The COVID-19 path of recovery for small and medium-sized businesses

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Facebook’s new Global State of Small Business report found initial signs of recovery among small and medium-sized businesses (SMBs) impacted by COVID-19.

  • But many SMBs continue to report facing challenging operating conditions — this is especially true for women- and minority-led businesses. 

Why it’s important: SMBs have a key role to play in establishing a resilient and prosperous post-pandemic world.

  • Entering the second half of 2021, with restrictions easing and vaccination programs in place within the U.S., recovery is underway, while some areas still face increasing difficulties.

The challenge: Minority-led businesses in the U.S. and women-led SMBs globally continue to be impacted more than their counterparts.

  • But both groups have also demonstrated recovery relative to previous periods of the pandemic.

The second half 2021 Global State of Small Business Report explores how these SMBs are pushing forward throughout the pandemic across the U.S., and around the world. 

1. Survivorship and closure rates 

Following the relaxation of restrictions across the U.S., 16% of SMBs reported that they were closed in July 2021, down from 22% in February.

Rates of closure were higher amongst women- and minority-led SMBs.

  • 18% of U.S. women-owned SMBs were closed compared to 13% of men-led SMBs.
  • 20% of minority-owned SMBs in the U.S. reported being closed compared to 13% for other SMBs.
  • Hispanic-led SMBs were also the most likely in the U.S. to report being closed at 24%, a drop of two percentage points since February.

What this means: The decline in closure rates is in line with the wider economic recovery and may be a sign of the lessening impact of COVID-19 — but progress has been uneven.
2. Effects on sales and employment 

The U.S. saw a 21-percentage point increase in the proportion of SMBs reporting higher year-on-year sales compared to those surveyed February 2021.

  • Additionally, 24% of U.S. SMBs stated they had reduced employment as a result of the COVID-19 pandemic, but 13% of SMBs have increased employment.

What this means: The sales environment and labor market are improving for some operational SMBs, although conditions remain challenging for many.

  • 44% of minority-led SMBs in the U.S. were more likely to report a reduction in sales compared to the same 30 day period in 2020, compared to 29% of other SMBs.
  • Women-owned businesses were less likely to report reducing employment but were also less likely to have increased employment.

3. Digital transformation

Digital platforms have provided many enterprises with an alternative avenue in which to operate during the pandemic. 

  • 88% of SMBs surveyed globally indicated use of digital tools, compared to 81% at the start of 2021.

Globally, 34% of SMBs reported an increase in sales as a most reported impact of using digital tools, and 31% reported an increase in customer or supplier base.

Why it’s important: SMBs with more digital sales reported better overall performance on average than the rest of the businesses surveyed.

Going forward, digital tools may become an increasingly integral part of SMBs operations.

  • 53% of SMBs confirmed that their use of digital tools is likely to change permanently due to the COVID-19 crisis.
  • Leaders of SMBs in Latin America were most likely to indicate that their change in the use of digital tools would be permanent.

4. The global impact

Businesses are beginning to operate in an environment that more closely resembles the pre-pandemic economy in Europe and North America.

  • But the situation in much of Latin America and Southern Asia has displayed more fragility, driven by repeated COVID-19 outbreaks.
  • The result: Only 38% of SMBs in Latin America and 34% in Southern Asia were confident in their ability to continue operating in the current circumstances for over 12 months.  

The background: The report found that SMBs in countries with higher vaccination rates were less likely to report a reduction in sales compared to a year ago, as well as a reduction in employment due to the pandemic.

The takeaway: While some SMBs are looking to the future, many SMBs are still dealing with the lasting impacts of the pandemic.

  • It’s important that these businesses are not left behind and are provided with the support and opportunities to flourish.