The Impact of Coronavirus on U.S. Businesses
Coronavirus has arrived, and we’ve suddenly found ourselves in the midst of a new and rapidly changing situation. In order to slow the rate of infection and “flatten the curve,” the new normal is social distancing, hand washing, and staying home when you’re feeling ill – but that may not be enough, as cities are shutting down restaurants, bars, and gathering places, and moving towards more drastic “shelter in place” initiatives.
The impact will be massive, especially on small businesses. In just the course of a week, businesses went from normal operations to altering the way their employees work, thinking about what operations to cut, and even facing shutting their doors. Business owners are making unprecedented – and swift – pivots and decisions with a lot of uncertainty as to what’s to come.
This week (March 17-19), we surveyed 400 U.S. small business owners who run companies with at least 5 employees, in order to get a sense of how they were responding to the Coronavirus outbreak. The industries our respondents represent are retail stores with physical locations, restaurants and food trucks, service businesses like consultants, agencies, etc., online retail or product offerings, software business, and non-profits and charities.
According to our survey, only 37% of business owners felt prepared for something like a virus outbreak. But 42% reported feeling only a little prepared, with 20% reporting they didn’t feel prepared at all. As you’ll see in our findings, Coronavirus has already had a significant negative impact on revenue and business operations that could impact businesses well into the future.
The Overall Impact
Even though the situation in the U.S. is changing rapidly, businesses are already reporting negative impacts from the Coronavirus – not just with employee sickness, but from the social distancing and isolation initiatives that are being implemented. Less people out and about means less foot traffic to brick-and-mortar locations. Temporary business closures lead to layoffs, lead to less people spending money in our economy. These halts in the system have also disrupted supply chains. Over half of our respondents (55%) reported that the Coronavirus has already had a negative impact on their business. While 39.3% reported that there had not been a negative effect, we will probably see that number drop as new distancing initiatives are put in place.
For those negatively impacted by the outbreak, a decrease in sales and revenue was the biggest way they were impacted (at 77%), with employees being unable to work a close second at 56.8%. 42.8% also reported that their vendor/supply chain processes have been disrupted, mostly likely due to closures and business alterations – an interesting upstream effect that is hurting the downstream. A number of businesses also reported seeing a stagnation in clients or customers paying bills, which points to the economic concerns happening as well. And it’s no surprise to see that the industries most adversely affected are restaurants and food trucks, followed by non-profits and charities, physical retail stores, and service businesses.
Respondents also reported other ways in which they felt the impact of Coronavirus on their business, including event cancelations, lack of bookings or appointments, a lack of non-essential shopping, and even remote work complications.
Whether they reported a negative impact or not, most businesses – 84.5% of respondents – reported there being at least some impact, with 44.5% indicating a major impact. From our responses, we know that the impact could hit any part of business operations: sales and revenue, supply chain, employee engagement, and more.
Whether they saw an impact now or not, nearly all of our respondents (92%) believe that the Coronavirus – and the social distancing initiatives around it – will have an impact on their business in the upcoming months. Again, the industries most concerned are restaurants and food trucks, service businesses, physical retail stores, and non-profits and charities.
The Impact On Operations
We’ve already seen that many of our respondents were feeling the impact of the Coronavirus in various ways across their business operations, so we wanted to drill down on a few specific – but significant – aspects.
About half of the companies we surveyed reported delaying their hiring, with restaurants and food trucks being the industry most represented in freezing new employees. Software companies reported that they were least likely to halt their hiring during this time.
Half of the companies we surveyed reported that they had to change their marketing plans due to the Coronavirus outbreak. While restaurants and food trucks reported having to change their strategy, it was actually non-profits and charities who would have to change the most, with physical retail locations behind them. Additionally, 67% of our respondents noted that they are making a higher than normal efforts to retain customers.
It’s no surprise that restaurants and food trucks reported the highest amount of sales loss. Yet each industry we asked – retail stores, service businesses, online retailers, software companies, and non-profits and charities – all reported some kind of significant sales loss due to the Coronavirus.
Of the companies we surveyed, 57.2% already reported that they worked remotely. Of the remaining companies who have physical locations, 43.6% reported going temporarily remote, while 24.3% are considering it. 32% have reported that they don’t plan to go remote (possibly because their business model won’t allow for remote work).
The Financial Impact
While our respondents reported feeling an impact across business operations from the Coronavirus outbreak, many reported financial concern and anxiety surrounding the sudden shift in business-as-usual here in the U.S. About half of the companies surveyed have already had to reduce overhead, and 71.3% reported a reduction in marketing expenses, which include printing, advertising, and other costs. The second biggest change came in reducing employee wages and promotions, followed by reducing service providers, contractors, and freelancers. Our respondents also wrote that they were reducing costs by turning down the heat, reducing business hours, reducing costs of goods, or even, unfortunately, closing.
So far, the majority of our respondents reported not having taken on any additional debt, but 20.8% responded that they had. For those who had taken on debt, the amount varied, but trended low: about a quarter took on an amount over $10,000, with the remaining three-quarters taking on less than $10,000.
Regardless of where they stood today, almost half of our respondents (44.3%) believed they would need to take on debt in the next 3 to 6 months, with a large percentage – 20% – just not sure.
That uncertainty was also reflected in our respondents’ concerns over if they would be able to access the capital they may need to get them through their business alterations: 55.5% reported that yes, they did have concerns, with restaurants and food trucks being the highest reporting industry.
What This Means
This situation is quickly evolving, and while social distancing measures are considered the best course of action to diffuse the spread of the virus, those same measures have greatly impacted small businesses – from customer sales, to supply chains, to business operations such as hiring and marketing, and even to employee retention. There’s also anxiety around being able to access capital to get their businesses over the hump. And of the industries we surveyed, it’s clear that restaurants and food trucks – places that have been ordered to close, or have closed voluntarily to help reduce the spread of the virus – are the biggest hit, with retail stores having a similar concern. Nonprofits and charities are also being impacted, but in a different way: Donations may dry up as the public becomes more concerned about the economy. But regardless of the industry, all businesses are going to experience the impact of the Coronavirus in various ways – and if they weren’t prepared before, they’re looking for ways to adjust to this changing world now.
Insights From Different Types of Businesses:
For those interested in seeing the impact on the different types of businesses surveyed, please find the data below: