Coronavirus surge killing U.S. small businesses
On the last Friday of June, after Gov. Greg Abbott of Texas said that bars across the state would have to shut down a second time because coronavirus cases were skyrocketing, Mick Larkin decided he’d had enough.
No matter that Larkin, an owner of a karaoke club in Wichita Falls, Texas, had just paid $1,000 for perishable goods and protective equipment in anticipation of the weekend rush. No matter that the frozen margarita machine was full, that 175 plastic syringes with booze-infused Jell-O were in place, or that there were masks for staff members and hand sanitizer for guests.
That day, June 26, Larkin and his partner dumped what they had just bought into the trash and decided to close their club, Krank It Karaoke, for good.
“We did everything we were supposed to do,” Larkin said. “When he shut us down again, and after I put out all that money to meet their rules, I just said, ‘I can’t keep doing this.’ ”
It was harrowing enough for small businesses — the bars, dental care practices, small law firms, day care centers and other storefronts that dot the streets and corners of every U.S. town and city — to have to shut down after state officials imposed lockdowns in March to contain the pandemic.
But the resurgence of the virus, especially in states such as Texas, Florida and California that had begun to reopen, has introduced a far darker reality for many small businesses: Their temporary closures might become permanent.
Nearly 66,000 businesses have folded since March 1, according to data from Yelp, which provides a platform for local businesses to advertise their services and has been tracking announcements of closings posted on its site. From June 15 to June 29, the most recent period for which data is available, businesses were closing permanently at a higher rate than in the previous three months, Yelp found. During the same period, permanent closures increased by 3 percent overall, accounting for roughly 14 percent of total closures since March.
Researchers at Harvard believe the rates of business closures are likely to be even higher. They estimated that nearly 110,000 small businesses across the country had decided to shut down permanently between early March and early May, based on data collected in weekly surveys by Alignable, a social media network for small-business owners.
Christopher Stanton, an associate professor at Harvard Business School who was one of the researchers, said it was difficult to accurately gauge how many small businesses were closing because, once they shut their doors for good, the owners were hard to reach. He added that it could take at up to a year before government officials knew the true toll the pandemic was taking on small businesses.
At the moment, 39 states continue to record growing numbers of new cases daily.
It is not clear how many of the businesses Yelp is tracking count as “small” — defined by the Small Business Administration as those with 500 or fewer employees. But the company found that, among the tracked businesses — which include restaurants, retailers and other independent, consumer-facing operations — retail businesses, led by beauty supply stores, have been closing at the highest rate since the pandemic began. Restaurants are the next hardest-hit group.
Small businesses account for 44 percent of all U.S. economic activity, according to the SBA, and closures on such an immense scale could devastate the country’s economic growth. Collectively, such businesses are one of the largest employers in the country, said Satyam Khanna, a resident fellow at the Institute for Corporate Governance and Finance at New York University School of Law who has written about the effects of the pandemic on small businesses.