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Small Businesses Are Dying by the Thousands – and No One Is Tracking the Carnage

153 points by behrlich95 6y ago

klipt 6y ago
Isn't this tracked to some degree in unemployment stats? Is being laid off from a small business that different from being laid off from a large business?
- ksdale 6y ago
  It probably does show up, but a huge number of small business are basically just the owner and some independent contractors (or just people they pay cash under the table to occasionally). Often the owners aren't even employees, and if they are, in some states they don't qualify for certain benefits by virtue of having been the owner.
  - dboreham 6y ago
    Correct, business owners aren't required to pay themselves via W2 income; and typically aren't required to register for unemployment or workers comp insurance. These would be the main data sources for "number of employed people", I imagine.
- Voliokis 6y ago
  The problem in this case isn't unemployment, and using unemployment to track it would be misleading. If small businesses die off, that means there will be less job openings for people to be hired into in the future. The US economy is already fragile. I'm not sure how it will cope with the kind of structural (long-term) unemployment that will result when too many businesses fold. Per the article: > While the businesses are small individually, the collective impact of their failures could be substantial. Firms with fewer than 500 employees account for about 44% of U.S. economic activity, according to a U.S. Small Business Administration report, and they employ almost half of all American workers. It's appalling that all the focus in politics is on big companies and giving them handouts.
- thu2111 6y ago
  Not necessarily. In the UK unemployment stats haven't moved, despite huge numbers of job losses, because for someone to be classified as unemployed they must be looking for work. But there's no work to find so people aren't looking. That's why technical unemployment often acts in odd ways: a booming economy may not see unemployment fall for a while because people who became economically inactive restart a job search, so get added to the ranks of the unemployed.
nathanyz 6y ago
This is the undercurrent of the pandemic's impacts. Businesses are disappearing by the tens of thousands and they are not necessarily represented in the normal metrics of bankruptcies. Unemployment and GDP are impacted by these closures, but without showing up as their own segment, not much is being done to counteract it. Retail & shopping centers are looking like ghost towns, and that is not good for overall economic health once we get to the other side.
lockdownornot 6y ago
Guess who bought up real estate post-2009 crisis, when prices were at rock bottom? Wealthy individuals and corporations that had enough assets to withstand the storm and capitalize on a down market. Guess who will grab more market share post-COVID? Better yet, guess who wasn't affected by forced lockdowns and benefited during the worst of COVID? I find it very distressing that this massive transfer of wealth from small businesses to megacorps isn't being discussed more.
- zarkov99 6y ago
  I share the distress. Covid has accelerated the inequality that was already at record levels. For many in tech and other white colar work Covid is either a non-event or a net benefit, while for many others its life ruining. We better start preparing for a future where many, maybe most, people have no economic value.
  - naveen99 6y ago
    Inequality is an increasing function of population size, so it probably went down some due to COVID. the reason is that for many things there is only value in being the best or within the top finite number in the population. Being top x percent isn’t good enough, even 0.1% with sufficiently large populations. For example: spectator sports, politics, movie stars, the first to discover relativity, semiconductors... and those finite toppers capture a larger and larger percentage of aggregate value as population size grows. In the limit all value is captured by an infinite number of toppers across an infinite number of dimensions to top. this also manifests in evolution where all but a finitely many mutants survive a catastrophic change in the environment and the rest perish.
    - zarkov99 6y ago
      Yes, but I think that is not the whole story. The shift in value in the economy from things to bytes has massively amplified that tendency. Information production scales infinitely since information is free to copy. The work of one single genius that deals in information, and arguably sport and entertainment now do deal in information in that sense, as does politics, can be consumed by billions. So there are simply not enough jobs for anyone else. That is in contrast with say medieval societies. Even if you were the best farmer in the world, you output would be consumed by only a few people, leaving plenty of room for lesser farmers to make a living.
ChrisMarshallNY 6y ago
In my area, I'd say about 50% of the storefronts in any shopping area are brown-papered. The other side of this, is that larger business are taking advantage of the small business' desperation, to buy them at rapacious prices, or coerce them into really bad deals. Meaning that some of the small businesses that "survive" this downturn, have just postponed death.
mac01021 6y ago
When 47% of the things you're classifying are "miscellaneous", you've got some more categories to come up with.
tipsysquid 6y ago
Non-paywall link[0] [0] https://outline.com/edfKYD https://outline.com/edfKYD
Animats 6y ago
It's tracked in the Census of Business and Industries. That's mostly annual, not real-time.
erikw 6y ago
For small businesses that are able to move online, there is no shortage of revenue available. In the article they mention a yoga studio owner closing up her shop. I agree that a yoga studio is pretty tough to move online. They also mention a jewellery brand, and that is exactly the type of boutique business that can be successful right now with the right marketing and ecommerce solution. My partner does online sales and marking consulting, and every one of her clients has at least doubled revenue within one month of onboarding. Most of them now have problems maintaining stock, not making sales. I don't know if these healthy sales will last, but for now I'm not seeing any ceiling for small businesses who make something or sell a service that works online. My guess is that a lot of SME owners just aren't aware of how to approach online sales.
- nathanyz 6y ago
  Funny you mention Yoga studios, as we are actually seeing a big influx from this market for video hosting. Many are starting to productize their lessons which will likely be bigger wins, versus selling their time as instructors. I think it's similar to what your partner is seeing. For many of these businesses, there is a viable online path. But that assumes that they have the skills and desire to operate an online business. Some of these small businesses are operated by folks who may know how to operate in a local market, and have very little interest in e-marketing and shipping products.
  - dver 6y ago
    Both of the studios I frequent have moved all classes to online. In the cases of the classes I've gone to the number of people in class if now larger, no longer being limited to the size of the building or location of the student.
  - spanhandler 6y ago
    The world's 50,000th best yoga instructor can probably make a living running a yoga studio. I'm not sure the world's 50,000th best yoga instructor can make a living selling online yoga classes.
tibbydudeza 6y ago
A friend of ours made a good living making wedding and prom dresses employing about 6 people ... she shut shop this month as weddings are limited to only 50 people and most churches, hosting venues and schools are all shut. Folks have more pressing worries on their plate than weddings or proms.
rkagerer 6y ago
Bankruptcy cannot create more revenue Tell that to Hertz
- selimthegrim 6y ago
  The SEC certainly did.
catsarebetter 6y ago
In the Bay Area, a lot of stores are closing down, not 50% but probably around 30%-50% range depending on which part. Places with less traffic are getting hit harder (obv). The thing that you have to understand is that the smbs were competing with other local smbs. So your favorite local coffeeshop only had 4 other competitors (not in SF lol). Ppl who used to type in "yoga classes near me" will be typing in "yoga classes online". Now they're competing against everyone on the internet. Against everyone who has a 5 year lead on them with SEO and marketing. There's just no way an SMB can take them, nor is there enough incentive for digital agencies to help b/c it's such a long shot that they can produce result for the smbs. Unless there's some search engine that ranks based on locale rather than standard SEO, but that's just not happening.
- gregoriol 6y ago
  Some local shops around my place have done great online reaches: some food shops did online order/pickup, some drinks (bottles) did online order/delivery, ... Most have reinforced their followers on social networks. There are some reasons to be optimistic for those who make the move!
  - catsarebetter 6y ago
    For sure, that's great to hear
- mc32 6y ago
  >"Unless there's some search engine that ranks based on locale" Yelp works like that as well, Yellow pages and Google Maps too.
  - catsarebetter 6y ago
    Do ppl actually use Yelp or Google maps for an online fitness class?
madengr 6y ago
We are having a deck and concrete patio built. That business is swamped with work. Also a shortage of lumber; not from COVID, but due to demand. I suppose being stuck at home, people want to upgrade their house.
jansan 6y ago
Who the hell killed the comment on the booming patio business? Here, pools have become all the rage. People cannot go on holiday, but enough people still have money. So what do they do? They try to make their home to resemble their holiday dream as much as possible, with decks, pools and outdoor furniture.
- mistrial9 6y ago
  expensive home additions seem to be booming in the SF Bay Area, along with sudden residential vacancies, right next to them
  - jansan 6y ago
    That's the thing with disruptions. One man's crisis is another man's opportunity. Unfortunately, with corona the crises far outnumber the chances, but chances do exist.
dharma1 6y ago
Anecdote - I had a small amount of money invested in SME lending through an online p2p lending platform since last year (UK). Not super high interest rates, about 6-8%, all "AAA" rated businesses. Before covid, default rates were a couple of percent. Right now 25% of the businesses in the loan book are late with repayments, I expect many of them will default and stop trading. And this is while government subsidies are still going - the subsidies will soon stop. Covid has been devastating for small businesses which don't operate online and unfortunately I think the fallout will continue up to a year, until we get mass vaccination.
- bdcravens 6y ago
  > until we get mass vaccination FUD is already spreading among the gullible about the coming vaccines, and I wish I was confident that it'll be a negligible percentage who believe the fake news https://www.cnbc.com/2020/07/22/bill-gates-denies-conspiracy-theories-that-say-he-wants-to-use-coronavirus-vaccines-to-implant-tracking-devices.html https://www.cnbc.com/2020/07/22/bill-gates-denies-conspiracy...
  - WorldMaker 6y ago
    It's also optimistic that a vaccine for this virus is even possible or likely in our lifetimes. No member of the coronavirus family has yet to succumb to a vaccine in mass trials, and it is a large family with decades of attempts. (I love the counter optimism that if we succeed with a coronavirus vaccine we have a likelihood to vaccinate against nearly a third of the common cold and it can join the flu as something if we'd all annually vaccinate would trouble us a lot less. But pessimism worries that is a big if.)
    - gregoriol 6y ago
      Actually it seems that a few large scale trials are starting, and Dr. Fauci was optimistic for November
      - WorldMaker 6y ago
mortenjorck 6y ago
This article omits the other half of the one-two punch many small businesses have endured this summer, losses from civil unrest. I'd recommend this piece: https://medium.com/@mtracey/two-months-since-the-riots-and-still-no-national-conversation-12a7e3e4e006 https://medium.com/@mtracey/two-months-since-the-riots-and-s... It's a somewhat long-winded bit of reporting, and has a certain media-cynic slant to it, but gives an on-the-ground perspective into how businesses in less-populous areas affected by the unrest in late May have been coping.
RileyJames 6y ago
It’s probably more relevant for Australian businesses (and uk & nz, based on subscribers) but Xero does have a project that releases statistics about overall business health and the economy from a SMB perspective. https://www.xero.com/small-business-insights/ https://www.xero.com/small-business-insights/ Again, it’s likely to undercount low / no-tech businesses and over count those that were already looking towards technology as a differentiator (having decided to move their accounting to the cloud)
- apihealth 6y ago
  Is there any such website specific to UK sub regions that you're aware of?

153 points by behrlich95 6y ago

Isn't this tracked to some degree in unemployment stats? Is being laid off from a small business that different from being laid off from a large business?

ksdale 6y ago
It probably does show up, but a huge number of small business are basically just the owner and some independent contractors (or just people they pay cash under the table to occasionally). Often the owners aren't even employees, and if they are, in some states they don't qualify for certain benefits by virtue of having been the owner.
- dboreham 6y ago
  Correct, business owners aren't required to pay themselves via W2 income; and typically aren't required to register for unemployment or workers comp insurance. These would be the main data sources for "number of employed people", I imagine.
Voliokis 6y ago
The problem in this case isn't unemployment, and using unemployment to track it would be misleading. If small businesses die off, that means there will be less job openings for people to be hired into in the future. The US economy is already fragile. I'm not sure how it will cope with the kind of structural (long-term) unemployment that will result when too many businesses fold. Per the article: > While the businesses are small individually, the collective impact of their failures could be substantial. Firms with fewer than 500 employees account for about 44% of U.S. economic activity, according to a U.S. Small Business Administration report, and they employ almost half of all American workers. It's appalling that all the focus in politics is on big companies and giving them handouts.
thu2111 6y ago
Not necessarily. In the UK unemployment stats haven't moved, despite huge numbers of job losses, because for someone to be classified as unemployed they must be looking for work. But there's no work to find so people aren't looking. That's why technical unemployment often acts in odd ways: a booming economy may not see unemployment fall for a while because people who became economically inactive restart a job search, so get added to the ranks of the unemployed.

nathanyz 6y ago

This is the undercurrent of the pandemic's impacts. Businesses are disappearing by the tens of thousands and they are not necessarily represented in the normal metrics of bankruptcies. Unemployment and GDP are impacted by these closures, but without showing up as their own segment, not much is being done to counteract it. Retail & shopping centers are looking like ghost towns, and that is not good for overall economic health once we get to the other side.

lockdownornot 6y ago

Guess who bought up real estate post-2009 crisis, when prices were at rock bottom? Wealthy individuals and corporations that had enough assets to withstand the storm and capitalize on a down market. Guess who will grab more market share post-COVID? Better yet, guess who wasn't affected by forced lockdowns and benefited during the worst of COVID? I find it very distressing that this massive transfer of wealth from small businesses to megacorps isn't being discussed more.

zarkov99 6y ago
I share the distress. Covid has accelerated the inequality that was already at record levels. For many in tech and other white colar work Covid is either a non-event or a net benefit, while for many others its life ruining. We better start preparing for a future where many, maybe most, people have no economic value.
- naveen99 6y ago
  Inequality is an increasing function of population size, so it probably went down some due to COVID. the reason is that for many things there is only value in being the best or within the top finite number in the population. Being top x percent isn’t good enough, even 0.1% with sufficiently large populations. For example: spectator sports, politics, movie stars, the first to discover relativity, semiconductors... and those finite toppers capture a larger and larger percentage of aggregate value as population size grows. In the limit all value is captured by an infinite number of toppers across an infinite number of dimensions to top. this also manifests in evolution where all but a finitely many mutants survive a catastrophic change in the environment and the rest perish.
  - zarkov99 6y ago
    Yes, but I think that is not the whole story. The shift in value in the economy from things to bytes has massively amplified that tendency. Information production scales infinitely since information is free to copy. The work of one single genius that deals in information, and arguably sport and entertainment now do deal in information in that sense, as does politics, can be consumed by billions. So there are simply not enough jobs for anyone else. That is in contrast with say medieval societies. Even if you were the best farmer in the world, you output would be consumed by only a few people, leaving plenty of room for lesser farmers to make a living.

ChrisMarshallNY 6y ago

In my area, I'd say about 50% of the storefronts in any shopping area are brown-papered. The other side of this, is that larger business are taking advantage of the small business' desperation, to buy them at rapacious prices, or coerce them into really bad deals. Meaning that some of the small businesses that "survive" this downturn, have just postponed death.

mac01021 6y ago

When 47% of the things you're classifying are "miscellaneous", you've got some more categories to come up with.

tipsysquid 6y ago

Non-paywall link[0] [0] https://outline.com/edfKYD https://outline.com/edfKYD

Animats 6y ago

It's tracked in the Census of Business and Industries. That's mostly annual, not real-time.

erikw 6y ago

For small businesses that are able to move online, there is no shortage of revenue available. In the article they mention a yoga studio owner closing up her shop. I agree that a yoga studio is pretty tough to move online. They also mention a jewellery brand, and that is exactly the type of boutique business that can be successful right now with the right marketing and ecommerce solution. My partner does online sales and marking consulting, and every one of her clients has at least doubled revenue within one month of onboarding. Most of them now have problems maintaining stock, not making sales. I don't know if these healthy sales will last, but for now I'm not seeing any ceiling for small businesses who make something or sell a service that works online. My guess is that a lot of SME owners just aren't aware of how to approach online sales.

nathanyz 6y ago
Funny you mention Yoga studios, as we are actually seeing a big influx from this market for video hosting. Many are starting to productize their lessons which will likely be bigger wins, versus selling their time as instructors. I think it's similar to what your partner is seeing. For many of these businesses, there is a viable online path. But that assumes that they have the skills and desire to operate an online business. Some of these small businesses are operated by folks who may know how to operate in a local market, and have very little interest in e-marketing and shipping products.
- dver 6y ago
  Both of the studios I frequent have moved all classes to online. In the cases of the classes I've gone to the number of people in class if now larger, no longer being limited to the size of the building or location of the student.
- spanhandler 6y ago
  The world's 50,000th best yoga instructor can probably make a living running a yoga studio. I'm not sure the world's 50,000th best yoga instructor can make a living selling online yoga classes.

tibbydudeza 6y ago

A friend of ours made a good living making wedding and prom dresses employing about 6 people ... she shut shop this month as weddings are limited to only 50 people and most churches, hosting venues and schools are all shut. Folks have more pressing worries on their plate than weddings or proms.

rkagerer 6y ago

Bankruptcy cannot create more revenue Tell that to Hertz

selimthegrim 6y ago
The SEC certainly did.

catsarebetter 6y ago

In the Bay Area, a lot of stores are closing down, not 50% but probably around 30%-50% range depending on which part. Places with less traffic are getting hit harder (obv). The thing that you have to understand is that the smbs were competing with other local smbs. So your favorite local coffeeshop only had 4 other competitors (not in SF lol). Ppl who used to type in "yoga classes near me" will be typing in "yoga classes online". Now they're competing against everyone on the internet. Against everyone who has a 5 year lead on them with SEO and marketing. There's just no way an SMB can take them, nor is there enough incentive for digital agencies to help b/c it's such a long shot that they can produce result for the smbs. Unless there's some search engine that ranks based on locale rather than standard SEO, but that's just not happening.

gregoriol 6y ago
Some local shops around my place have done great online reaches: some food shops did online order/pickup, some drinks (bottles) did online order/delivery, ... Most have reinforced their followers on social networks. There are some reasons to be optimistic for those who make the move!
- catsarebetter 6y ago
  For sure, that's great to hear
mc32 6y ago
>"Unless there's some search engine that ranks based on locale" Yelp works like that as well, Yellow pages and Google Maps too.
- catsarebetter 6y ago
  Do ppl actually use Yelp or Google maps for an online fitness class?

madengr 6y ago

We are having a deck and concrete patio built. That business is swamped with work. Also a shortage of lumber; not from COVID, but due to demand. I suppose being stuck at home, people want to upgrade their house.

jansan 6y ago

Who the hell killed the comment on the booming patio business? Here, pools have become all the rage. People cannot go on holiday, but enough people still have money. So what do they do? They try to make their home to resemble their holiday dream as much as possible, with decks, pools and outdoor furniture.

mistrial9 6y ago
expensive home additions seem to be booming in the SF Bay Area, along with sudden residential vacancies, right next to them
- jansan 6y ago
  That's the thing with disruptions. One man's crisis is another man's opportunity. Unfortunately, with corona the crises far outnumber the chances, but chances do exist.

dharma1 6y ago

Anecdote - I had a small amount of money invested in SME lending through an online p2p lending platform since last year (UK). Not super high interest rates, about 6-8%, all "AAA" rated businesses. Before covid, default rates were a couple of percent. Right now 25% of the businesses in the loan book are late with repayments, I expect many of them will default and stop trading. And this is while government subsidies are still going - the subsidies will soon stop. Covid has been devastating for small businesses which don't operate online and unfortunately I think the fallout will continue up to a year, until we get mass vaccination.

bdcravens 6y ago
> until we get mass vaccination FUD is already spreading among the gullible about the coming vaccines, and I wish I was confident that it'll be a negligible percentage who believe the fake news https://www.cnbc.com/2020/07/22/bill-gates-denies-conspiracy-theories-that-say-he-wants-to-use-coronavirus-vaccines-to-implant-tracking-devices.html https://www.cnbc.com/2020/07/22/bill-gates-denies-conspiracy...
- WorldMaker 6y ago
  It's also optimistic that a vaccine for this virus is even possible or likely in our lifetimes. No member of the coronavirus family has yet to succumb to a vaccine in mass trials, and it is a large family with decades of attempts. (I love the counter optimism that if we succeed with a coronavirus vaccine we have a likelihood to vaccinate against nearly a third of the common cold and it can join the flu as something if we'd all annually vaccinate would trouble us a lot less. But pessimism worries that is a big if.)
  - gregoriol 6y ago
    Actually it seems that a few large scale trials are starting, and Dr. Fauci was optimistic for November
    - WorldMaker 6y ago

mortenjorck 6y ago

This article omits the other half of the one-two punch many small businesses have endured this summer, losses from civil unrest. I'd recommend this piece: https://medium.com/@mtracey/two-months-since-the-riots-and-still-no-national-conversation-12a7e3e4e006 https://medium.com/@mtracey/two-months-since-the-riots-and-s... It's a somewhat long-winded bit of reporting, and has a certain media-cynic slant to it, but gives an on-the-ground perspective into how businesses in less-populous areas affected by the unrest in late May have been coping.

RileyJames 6y ago

It’s probably more relevant for Australian businesses (and uk & nz, based on subscribers) but Xero does have a project that releases statistics about overall business health and the economy from a SMB perspective. https://www.xero.com/small-business-insights/ https://www.xero.com/small-business-insights/ Again, it’s likely to undercount low / no-tech businesses and over count those that were already looking towards technology as a differentiator (having decided to move their accounting to the cloud)

apihealth 6y ago
Is there any such website specific to UK sub regions that you're aware of?