Facebook report details devastation to small businesses during pandemic

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LAS VEGAS (KLAS) — A global study of the COVID-19 pandemic’s impact on small and medium-sized businesses (SMBs) confirms the devastation to tourism-based businesses — and especially businesses where close customer interactions are important.

One in five U.S. small businesses in the travel, restaurant and hospitality industry were closed, according to the Global State of Small Business Report released today by Facebook. Globally, one in four such businesses were closed.

The survey summarizes responses to a worldwide survey of owners or managers of businesses on Facebook, including 18,434 respondents in the United States. The survey was conducted in February.

In addition, 43% of the still-operating hospitality SMBs reported they had laid off half or more of their employees. More than half (51%) outside the U.S. indicated they had done so.

The report comes a day after another look at the recovery of small businesses in a report from “Kabbage,” an American Express company.

There are 30 million small businesses across the nation. About 90% of them have fewer than 20 employees, and 80% have fewer than 10 employees.

The Facebook report showed that 51% of U.S. SMBs that have reduced their staffing do not plan to rehire workers in the next six months. More than a quarter of SMBs reduced their workforces.

As expected, sales have suffered — 66% of hospitality businesses that are still open had lower sales compared to the same point in the prior year. Only 16% indicated sales had improved.

While state-by-state breakdowns are not available, Facebook did list the three states where small businesses were hit the hardest. The highest business closure rates came in New York (31%), Pennsylvania (31%) and Massachusetts (30%).

The states where small businesses reduced employment the most included New York (38%), Illinois (36%), Michigan (36%), California (33%) and Florida (32%).

The report also contained information about businesses owned by minorities and women.

“While the roll-out of vaccines and the easing of lockdowns in many countries are reasons to be hopeful, our latest Global State of Small Business Report is a timely reminder that many are still vulnerable and in need of support,” Chief Operating Officer of Facebook Sheryl Sandberg said.

“And those feeling the impact of the pandemic the most are female and minority-owned businesses – a further reminder that whenever crises hit, it’s the most vulnerable who are always hit the hardest,” Sandberg said.

Small businesses led by minorities continue to face higher closure rates, and lower sales:

  • 33% of Black-led small businesses reported being closed (compared to 18% of other SMBs)
  • 32% of minority-led small businesses (Black, Hispanic, Asian-American, and other races) reported reduced employment since the start of the pandemic (compared to 25% of other SMBs)
  • Black-led (35%) and Asian-led (34%) small businesses were more likely to report having changed their advertising strategy as a result of COVID-19 compared to other SMBs (20%).

And small businesses owned by women showed lower sales compared to businesses led by men. More than half (54%) of women-led SMBs reported a fall in sales, compared to just 47% of men-led SMBs.



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