Bredin Report: The effect of COVID-19 on SMBs

Each month, we survey 500 SMB principals to keep track of their evolving needs and priorities. We recently asked what effect the COVID-19 pandemic has had on their business.

The most immediate and striking impact, of course, is on revenue. In February, before the pandemic hit, many SMBs expected to grow by double digits or more this year: 32% of those with under 20 employees (very small businesses, or VSBs) did, versus 57% of those with 20 to 99 employees (small businesses, or SBs) and fully 74% of those with 100 to 500 employees (mid-sized businesses, or MBs). In October, the SMB 2020 growth outlook had contracted dramatically, to 20%, 22% and 31%, respectively.

The revenue decrease is consistent with the decline in demand experienced by a wide range of SMBs: 39% of VSBs, 38% of SBs and 21% of MBs have seen lower demand for their offerings as a result of COVID-19. For VSBs, this is the single biggest impact of all the effects we surveyed. It’s also the largest effect regardless of industry group, although it varies by sector: 49% of manufacturing sector companies report reduced demand, versus 41% in retail/wholesale and 34% in professional services.

Staffing and pay

For SBs, the largest single effect of COVID-19 is having to reduce employee hours; 39% have, versus 27% of both VSBs and MBs. 24% of SBs have had to lay off or furlough employees, compared to 16% of VSBs and 21% of MBs. Many SMBs have also had to reduce pay: 14% of VSBs, 18% of SBs and 20% of MBs have cut employee wages as a result of decreased revenue.

For MBs, the biggest single effect of the pandemic is government-imposed restrictions: 30% agree they have had an impact, versus 20% of VSBs and 24% of SBs. Whether requiring businesses to close completely or restrict operations, government mandates have a strong impact on SMB revenue and, because many operate on low margins, survival.

Production inputs

Losing customers is not the only challenge that COVID-19 poses; SMBs have also lost access to supplies and contractors. 22% of VSBs report limited or reduced availability of supplies or raw material, as do 16% of SBs and 19% of MBs. Likewise, 15% of VSBs, 22% of SBs and 27% of MBs have had employee and contractor availability constraints, which can significantly affect production. A further 7% of VSBs, 15% of SBs and 16% of MBs have had difficulties with transporting goods, whether as inputs or finished products.

The benefits of size

Not all of the effects of COVID-19 have been dire; a few SMBs have benefited. In fact, roughly 20% of MBs have seen increased demand, and as a result have increased hiring, wages and hours. Certain sectors like ecommerce, home exercise equipment and delivery have flourished in the pandemic.

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About Bredin

Bredin was founded in 1991 by America's foremost small business expert, author and syndicated columnist Alice Bredin. From its beginning, Bredin was designed to be a breed apart: 50% research consultancy, 50% creative agency, 100% focused on SMB. Based in Somerville, Mass., Bredin helps Fortune 500 companies understand, reach and retain SMB customers through timely, targeted research and award-winning marketing programs.