Which small businesses are most vulnerable to COVID-19—and when

Those with relatively limited financial resources are most at risk, but none are immune to the pandemic’s effects. Understanding which small businesses are most threatened can help the rest of us respond to the crisis.

As the fallout from the coronavirus pandemic comes into sharper focus, the position of the nation’s small businesses appears, overall, to be particularly bleak.1 By mid-April, according to a report from the Facebook & Small Business Roundtable, about a third had temporarily stopped operating,2 and by mid-May more than half had laid off or furloughed employees. Our analysis of several surveys of small businesses suggests that before accounting for intervention, 1.4 million to 2.1 million of them (25 to 36 percent) could close permanently as a result of the disruption from just the first four months of the COVID-19 pandemic.3

Some small businesses may close because they’re in industries, such as accommodations, food service, and educational services, that are affected by changed customer behavior, especially the physical distancing and mandated operational restrictions that began during the pandemic. Other small businesses may close because they were already at risk financially before the crisis. Indeed, recent research by the Federal Reserve4 finds that only 35 percent of small businesses were healthy at the end of 2019 and that less healthy ones were three times more likely than the others to close or sell in response to a revenue shock (see sidebar, “Our methodology”). The most vulnerable small businesses face both financial and COVID-related challenges (Exhibit 1).

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Πηγή: mckinsey

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