This comes as no surprise to Trends Journal subscribers. Small businesses are recovering more slowly from the economic shutdown than are other sectors of the economy, reported Womply, a data and technology company with about 500,000 small-business clients.
Key reasons:
- A large proportion of small businesses rely on person-to-person contact, such as restaurants, barber shops, and stores.
- Most small businesses lack the capital to survive weeks, let alone months, with no trade or dramatically reduced trade.
- Most small businesses will use their savings or working capital to pay fixed expenses during the shutdown and will not have the funds to invest in new stock, advertising, and other needs when customer flows return to normal.
In early April, 60 percent of small-business workers who had been working in January registered no hours of work, according to Homebase, which makes scheduling software.
In contrast, employment at businesses less dependent on physical presence are returning to pre-pandemic levels, said Gusto, a firm providing payroll services to law offices, tech companies, and similar businesses.
About 1.85 million U.S. businesses closed temporarily or permanently during 2020’s second quarter, reported Oxxford Economics, which tracks data on 32 million businesses around the country.
The number of businesses that will never reopen will exceed the 4.5 million that disappeared in a single year during the Great Recession, said Oxxford president Raymond Greenhill.