- 57% of small businesses will close permanently if there are more shutdowns due to the COVID-19 Delta variant
- Businesses that operate only in-person are at greatest risk with 67% predicting permanent closure if there are more shutdowns
- 46% of online businesses and 57% of hybrid businesses are at risk of closure if there are more shutdowns
- Nearly 4 in 10 businesses that are in financial trouble didn’t receive a Paycheck Protection Program (PPP) loan
- For businesses that aren’t in danger of closing, another shutdown could mean staff layoffs and bankruptcy
As COVID-19 cases rise again due to the highly contagious Delta variant, public health officials and state and local governments are trying to mitigate the virus’ spread by encouraging eligible individuals to get vaccinated and reinstating mask mandates in public places.
More extreme measures, such as lockdowns, could spell disaster for small businesses.
Digital.com surveyed 1,250 U.S. small business owners during the first week of August. More than half say another round of shutdowns will force them to close their businesses permanently. Our survey also found that businesses that aren’t at risk of closing if another shutdown occurs, would still face serious consequences, including significant lost revenue and staff layoffs.
More shutdowns spell trouble for in-person, online businesses alike
Fifty-seven percent of all small business owners we surveyed say they will be forced to close permanently if the government orders another round of shutdowns due to the Delta variant.
That includes 46% of online-only businesses, who, despite not having brick-and-mortar locations to shutter, could still feel the economic impacts of more shutdowns.
Expanding into e-commerce may have also helped businesses with an in-person component weather the first round of shutdowns, but now 57% of businesses that operate both in-person and online say another shutdown will lead to permanent closure.
However, the situation is most dire for businesses that operate solely offline. Sixty-seven percent of in-person businesses are facing permanent closure if there is another shutdown.
According to Digital.com Small Business Expert Dennis Consorte, small business owners may be able to mitigate risks presented by another shutdown if they act now.
“Collaborate with other local business owners and start selling discounted vouchers to your community, which people can redeem at a future date,” says Consorte. “Next, get online. If you already sell products, great. Set up an e-commerce shop. If not, think about how you can augment your core business. For example, if you’re a salon owner, you can sell hair care products online.”
Consorte also encourages companies to use social media and crowd-funding platforms like Patreon to keep customers engaged and raise needed funds.
Many businesses in danger of closing ‘barely hanging on’ after earlier shutdowns
Sixty-two percent of business owners who predict they’ll close permanently in the event of another shutdown say they’re “barely hanging on” after the financial devastation of the first shutdowns. Fifty-one percent of these business owners lost over half of their business due to previous shutdowns.
Businesses that operate both in-person and online are in the most serious financial straits. Sixty-nine percent of those business owners report barely surviving the financial devastation of earlier shutdowns, compared to 58% of in-person only businesses, and 43% of online businesses.
The challenge, according to Consorte, is that during the shutdowns in 2020, these types of businesses got hit on both fronts. This is especially true on the retail front, where they had to compete with much larger retailers, both in brick-and-mortar stores and online.
“During the first lockdown, we saw chains like Target and Wal-Mart qualify as ‘essential,’” he explains. “Meanwhile, boutique clothing stores and other small businesses were forced to shut down.”
On the e-commerce side, small businesses struggle to compete with behemoths like Amazon, who can provide customers with better prices and delivery speeds than most small businesses.
Meanwhile, for 65% of businesses that only operate in-person, another round of shutdowns will force them out of business because they have no alternative means of commerce.
Failure to receive PPP loan hurting businesses
Although the Paycheck Protection Program (PPP) distributed more than $800 billion to small businesses between April 2020 and June 2021, 37% of the business owners we surveyed who are at risk of having to permanently close their business say they never received a PPP loan.
A similar number of businesses, 32%, have already tried declaring bankruptcy to remain solvent.
Owners who believe they’ll survive shutdown still fear revenue loss, staff layoffs, bankruptcy
Among businesses that aren’t in danger of permanent closure, 59% say they will face a loss of revenue if forced into lockdown again, and 34% say they will be forced to lay off staff members.
Another potential consequence of more shutdowns is small businesses declaring bankruptcy to avoid closure. Fourteen percent of all business owners who expect to survive another shutdown say bankruptcy is still a possibility if the government orders another lockdown.
The data for this report comes from a survey designed and paid for by Digital.com. The survey was administered by online survey platform Pollfish on August 2, 2021. Digital.com surveyed 1,250 owners of small businesses (defined as 500 or fewer employees) about the impact COVID-19 related shutdowns had on their businesses, and how another round of shutdowns would affect them.