Keep The Faith In Small Business

Let’s slow the roll on the demise of small business. The “death of Main Street” theme is provocative. But it’s also a seriously flawed overreaction to the impact of Covid-19, ignoring recent evidence and decades of experience.

According to the U.S. Bureau of Labor Statistics, the number of business closings peaked at around a quarter of a million at the end of 2008 but returned to pre-recession levels by the end of 2011. Nearly as many new companies were started in 2012 as in 2006. 

And even in this year of a pandemic, the country has recently seen tens of thousands of new business starts each week. The 36th week of this year saw over 101,000 new starts, nearly double the same week in 2019. 

For existing small businesses, there’s no point in minimizing the impact of the virus. The economic impact cut much deeper in small business than large enterprises — a function of smaller cash reserves and less room to cut costs. 

Between big and small businesses, that’s always been the critical and enduring point of separation. It’s not size, scale, brand recognition or credit rating, but cash. Cash flow is one of the leading causes of small-business failures, and that was true before Covid-19 crushed sales and revenue.

Among small businesses that closed in the spring, 14% haven’t reopened. I’ve been thinking about those owners lately, and I think the second flaw in all the early obituaries on small business is what all our experience tells us about people who are willing to bet on themselves. 

When I was growing up, my mom operated Hair in Motion, her own hair salon. It was a little shop, with six chairs, on Roblin Boulevard in Winnipeg, Manitoba. It is where I came to understand something about the soul of the small-business economy. It’s relentless. It’s in early. It works all day and does the accounting, payroll, taxes and compliance work long into the night. I see that same ideal about self-determination in the small-business owners I talk with every day. 

Read more: https://www.forbes.com/