investments as well as sustain their employees.

Since the pandemic started, reports have shown a massive increase in unemployment rates in the US. Many were laid off from their jobs because their employers could no longer keep up with the devastating demands of the crisis. A recent survey by McKinsey revealed that a disproportionate share of vulnerable jobs in the US came from small businesses. Nearly half of these jobs came from industries that were impacted the most in this crisis. This includes accommodations and food services, construction, retailing, and healthcare and social assistance.



Even before the pandemic, many small businesses were already vulnerable, with the median small business holding a 27-day cash buffer in reserve. COVID-19 only made it worse. According to, the trusted advisor and counselor to many of the world's most influential businesses and institutions, while small businesses provided nearly half of all US private-sector jobs before this crisis began, they account for 54% of the jobs most vulnerable during this pandemic. Firms with fewer than 100 employees were specifically vulnerable nowadays. Food service and customer service and sales—two occupational categories—account for more than four in ten vulnerable small-business jobs.

The survey also showed that more than half a million small-businesses jobs are at risk in 22 of the 50 US states. The number of vulnerable small-business jobs in California, Florida, Illinois, New York, Ohio, Pennsylvania, and Texas, for instance, ranges from 1.0 million to 3.5 million per state. Overall, 42 of the 50 states will have a larger share of their vulnerable jobs in small businesses than in large ones. Vulnerable jobs in the other eight states are nearly evenly split between large and small businesses.



Impact of COVID-19 on Small Businesses

Samantha Paustian-Underdahl, assistant professor of Management at Florida State University, said that small businesses and nonprofits have taken a huge hit amid the COVID-19 pandemic. As early as May, nearly 30% of their targeted businesses in the US had to close temporarily or permanently. According to Social Media Today, an online site that provides original analysis on the latest happenings in the social media, predictions suggest that up to 7.5 million small businesses in the country are at risk of shuttering permanently in the coming months.

Along with other researchers, Paustian-Underdahl examined the impacts of this crisis on small firms and nonprofit organizations throughout the country. The findings of the survey revealed that 15.2% of the 567 small businesses and nonprofit organizations closed permanently, while 14.5% closed temporarily.

According to, an internet news portal that provides the latest news on science, the participants were asked to provide feedback on several factors to measure how businesses have changed daily operations during this global pandemic. These include employee layoffs, government loan programs, operating capacity, and stress levels. About 31% of the participants are operating below 40% capacity, while nearly 40% are operating at 40% or higher during COVID-19. Over 46.7% reported being laid off of their jobs, while 51% reported that they did not. The average number of employees laid off was 10.5. The researchers also discovered that business owners and NPO leaders are experiencing different effects of COVID-19 on their overall well-being and performance, depending on their gender.

"Consistent with recent research by Gallup, we found that women who own small businesses are experiencing higher levels of stress and burnout during COVID-19 compared to men. While some may assume this could be due to higher work-family-conflict, we found the men surveyed are reporting higher work-family-conflict than women,” Paustian-Underdahl said.

Paustian-Underdahl explained that the reason why men reported having higher stress levels than women is because women are already used in juggling work with family. Meanwhile, men need to make more adjustments. "Despite being more stressed, the women in our sample are more satisfied with their performance and that of their organizations during COVID, compared to men, so maybe their hard work is paying off," she said.

Fortunately, most businesses and organizations are getting help. The participants were asked about their experience applying for and receiving funds from the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL). The researchers found out that nearly 92% of the participants who applied for government funding received some type of financial assistance. The findings revealed that 75.5% of the respondents applied for one or both types of government aid. About 28.9% of those who applied received PPP funding only, 26.8% received EIDL only, 11.3% received both PPP and EIDL, and 8.3% did not receive anything.

Recently, Facebook published a report providing a range of insight into the sentiments of small and medium businesses. The report showed that 31% of small and medium-sized businesses have shut down [entirely] in the last three months. “The situation is worse for personal business (52% of which report shutting down), hotels, cafes and restaurants (43%) and services like wellness, grooming, fitness or other professional services (41%),” Facebook said.

The SMB (Small and Medium Business) Group also surveyed more than 500 businesses. According to the survey, small businesses that provide hands-on services such as hair salons and spas, home improvement, and repair contractors find it impossible to operate these days. For others, such as those in retail who relied on in-store traffic, small business owners had to find new ways to get their product to the customers.

Thus, many experts believe that businesses need to find new tactics to promote their products and services to survive. “There will be a new normal, where people learned to do business in different ways. Maybe your business was a law firm or financial planning, and everybody used to come to the office,” Laurie McCabe, SMB’s co-founder, said.