BMM3103 Project: Analyzing COVID-19's Impact on Small Businesses

This project report investigates the impact of the COVID-19 pandemic on small businesses, examining the challenges they faced and the consequences for their future growth. It evaluates the factors contributing to business shutdowns, beyond just the pandemic, such as lack of demand, logistical issues, and resource imbalances in HR, physical, financial, and organizational areas. The report also reviews existing literature on the subject, highlighting the adverse effects on various business operations like marketing and finance, and the disproportionate impact on immigrant and female business owners. Furthermore, it explores strategies for small businesses to minimize the impact of COVID-19, including short-term plans adaptable to market conditions, and analyzes the role of government support. The report concludes by assessing the confidence levels of business owners regarding future survival and the factors influencing their prospects, such as cash flow and employee size.

Project BMM3103
1

Table of Contents
INTRODUCTION...........................................................................................................................3
LITERATURE REVIEW................................................................................................................4
CONCLUSION................................................................................................................................8
REFLECTIOLN..............................................................................................................................8
REFERENCES..............................................................................................................................10
2

INTRODUCTION
In recent times, the pandemic has affected on global economy. Almost every nation is
fighting with this situation and taking relevant measures to minimise impact on pandemic on
their economic growth. There are various types and size of businesses which operate in a country
such as small, medium, micro, large, etc. They all contribute in GDP and economic growth of
nation. Besides that, they all provide variety of products and services to people to fulfil their
needs. But due to lock down the business are not able to operate. Those who were having online
presence offered products via website (Bartik, and Stanton, 2020). Along with it, in many nation
small business owners faced a huge challenge to survive in market. even after opening of market
still it is found that many small businesses are not able to survive. They are shut down due to
huge loss incurred.
It is analysed that there are various factors which resulted in closure of small business. for
example – due to lack of demand of products the face huge loss, also, there was issue related to
logistics as well. There was lack of logistics resources to supply goods in the market. Here, in
agricultural business they face challenge due to raw material shortage. Thus, they were not able
to produce products. There are different types of resources which is required for business to grow
and develop. The resources are HR, physical, financial and organisational. During pandemic
there was lack of all these resources. There was imbalance in resources and this led to critical
consequences of it. In such time of crisis, it is important for SME to focus on their survival rather
than expansion. They all were kept reserve in order to execute it next phase of growth.
The project is related to investigate affect of covid 19 on small business and what
consequences it can have in the future on their growth. for that research is conducted and
secondary data is gathered (Beland, Fakorede, and Mikola, 2020).
Project aims and objectives
Aim – To analyse the impact of covid 19 on small businesses.
Objectives
 To evaluate impact of covid 19 on small business
 To identify factors other than covid 19 for shut down of business
 To recommend strategy how small business can minimise impact of covid 19
Project question
 What is impact of covid 19 on small businesses?
3

Areas to be focused upon
The project will focus on various areas but main will be impact of covid 19 on small
businesses. It will also evaluate that what are the factors due to which small businesses were shut
down. Apart from it, project will emphasis on certain countries as well such as China, US, etc.
that how growth of SME has been affected due to covid 19. In the project the data and statistics
related to decline in small business owners and sales is mentioned. At last project will focus on
what are strategies that can be followed or applied by small business to minimise impact of covid
19 on growth.
LITERATURE REVIEW
Impact of covid 19 on small businesses
As said by Bloom, Fletcher and Yeh, (2021), covid 19 has adversely impacted on overall
global economy and businesses. The entire economic growth of world has declines and it has
affected on growth of organisation as well. Each sector like construction, service, etc. is affected
due to covid 19. Moreover, there is also change in needs of people as well. Now, they have
become more health conscious and are consuming healthy products only. In addition, spending
on other things has decrease and they are focusing only to fulfil basic needs. It has led to
decrease in sales and profits of small businesses due to which their growth and developed has
affected to great extent. Besides that, there are various other business operations like marketing,
finance, etc. as well on which covid 19 has impacted in negative way.
It is found that small business already finds it hard to sustain in market for long term. It is
because they face stiff competition from medium and large companies. However, by providing
products at low cost businesses are able to earn and generate revenue. The pandemic has resulted
in close down of small businesses. They are not able to survive because of lack of revenue and
huge loss. Even if they take loan from banks or other sources it is highly difficult for them to
repay back in given time. The staff who were employed in small businesses lost their job. It is
found that in feb 2020 there were 15 million small business which fall to 11.7 million in April
2020. Thus, there was loss of 3.3 million owners. In addition to that, immigrant business owners
suffered decline of 36% in business activity, and female business owners suffered 25%. It is also
analysed that from in feb 13.6 million business owner worked 15+ hours. And in april 9.8 million
worked 15+ hours (Dai, and Zhang, 2020). There was decrease in 3.8 million owners. From
February to March there was a drop in total hours worked in businesses by owners of 29%. From
4

feb to May business owner working hours has declines that is to 20%. From feb to June total
hours worked dropped by 12%. In terms of demographics it is found that female business owner
also dropped from 5.4 to 4.5 million and male owner from 9.6 to 8.3 million. Moreover, African
American owner declined from 1.1 million to 640,000 during pandemic. So, there was decrease
up to 41 %. The active owners were only 26%. Due to pandemic the wealth of business owner
has declines to a great extent. The Latinx business owner decreased from 2.1 to 1.4 million.
Similarly, Asian business owner suffer 26% loss representing total sales of $365000. Other than
this, it is found that in all industry there is decrease in active business owners. Here, main is
construction in which 670,000 SME shut down in US.
According to Fabeil, Pazim, and Langgat, (2020), if in future the condition remain same
than more number of small businesses will shut down. This will affect the livelihood of business
owner. In future there may be downfall in demand of products and services. Also, due to tough
competition in market small business can suffer. Fairlie, (2020), stated that it is important for
small business to develop strategies and plans so that pandemic impact is minimized. This also
enable to sustain in market for long term. The strategies can be short term so that changes are
made into it according to market situation and economy. The business are not even benefited due
to CARES Act or giving loans. It is because of lack of funds due to which they are not able to
operate and manage their daily expenses. In hospitality industry most small business are shut
down because there is long ban on travelling. This has restricted people to travel from one place
to another. Hence, due to it small business owners are not able to provide salary to staff. Their
growth is adversely affected due to lock down. But in other industries there are some relaxations
given so small business are able to operate. Many nations gov is taking some initiatives and
programs to provide financial support to small firms. It has highly benefited them in ensuring
that they are able survive in market. Due to financial fragility many small businesses closed
down as well. here, most businesses were not having operating cash to continue their operations.
Furthermore, those having $10000 cash was only able to operate 15 days. Even firms were not
having enough cash to meet daily expenses. Due to that they were not able to meet payroll
requirement of employees.
Factors other than covid 19 for shut down of business
As elucidated by Kalogiannidis, (2020), many businesses took certain response in regard
with lock down and pandemic. In that it was found that 41.3% of business were temporary closed
5

due to pandemic, 1.8% were permanently closed. And 1.3% said they closed it temporary for
other reasons and 55.5% are still operating. It is also stated that full time employment falls down
by 33.3% in Jan and march 2020 and part time fall down by 57%. And those business who are
currently operating is having full time employment decline by 17.3% and part time by 34%.
Besides that, due to financial fragility many small businesses closed down as well. here,
most businesses were not having operating cash to continue their operations. Furthermore, those
having $10000 cash was only able to operate 15 days. Even firms were not having enough cash
to meet daily expenses. Due to that they were not able to meet payroll requirement of employees.
Also, they were not able to pay to suppliers as well. It was found that rent was main expense of
62.3% business and for 42.5% salary. 14.6% firms were not able to survive for 1 month and
33.5% said their cash last to 1-3 months. In China 27% owner said salary as expense and 35.1%
said debt. In Gansu 56.4% said cash flow did not sustain for 3 months. It is also evaluated that in
China small business produce 80% employment so 16.4% decrease in that will result in 13% rise
in unemployment rate. From findings it is stated that 20.6% of self employed business got closed
in China. On other hand businesses who were having surplus operating cash are able to survive
in such a critical situation. This is because they were able to meet their daily expenses.
Alongside, the raw materials available with them were sufficient to manufacture products.
It is also predicted that how long will this situation last and whether small businesses
grow or not. In that it is said that 30% of business owner said crisis will end till May 2020 and
economic growth is back to normal till august 2020 (Lim, Morse, and Yu, 2020). But 50% of
owner were not confident enough that crisis end till May 2020. However, more than 90% of
SME owner said some what like they would be open after dec 31, 2020. 63% said extremely
likely to be open. Therefore, survival rates are still low as predicted.
The firms having high cash is more confident about to be open in future. 50% of firms are
having medium cash are extremely likely to open in dec 2020. 31% of firms is having less cash
in hand also likely to open in dec 2020. The firms with at least 20 employees, 71 percent
expressed that they were either very likely or extremely likely to survive, which may
indicate greater access to outside resources despite having a higher expense
base.
It is interpreted that during 2008 recession CCI in Canada fell to 56.3 in 2008 as compare
to 119 in 2007. Thus, it indicated decline in growth of business. hence, main issue is value
6

proposition offered in product or service. As per statistics 40% of small business with 5- 19 staff
and 31% of 20-99 staff requested loan (Shafi, Liu and Ren, 2020). This was done to cover
operating cost. Apart from it, it is found that 50% of SME in Canada said they laid off staff
during covid 19 and 80% did redundant. Besides, employment rate of top 100 MBA schools after
graduation was 80.1% in 2009 which was 90.1 in 2008. In US various stores and businesses are
closed due to policy mandate, health concern and other factors. There is rise in unemployment
rates as many businesses are closed. In India also it is found that 82% of businesses has impacted
in negative way due to pandemic. Even due to digitalization businesses has suffered loss in their
productivity. Usually, small business are back bone of economy because they also contribute in
GDP and provide employment to large number of people in society. they offer variety of
products and services to people in order to fulfil their needs. Small businesses are hardest hit due
to pandemic because they are not having enough resources to manage daily wages.
Strategies to minimise impact of covid
In the view of Bartik, and Stanton, (2020), it is said that in Canada there are some
measures which is taken by gov to support small businesses. In that it is found that during
recession support since 2008 the gov provide more financial support to recover. In that it is
found that these include interest free loans, a wage subsidy, and tax payment deferral mentioned
at the outset of this commentary, as well as co lending program of up to $6.25 million with
Business Development Bank of Canada for SME’s and a commercial rent assistance program.
The CARES program provide loan to business and also forgive around 75% of loans
which is spent on giving salary. The loan is considered as grant rather than debt. It clearly shows
that forgiving of loan enable in giving financial support to business. So, one third of business
shown interest in this program. However, 72% of owners said that they would like to take loan
from CARES program. 59% of them said they will take it without forgiveness. The main reason
for forgiving loans is to ensure small business sustain and the employment rate is maintained in
the market. It is also found that in dec 2020 employment was less than 40% as compare to dec
2020. When ask about question of remain in market it is found that 62-63 % said they have
chance of it and 81% said no. 28% will not take a CARES loan because among them
35% said they do not need the cash. Thus, it clearly shows that one tenth of
small business owners are confident with their financial security.
7

In US small business employ about 50% of people. It is evaluated that 43% of them are
being closed and there is decline in employment by 40%. This is a great impact on economy on
US since 1930 (Beland, Fakorede, and Mikola, 2020). Along with it, in many nation small
business owners faced a huge challenge to survive in market. even after opening of market still it
is found that many small businesses are not able to survive. They are shut down due to huge loss
incurred. It has led to decrease in sales and profits of small businesses due to which their growth
and developed has affected to great extent.
CONCLUSION
Hereby, it can be summarised that covid 19 has impacted on small businesses more than
medium or large enterprises. Due to that many businesses have shut down as they are not able to
survive in market for long time. Furthermore, in future if this situation remain for 2-3 year more
than it will result in shut down of more businesses. Besides that, there are several factors due to
which small businesses shut down like lack of demand, logistics problem, shortage of raw
materials, etc. moreover, the resources which is required to grow are HR, physical, financial and
organisational and in pandemic there was imbalance in resources and this led to critical
consequences of it. Furthermore, there are different strategies which can be used by small
businesses to minimise impact of covid 19.
There are certain recommendations which can be followed by SME’s. they are as follows :
 The government should financially support businesses and provide them funds. It will
help business to meet their expenses and survive in market. They will not get shut down
due to lack of expenses.
 The small business owner must focus on innovation. It will be useful for them to compete
in market with others and survive. Besides, they can generate revenue through it easily.
 The business should be rebuild by which it becomes easy to deal with economic
situations. In that changes can be made into operational process. With that there is
decrease in operation cost.
REFLECTIOLN
I found that the things which went well in project was collecting of data from different
journals, articles, books, etc. this was easy to do as there were a lot of articles there on topic.
Besides that, I was also able to manage progress of project in effective way by regularly
communicating with my team.
8

But, I face difficulty in analysis and interpreting of data. It is because I was not having any
experience in doing so. Thus, this highly impacted on research outcomes. Moreover, a lot of time
was wasted as well in it and this led to delay in completing project on time. There was an issue in
communication as well.
Thus, to complete project on time I identified priority activities and then did that first. It was
helpful in keeping pace and progress of project and meeting deadline. However, for interpreting
data I took help of an expert by which it was easy to obtain relevant results. I also got to know
entire procedure of how analysis is done. So, I also did during project.
If I have to do this project again then I would prepare a time line that what activity is to be
taken and when. By that it will be easy to do project is systematic way. Furthermore, I will work
with expert by which I will gain knowledge about data analysis. This will help me in future to
undertake project individually and complete it.
9

REFERENCES
Books and journals
Bartik, A.W. and Stanton, C., 2020. The impact of COVID-19 on small business outcomes and
expectations. Proceedings of the National Academy of Sciences, 117(30), pp.17656-
17666.
Beland, L.P., Fakorede, O. and Mikola, D., 2020. Short-term effect of COVID-19 on self-
employed workers in Canada. Canadian Public Policy, 46(S1), pp.S66-S81.
Bloom, N., Fletcher, R.S. and Yeh, E., 2021. The impact of COVID-19 on US firms (No.
w28314). National Bureau of Economic Research.
Dai, R., and Zhang, X.Z., 2020. The impact of covid-19 on small and medium-sized enterprises:
evidence from two-wave phone surveys in china. Center for Global Development
Working Paper, 549.
Fabeil, N.F., Pazim, K.H. and Langgat, J., 2020. The impact of Covid-19 pandemic crisis on
micro-enterprises: Entrepreneurs’ perspective on business continuity and recovery
strategy. Journal of Economics and Business, 3(2).
Fairlie, R.W., 2020. The impact of COVID-19 on small business owners: The first three months
after social-distancing restrictions (No. w27462). National Bureau of Economic
Research.
Kalogiannidis, S., 2020. Covid Impact on Small Business. International Journal of Social
Science and Economics Invention, 6(12), pp.387-391.
Lim, D.S., Morse, E.A. and Yu, N., 2020. The impact of the global crisis on the growth of
SMEs: A resource system perspective. International Small Business Journal, 38(6),
pp.492-503.
Shafi, M., Liu, J. and Ren, W., 2020. Impact of COVID-19 pandemic on micro, small, and
medium-sized Enterprises operating in Pakistan. Research in Globalization, 2, p.100018.
10