57% of Small Businesses Could Face Permanent Closure From Coronavirus Delta Surge

57% of Small Businesses Could Face Permanent Closure From Coronavirus Delta Surge

Survey shows most businesses just ‘barely hanging on’ after previous COVID-19 shutdowns
small business closed because of coronavirus shutdown

With the rapid rise of the COVID-19 delta variant, U.S. government and public health officials have proposed a variety of methods to stop the spread of the virus, including reinstating mask mandates, pushing to increase vaccination rates and even a new round of shutdowns.

This last option — reclosing public spaces — also poses a major challenge to many small businesses. According to a new survey from small-business resource review site Digital.com, 57% of small businesses expect to close permanently if more shutdowns take place.

And although in-person businesses are more likely to face permanent closure (67%), the move could also affect a significant amount of online businesses (46%), the survey found.

Previous shutdowns hurt chances of survival for many small businesses

One reason why another round of shutdowns would affect small businesses to this extent is because many are still recovering from the previous ones. Digital.com found that, of those business owners who predict permanent shutdowns for their companies, 62% of them say they were "barely hanging on" after earlier shutdowns devastated their finances.

The survey also found other reasons for facing permanent closure included:

  • No alternative means of commerce besides in person (55%)
  • Not receiving a Paycheck Protection Program (PPP) loan (37%)
  • Having declared (or tried to declare) bankruptcy (32%)

Likewise, just over half (51%) of those who said they’re barely surviving reported having lost at least half of their business due to previous shutdowns.

Compared to in-person-only (58%) and online-only (43%) businesses, companies that conducted business both online and in person (69%) were more likely to suffer financially because of these shutdowns.

In addition to dividing their resources between both channels, these hybrid businesses were also at the mercy of retail trends taking place at the time. For instance, large chains remained open at the height of the pandemic due to their "essential" status, while other, smaller retailers were forced to shut down.

At the same time, big brands with resources to spare created or expanded their online footprint, taking customers away from smaller businesses. A separate survey from Scalefast found that, during the pandemic, consumers preferred to purchase from online marketplaces and traditional retailers with an online presence, rather than direct-to-consumer brands, due to their perceived reliability.

If another round of major shutdowns were to take place, 65% of in-person-only businesses predict that the lack of revenue would force them to shut their doors permanently.

Small businesses that survive may still hurt financially

Digital.com's report also shows that even the businesses that might be able to weather another big shutdown won't get through unscathed. Respondents who predicted that their business wouldn't close permanently still voiced other concerns, such as:

  • Losing revenue (59%)
  • Laying off staff members (34%)
  • Declaring bankruptcy (14%)

And because these challenges come at a time when many workers are interested in leaving their employers for better prospects elsewhere, the small businesses that do survive could be in a very tight spot indeed.

Methodology: Digital.com conducted an online survey of 1,250 owners of small businesses (those with 500 or fewer employees) via Pollfish on Aug. 2, 2021.