According to the most recent Census Pulse poll, 38.2% of businesses nationwide have reported a “large negative effect” of COVID-19 on their overall business operations. An additional 44.3% reported a “moderate negative effect.” While there is substantial variation from sector to sector (food services, entertainment, recreation and education were hardest hit, while utilities have felt relatively little impact), and from state to state, the reality is that for 41% of survey respondents, the Coronavirus is projected to impact operations for more than six months. When it comes specifically to small businesses, the impact is even bigger — a March 30 survey from the National Federation of Independent Businesses found that 92% of small businesses have experienced negative effects from the pandemic.
States feeling the biggest negative COVID-19 impact
McKinsey, which has done a marvelous job presenting actionable COVID-19 data, came to a rather sobering conclusion in their June 18th analysis of COVID-19 vulnerability. Their “analysis of several surveys of small businesses suggests that before accounting for intervention, 1.4 million to 2.1 million of them (25 to 36 percent) could close permanently as a result of the disruption from just the first four months of the COVID-19 pandemic” (emphasis ours). Looking at some of the same industry data, the developed the following diagram that outlines various industry impacts:
What can businesses that are really feeling the impact do? Our America Reopens series offers some advice, including strategies for surviving an economic downturn. McKinsey offers its own advice, noting:
“Broadly, companies are focusing on three phases of action. The first is to navigate the now by safeguarding and protecting their employees, their customers, and the viability of their business. The second is to reorient the business so it can navigate the disruption and plan for the recovery. Finally, the most sophisticated companies are already positioning their business for the next normal after the crisis. Revenue growth management (RGM)—the discipline of driving sustainable, profitable growth through a range of strategies around assortment, promotions, trade management, and pricing—has an important role to play in phases two and three” [emphasis ours].
We’re going to be talking a lot about business growth strategies in the very near future. But let’s look to the future. Deloitte is offering some projections. Their baseline projection, which they give a 70% likelihood of happening, show “another decline in Q4 and slow growth in the following two quarters as the disease proves harder to eradicate than some optimists expect. Recovery will not really get underway until the middle of 2021. Given the low base, GDP growth in 2022–24 may be in the 7–8% range. Growth returns to the pre-COVID level by the end of 2023, with the economy finally reaching full employment by Q1 2025.”
Their second most likely scenario is the “no end in sight” projection, which they give a 25% likelihood of happening. After a brief recovery over the summer, new COVID-19 outbreaks offset the growth, and then “growth remains relatively low, with recovery only starting hesitantly at the end of 2021. By 2025, unemployment remains in double digits, with the level of GDP over 10% below the level it would have reached had the pandemic not occurred.”
Their third scenario is the “fast bounce back.” With a 5% likelihood, there is reason to put your unbridled optimism in check for the time being. In this scenario, “[e]conomic activity largely returns to the pre-COVID normal by the end of 2022.”
“Two out of three ain’t bad”
Only time will tell how things play out, but this is no time to sit on your hands. Over the next few months we’ll be sharing breakthrough advice from real business owners who are successfully navigating the challenges that COVID-19 presents us.