“The coronavirus pandemic is emerging as an existential threat to the nation’s small businesses,” reported the Washington Post this week. Over the last two months, over 100,000 small businesses have closed its doors permanently due to the effects of the Covid-19 pandemic. This trend could turn into a cascade of small business bankruptcies and closures—the largest seen since the Great Depression.
Prolonged periods of time without earning any revenue make it impossible for business owners to stay solvent. It’s a one-two punch as little—or no—money is coming in, but they are still expected to pay rent, salaries, taxes, insurance and other expenses. Mark Zandi, the chief economist at ratings agency Moody’s, said in a report to clients, “It wouldn’t be surprising if well over one million of these micro firms ultimately fail,” referring to businesses with 10 workers or less.
If you’re anyone who has a job with a guaranteed salary and benefits during the Covid-19 pandemic, it’s easy to simply say keep everything closed. You have the comfort of knowing you’ll still get paid no matter how long this pandemic lasts.
For those who aren’t fortunate enough to receive a steady guaranteed income to get through months without earning any money, they face an existential crisis. Barstool Sports’ founder Dave Portnoy, better known as “El Presidente,” posted a video on Twitter citing his issues with how the Covid-19 outbreak is being managed. In his now-viral video, Portnoy shared his frustrations of how millions of small business owners and their workers are being mistreated.
We take small businesses for granted. Half of America’s workers are employed by small businesses. The failure rate for a new business is ridiculously high. Most eek out a living. As Portnoy said, imagine if you worked for the last 20 years starting, building and running a business. It’s not a 9-5 job, you’re always working. There’s unrelenting pressure and stress. You’re responsible for your employees and customers. If you’ve made it past five or more years, it’s a rarity. You’ve sacrificed everything to make it work.
Portney pointed out, after all of your hard work, it could be wiped out in a matter of weeks. Not many business owners have enough money to make it through this pandemic. They are still liable for rent, insurance, taxes and other costs while no revenue is coming in. If your business has strong online competitors, you may never get your customers back. Once the business is closed down, what could the 45-year-old owner do next? He or she might have no other marketable skills to offer and would have to start all over again. What will happen to their workers? They’ll have to file for unemployment benefits and search for a new job—competing against the other 30-plus million job seekers recently laid off.
James Hammond, who covers bankruptcies as the chief executive of New Generation Research, said, “I think we will see bankruptcy activity on a scale that has not been seen in anybody’s business lifetime. This will hit everyone, but it will be harder for small businesses since they don’t have a lot of spare cash.”
The Covid-19 crisis represents a once-in-a-generation crisis for America’s small businesses. They’ve already confronted closures, been forced to lay off people and are “financially fragile” holding less than one month’s worth of cash on hand to sustain them, according to a recent study of small business conducted by the National Bureau of Economic Research. “Nearly 7.5 million small businesses will be at risk of closing permanently over the coming five months, and 3.5 million are at risk of closure in the next two months,” according to a new survey from Main Street America.
The government said that it’d help small businesses with its multitrillion-dollar stimulus program. The Paycheck Protection Program was meant to offer forgivable loans to small businesses, so that they could survive and retain employees. It’s been widely reported that either due to corruption or mismanagement, the cash went to dozens of large firms. Some worth more than $100 million reportedly received millions in taxpayer aid—instead of the intended small businesses that depended upon it.
Millions of small businesses will fail if things continue as they are now. Small businesses employ 58.9 million people, which makes up almost half of the country’s total workforce. The Bureau of Labor Statistics shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more. It doesn’t make business owners un-American or evil if they want to reopen, earn a living, put food on their tables and keep people employed. If they’re forced to stay closed, they’ll ultimately fail, close down, hounded by creditors and have to let go of all of their workers who will enter the worst job market since the Great Depression.
It’s easy for those who have secure jobs to point to protestors in Michigan and think of them as dumb rubes who want to endanger everyone’s lives and mock the Californians who wanted to get some sun and fresh air at the beach as selfish morons. We don’t know their individual stories, so it’s not fair to assume they’d wish harm on others.
It’s not a simple binary option—reopen and people die, close forever and everything will be fine. It’s more nuanced than that. Politicians, health experts and business leaders need to work together to formulate an intelligent realistic plan. Kicking the can down the road because they’re afraid to make a decision is not a sound strategy.
Portnoy’s video is reminiscent of the old-school 1970s movie, Network. In the defining scene, beaten-down, discouraged and angry veteran news anchor Howard Beale vents his frustration over the bad state affairs on live television. He launches into an epic rant passionately decrying all of America’s problems. “Everybody knows things are bad. It’s a depression. Everybody’s out of work or scared of losing their job. We know things are bad. They’re worse than bad. They’re crazy, so we don’t go out anymore.” He followed up with the iconic call to action, yelling, “I’m as mad as hell and I’m not going to take this anymore!” Beale implored his viewers to open their windows and scream out the same statement. The scene cuts to dozens—if not hundreds—of people shouting out of their windows.
Today, the equivalent of yelling out of the window is airing your censures on social media. Portnoy, channeling Beale in his expletive-laden video, fervently advocated for paying attention to the overlooked owners and workers at small restaurants, retail stores, gyms, bars and other businesses that you love and make your town special.
Instead of spending our time shaming, hating and arguing, we must focus on making some tough decisions quickly before we further destroy the economy, drive small business into bankruptcy and put millions of more people out of work.