COVID remains a challenge for small businesses. The international pandemic has put citizens and businesses on their heels since last March. New regulations and mandates have the entire world adapting to stark and sudden changes on a nearly weekly basis and these new measures continue to impact small businesses the most.
A research article prepared by the Proceedings of the National Academy of Sciences (PNAS) looked at different factors during the pandemic that have an either direct or indirect impact on business. Most businesses that participated in the survey (approx. 5800 small businesses) reported mass layoffs or closures only a few weeks into the pandemic. This fact provides proof of the financial fragility of certain small businesses, with many of them reporting a smaller chance of surviving the pandemic the longer it went on.
Individual States were given sovereignty when it came to enacting and enforcing restrictions to local businesses. As you know, mask mandates were quickly adopted, social distancing became commonplace, and gatherings over a certain number of people were restricted. The restaurant industry in particular struggled to adapt mainly due to conflicting guidance from States encouraging their citizens to stay home while also asking them to support small business. While some restaurants were able to carry themselves through with their take-out sales, many either closed down temporarily or went out of business.
Back in November 2018, we posted a blog outlining why we believed it was time to redefine what it meant to be considered a “small business”. Fast forward to the present, the government’s efforts to help small businesses survive during this pandemic seem misaligned and disproportionate. In many States, the stimulus relief either ran out or was funneled to businesses that you and I wouldn’t consider “small business”. When we think of small business, we typically imagine the small bodega or mom & pop store that services the local neighborhood. Not businesses that have around 500 employees or bring in $7.5 million in annual receipts, which are the two most widely used standards by the Small Business Administration to identify as a small business. *As a point of reference, there are specific requirements outlined for individual industries in the North American Industry Classification System put forth by the US Census Bureau. You can also find the Small Business standards at https://www.sba.gov/federal-contracting/contracting-guide/size-standards.
Regardless of what you and I think is right, the SBA classification standard governs who gets what and where you place in line to receive benefits. The current standards classifies 99% of American business in the “small business” category. If COVID is negatively impacting small businesses, and 99% of American businesses are considered “small”, then by definition the vast majority of American businesses are suffering.
This is where the idea of reclassification comes into play. With the introduction of more concise characteristics, we can begin to break down certain industries or demographics into a more realistic size standard, which in-turn would provide direct benefits to those truly “small” businesses in need. Furthermore, this could support the development of more focused financial or philanthropic opportunities through loans or tax breaks.
What’s your take? Do you believe that restructuring or reclassifying “small business” would be more beneficial to the economy or our understanding of the intricacies and challenges that they face? Or is it more unnecessary big government?