Why Nearly 25% of Small Businesses Have Closed Temporarily or Permanently


Saturday, August 29th, 2020

We know that businesses have suffered through Coronavirus, but how far have these adverse effects gone?

According to the most recent stats, nearly 25 percent of microbusinesses have already closed down permanently without plans of ever recovering—another 40 percent plan to close down operations in the coming few months.

The few who are still hopeful rely on financial support from the Small Business Administration or any other lending institution.

But why are many businesses closing down? According to stats, many micro-business owners blame the federal and ministry of health ministry restrictions as the primary reason for shutting down permanently or temporarily.

Ten percent blame the economic recession, and another 8 to 10 percent cite the reducing number of customers as the reason for the shutdown.

Small businesses have faced several challenges since the start of the Coronavirus

  1. Poor Cashflow

Operational expenses shot up amid Coronavirus as businesses had to spend more to protect both employees and customers. But while companies spent more to remain in business, a reduction in customer numbers threatens to hinder their cash inflow.

Stats show that only 24 percent of microbusiness owners are sure enough their cash inflow exceeds their expenditure.

Still, an entire 35 percent do not know their status or find no differences in cash inflows and outflows.

  1. Job losses and the future of employment

The Coronavirus has stripped organizations of many employment avenues and robbed entrepreneurs of their self-employment opportunities.

Many no longer rely on their previous income sources, and many more are hopeless about the future.

Many industries are suffering from the COVID effect at different levels. The Table below shows depicts the percentage of staff “not” currently functioning in their micro-businesses from various sectors.

Sector Percentage
Manufacturing 20 – 23 percent
Retail 22- 25 percent
Hospitals 41- 45 percent
Services/Corporates  40 percent
Agro-economic 10 – 15 percent

 

From the above stats, it is evident employment opportunities have been reduced significantly amid a global crisis.

Final Words

Coronavirus has taken longer than small businesses anticipated and had its fair share of adverse effects on microbusinesses.

Small business owners must now strive to get back on their feet amid an economic recession. It won’t be easy, but it’s possible.