25% of US small businesses shuttered due to Covid-19

Almost 33% expect it to take longer than six months for operations to return to normal, new survey by Facebook finds

A man looks at signs of a closed store due to Covid-19 in Illinois. AP

Nearly a quarter of small and medium-sized businesses in the US closed due to disruptions caused by the Covid-19 pandemic as of December last year, according to a survey by Facebook.

However, fewer businesses were shut compared with April (31 per cent), with some SMBs that were previously closed able to reopen, the survey added.

It was a challenging year for small businesses in 2020, Sheryl Sandberg, Facebook’s chief operating officer, said.

“Many closed their doors either temporarily or permanently, and many that stayed open struggled financially,” she added.

Almost 33 per cent of SMBs expect it to take longer than six months for operations to return to normal.

The report, which surveyed more than 11,200 business leaders, 8,000 employees and 6,600 consumers across the US in November and December, defines SMBs as those with 500 or fewer employees. SMBs tend to differ from SMEs by employment, with the former often relying on part-time workers or outsourced staff and the latter employing full-time workers.

More than 50 per cent of SMBs reported lower sales compared with the same period in 2019, the survey found.

Businesses in customer-facing industries and those that deal in non-essential goods and services faced the brunt of the pandemic. Closure rates were highest in food and accommodation (35 per cent) and arts and entertainment (34 per cent), but lower in health (10 per cent) and transport (8 per cent) in December.

Reasons cited for closure included government restrictions (33 per cent), financial challenges (30 per cent) and lack of demand (26 per cent). In April, 62 per cent of businesses were closed due to government and health authority orders.

“It is also increasingly clear that the economic impact of the pandemic hasn’t been felt evenly,” Ms Sandberg said.

“Female-owned small businesses are closing at a higher rate than those run by men … this gap has increased since the start of the pandemic. Businesses in minority communities are also closing at a higher rate than others and have seen a steeper drop in sales, too."

In December, 42 per cent of female-led businesses were closed, compared with 31 per cent of male-led firms. The gender divide in closures was driven by a bigger representation of female entrepreneurs in sectors with higher closure rates, the survey found.

In December, only 37 per cent of closed businesses predicted they would reopen within six months, compared with 66 per cent in April.

Among businesses that closed and subsequently reopened, the most common enablers were social distancing protocols (40 per cent), customer support (31 per cent) and the easing of restrictions (30 per cent).

Meanwhile, more US businesses have started selling online for the first time.

The proportion of SMBs with no digital presence in the 30 days before the Covid-19 pandemic was 35 per cent. However, this fell to 13 per cent in the 30 days prior to the December survey, the report revealed. “The proportion making 100 per cent of their sales online rose from 13 per cent to 20 per cent.”