The not-so-small world of small business has been rattled to its core. In 2016, small businesses accounted for 99.7% of all businesses in the U.S. If we could figure out that percentage today, it would likely change as quickly as the COVID-19 outbreak chart itself. What can reliably indicate the future of small businesses, however, are peeks into the mindsets of the business owners. Their level of optimism or pessimism, the amount of help they’ve received, and what they personally envision may just help us know what to expect for the small businessman in America.
What follows is an in-depth analysis of reporting from the Small Business Pulse Survey. State-by-state analyses reveal the visions small business owners across the country have for their livelihoods. We’ve broken down their responses and compared them by optimism as well as political party lines. If you’re curious about the future of America’s small businessman, keep reading.
The first part of our study looks at small business opinions on how the next six months may unfold, beginning with the overall national average as well as state-by-state results.
Over the course of the next six months, small business owners aren’t necessarily expecting any miracles. In May of 2020, even as COVID cases raged on, more than half of business owners felt things would return to normal within six months. That figure plummeted to just 18% in October. In other words, fewer than 1 in 5 business owners still held the belief that normality would return in half a year. As the line chart above starkly reveals, June appeared to be a particular shifting point for this belief, which also happened to correspond with an intense COVID spike throughout the country. Again in October, we see a similar circumstance having occurred.
On a state level, the six-month timeline feels most unrealistic in Hawaii and Washington, D.C. Ironically, the small businesses in these locations are also the country’s top two earners of export value. Moreover, Hawaii also has the country’s highest unemployment, while one could argue that D.C. may have the most insight into what’s going on with COVID-19. All of this is to say that their lack of optimism over the next six months is concerning.
On the other hand, some Western and Midwestern states didn’t entirely agree. Places like Idaho, South Dakota, Utah, and Montana all felt that things would return to normal within six months. Though these states happen to have some of the smallest numbers of COVID cases, their numbers are on the rise, without exception. So their optimism may soon be dropping off as well.
Since COVID-19 has become so politicized, we thought it would be helpful to next compare six-month optimism by political lines. The two charts below contrast right wing and left wing states with regards to their opinions as to what will happen to small businesses within the next half-year.
Traditionally red states were overall more optimistic about things returning to normal before six months. Blue states, like California and New York, had at least half of small business owners thinking it would take longer than six months for their operations to feel normal again, while red states, like Texas and Florida, were much less likely to be in agreement, instead assuming things wouldn’t have to take so long.
Looking at the graph of COVID-19 cases, it’s easy to see that this sense of optimism actually has less to do with the number of cases and more to do with the rhetoric of each party’s prominent leaders. While Trump and Pence remain insistent that COVID is under control, blue leaders like Andrew Cuomo have repeated the instructions to " be afraid" of this disease. This stark contrast is clearly being reflected among small business owners.
Businesses have been closing so quickly across the country that Yelp actually added a feature to allow business accounts to temporarily or permanently close their profiles. Since March of 2020, Yelp estimates that nearly 165,000 businesses have already done so. Other experts estimate that 60% of these businesses will never return.
The chart above, however, looks exclusively at permanent closures. By comparing party lines, we can see just how impactful the optimism and pessimism can be. While fear of the disease and corresponding restrictions demonstrated disproportionately by blue states may be warranted and accurate, blue states are seeing higher numbers of business closures than red states. In one week of August alone, Colorado saw 3% of its small businesses permanently close their doors, while New York and New Jersey saw 2% and nearly 3% do the same in the first week of September, respectively. While North Carolina saw 2.4% of its small businesses permanently close shop near the tail end of August, it was the only state to break 2%. All other red states saw under 2% of small business doors close permanently, at least as far as a single week was concerned.
Of course, we cannot assume that optimism alone carries small businesses through pandemic restrictions. A small business’ success may easily depend on the amount of support they are able to receive during a time when typical operations become impossible. The next part of our study looks at the percent of small businesses claiming they have not received financial support of any kind during the pandemic.
In spite of their higher number of closures, blue states did appear more likely to receive financial support. States like California, New Mexico, and Colorado maxed out at 32% of businesses who were unable to receive support of any kind, while the cap remained at 38% for red states. Small businesses from Connecticut were the most likely to receive support, with only 17% claiming they did not find any, while Alabama was the most likely red state to receive support. Many researchers are claiming that Connecticut’s small business economy won’t be restored for another decade, in spite of their apparent ability to receive financial aid more readily at this time.
Alabama was the most likely red state to receive financial aid. Alabama Governor Kay Ivey recently announced a $100 million grant program to help employers from the state recover, and it’s evidently being utilized. That said, the most common form of financial assistance received across all states was PPP, or the Paycheck Protection Program. Nearly three-quarters of small businesses that received aid received it in this form.
With nationwide school closures and switches to remote learning, it’s easy to understand why the educational services industry was the most pessimistic of all. Nearly 70% of this sector felt that it would take six or more months to recover. This makes sense, as the schools that have attempted to recover prematurely are facing dire consequences – The University of Alabama being just one example.
The only sector to arguably fare worse than education is the food and accommodation industry. Restaurants are facing a notoriously difficult time, particularly because they’ve been legally restricted from serving their customers. As other businesses were often able to go online, some restaurants may rely solely on their in-person patrons to run their business. Even as they are allowed to open their doors again, capacity and distancing limits severely restrict earning potential. This industry was even less optimistic than the education industry and most often felt that their establishments would be permanently closed within six months.
As small businesses across the country attempt to rebound against all odds, their spirits unfortunately appear increasingly pessimistic. As time has gone on, they more often estimate the need for more than six months for their livelihoods to return to normal, while they also bear witness to increasing amounts of small business closures in many states. Though blue states were even more pessimistic than red, it was really the educational and food services industries that generally demonstrated the brunt of low expectations for recovery.
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For this project we used the Small Business Pulse Survey conducted by the United States Census Bureau. The purpose of the survey was to understand the effect of COVID-19 on businesses since the declaration of a pandemic in mid-March of 2020. For more information on the survey, please visit https://portal.census.gov/pulse/data/#data where you can find detailed information on collection methods, questions, and more data. Please note that the survey was not conducted in July.
State political leanings were based on the 2016 election results as per Politico: 2016 Presidential Election Results.
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