U.S. State of
Small Business2020 – A CHALLENGING YEAR FOR SMBS

FA C E B O O K &SMALL BUSINESSR O U N D TA B L E

Vol. 2 United States of America January 2021

2020 – U.S. SMB REPORT

Introduction
When we first surveyed small businesses last April, we saw a snapshot of an economy reelingfrom the early shock of the pandemic. It was clear then that restrictions on business thatwere essential for public health were also creating major challenges for many businesses.
We have continued to listen to small businesses across the country throughout the pandemic
to find out how they are coping and what they need.
This latest survey, conducted in late November and December, gives us a more comprehensive
picture of the impact COVID-19 has had on small businesses over the course of 2020. It’s
clear that it was a challenging year for small businesses. By the end of the year, more thanhalf of small and medium-sized businesses (SMBs) were still reporting lower sales compared
to 2019, and although closure rates improved slightly compared to the early days of thepandemic, they are still high.
It’s also increasingly clear that the economic impact of the pandemic hasn’t been felt evenly.
The report shows that female-owned small businesses are closing at a higher rate thanthose run by men—and the gap has increased since the start of the pandemic. Businesses inminority communities are also closing at a higher rate than others and have seen a steeper
drop in sales too.
More optimistically, the survey also paints a picture of resilience and creativity among
American businesses. Many that closed earlier in the pandemic have been able to adapt andreopen, helping to reduce the number of people out of work. And many have relied on theinternet to do this, with more than one-third of small businesses saying they have increased
their use of digital tools during the pandemic.
Whatever comes next, Facebook and the Small Business Roundtable will continue to workwith SMBs to help them survive and, hopefully, thrive in 2021 and beyond.

Sheryl Sandberg
COO, Facebook
John Stanford
Co-Executive Director, Small Business Roundtable
Karen Kerrigan
Chair, Small Business Roundtable01

2020 – U.S. SMB REPORT

02

Executive Summary
This study, conducted by Facebook in collaboration with the Small Business Roundtable,
presents the results from a survey of United States (U.S.) small and medium-sizedbusinesses (SMBs), employees and consumers, with the objective of gaining a deeper
understanding of the challenges they have encountered throughout 2020 while facing thecoronavirus (COVID-19) pandemic. The results are based on a representative survey ofFacebook users, capturing the views of 11,203 online SMB leaders, 8,066 employees and6,666 consumers across the U.S. This follows an April 2020 study, conducted at the onset ofthe pandemic, allowing us to understand how impacts have evolved over the year.
The results reveal that, as of December 2020, fewer businesses were closed(25%) relative to April (31%), with some SMBs that were previously closed able
to reopen in recent months, thereby helping to reduce the number of employees
out of work due to business closures. Restrictions on public gatherings andin-person interactions continued to drive closures, although financial challenges
and a lack of demand have played an increasing role since April. This was also
observed through consumers reporting a reduction in spending, on account of
the prevailing economic situation.

25%of SMBs wereclosed as ofDecember 2020

The proportion of SMBs reporting a reduction in sales of over 50% also fell since April, andfewer businesses reported a reduction in their workforce. However, by December, nearly
one-third of businesses still reported a reduction in their workforce compared to last year.
SMBs that have tried to hire workers have faced challenges in doing so; in December, 34%of sampled SMB owners and managers found it challenging to find adequately skilledemployees. The decline in employment relative to last year has also led to job insecurity
among employees.
Many businesses, however, have adapted their business models to improve theirresilience—for example, by adopting social distancing practices and increasing their useof digital tools. This increased use of digital tools also helped to support sales. Indeed, theproportion of businesses making no sales through digital channels fell from 35%, prior to
COVID-19, to 13% in December. This switch to digital channels has, in part, been driven bystore closures and consumers switching to online purchases for safety and convenience.

2020 – U.S. SMB REPORT | EXECUTIVE SUMMARY

COVID-19 has had disproportionate impacts on some elements of society, including female
business leaders and those in majority-minority neighborhoods. A greater proportionof female-led businesses were closed relative to male-led businesses in both April and
December, with the imbalance in closure rates increasing to 6 percentage points by the endof the year. Similarly, SMBs in majority-minority neighborhoods have faced worse businessoutcomes than those in non-minority neighborhoods, including higher closure rates,
greater decreases in sales and larger reductions in their workforce. This in part reflects theprevalence of female-led businesses and businesses in majority-minority neighborhoods insectors that were most impacted by lockdown restrictions, namely those classified as “nonessential” and those offering in-person services.
Female business leaders also faced a greater challenge in balancing their work and domestic
responsibilities, with the disparity increasing since April. Female business leaders reported
they were spending more time on both their business and domestic responsibilities,
including caring for children and children’s education at home, and their ability to take careof both was being stretched. A greater proportion of female business leaders reported thatdomestic responsibilities were impacting their ability to focus on their businesses and thatwork was impacting their ability to take care of their household.
Given the challenging circumstances, many business leaders and employees applied forfinancial support to mitigate the effects of the pandemic, although fewer business leaders
applied for support in December than in April. However, only 40% who did not apply reported
that they did not need support, with many others reporting concerns over getting into debt or
not being eligible for support.
Despite a gradual improvement in economic conditions and the adaptations SMBs have made,such as incorporating digital tools into their business models, many expect it will take time
to return to normal. A notable proportion (33%) expect it to take longer than 6 months
for operations to return to normal and foresee challenges related to ongoing government
restrictions and reduced cash flow. Business leaders will likely continue to need financial
support to either reopen or maintain their operations, as well as support due to theincreased pressure on their lives, both at work and at home.

03

2020 – U.S. SMB REPORT | EXECUTIVE SUMMARY

04

33%

of SMBs expect it to take longer than
6 months for operations to return to normal

52%

of SMBs reported that they had lower sales
in the last 30 days compared to last year2020 – U.S. SMB REPORT

05

Table of Contents
INTRODUC TION ���������������������������������������������������������������������������������� 01
EXECUTIVE SUMMARY������������������������������������������������������������������������ 02
BACKGROUND������������������������������������������������������������������������������������� 06
CHAPTER 01

Business challenges in 2020������������������������������������������� 09
Closure rates���������������������������������������������������������������� 10
Sales���������������������������������������������������������������������������� 13
Employment������������������������������������������������������������������ 17
Operational challenges��������������������������������������������������� 20
Financial support���������������������������������������������������������� 22

CHAPTER 02

Domestic pressures������������������������������������������������������� 24
Financial pressures at home�������������������������������������������� 25
Domestic responsibilities������������������������������������������������ 27

CHAPTER 03

Looking into 2021��������������������������������������������������������� 29
Future expectations������������������������������������������������������� 30
Ongoing support����������������������������������������������������������� 32

CONCLUSION

���������������������������������������������������������������������������������� 34

APPENDIX

Appendix 01: Survey methodology����������������������������������� 35
Appendix 02: Additional community voices������������������������ 41

ENDNOTES������������������������������������������������������������������������������������������ 45
BIBLIOGRAPHY����������������������������������������������������������������������������������� 46
ACKNOWLEDGEMENTS����������������������������������������������������������������������� 49

2020 – U.S. SMB REPORT

06

Background
SMBS GLOBALLY HAVE BEEN PROFOUNDLY
AFFECTED BY COVID-19 IN 2020…

…INCLUDING THOSE IN NORTH AMERICA
AND THE U.S.

Lockdown and mobility restrictions, uncertainty
and reduced consumer spending led to reductionsin economic activity in the global economy. The
International Monetary Fund (IMF) estimates that
global real gross domestic product (GDP) declined
by 3.5% in 2020 (IMF 2020a). Although the crisis has
impacted businesses of all sizes, small and mediumsized businesses (SMBs), defined here as those withfewer than 500 employees, are particularly vulnerable
to economic shocks. SMBs are more dependent on debt
for financing than their larger peers and normally relyon short-term loans to deal with liquidity shortages.
However, their inability to raise other sources of funds
at short notice can turn a liquidity shortage into asolvency problem and can lead to the threat ofclosures (IMF 2020b).

Between May and October, SMBs in North America(i.e., the United States [U.S.] and Canada) saw a greater
recovery in closures, sales and employment than manyother regions as lockdown restrictions continued toease. Over those 6 months, closure rates fell from
24% to 11%, and the proportion of businesses thatreported a fall in sales and employment compared tothe same time last year improved by more than in any
other region.

According to the Global State of Small Business
Report, 26% of SMBs around the world were closed in
May 2020, as government restrictions peaked in many
countries. As government restrictions were eased,closure rates fell to 15% in October (Facebook/OECD/
World Bank 2020). However, even among businesses
that remained or returned to trading, conditions were
bleak. In October, 55% of SMBs globally reported
lower sales compared to the same month in 2019, an
improvement of only 7 percentage points since May.
Similarly, the aggregate proportion reporting that they
had reduced employment broadly stayed the same
between May and October. Business leaders aroundthe world also faced greater difficulties at home,with increased responsibilities from childcare andhousehold tasks, with female business leadersparticularly impacted.

However, in the final few months of 2020, thestringency of lockdown measures in the U.S. increased
and mobility became more restricted as cases rose.
The Lockdown Stringency Index in December was 72,
only slightly lower than 73 in April (Hale et al. 2020).1
By the end of December, the total number of open
small businesses was 30% lower than in January,
compared to approximately 25% below the Januarybaseline in mid-October (Chetty et al. 2020).

2020 – U.S. SMB REPORT | BACKGROUND

07

85

6%

80

4%

75

2%

70

0%

65

-2%

60

-4%

55

-6%

50

-8%

45

-10%

40

March

April

May

June

July

Lockdown Stringency Index

TH E U.S . STAT E O F S M AL L BU S IN E S S
SU RV EY H A S M O N ITO R E D T H E C H AL L ENGESCR EATE D BY T H E PAN D E M IC IN 2020
As in the rest of the world (World Bank 2017), SMBs
are widely considered the backbone of the U.S.
economy. They play an important role in creating jobs,
employing 47.1% of workers (SBA 2020) and, since the1970s, have created two-thirds of all net new jobs inthe U.S. (SBA 2017). SMBs also represent 99.9% of all
businesses in the U.S. (SBA 2020).
As part of continuing efforts to support SMBs in
the U.S., Facebook, in collaboration with the Small
Business Roundtable, conducted a survey of SMB
leaders, employees and consumers to gain a deeper
understanding of challenges that remain in the wakeof the coronavirus (COVID-19) pandemic. Including
employees and consumers allows for a fuller pictureof the state of the economy and how these economic
actors interact and impact one another.

AugustSeptember OctoberNovember December

Real GDP growth

Lockdown Stringency Index

FIGURE 1: Lockdown Stringency Index and real GDP growth estimates in the U.S. 2-12%Monthly GDP

This followed a similar survey conducted by Facebook
in April, which found that nearly one-third of SMBs
had closed and were facing challenges such as cash
flow (28%) and a lack of demand (20%). At that time,business leaders were struggling to balance theirbusiness and household responsibilities; nearly half(47%) of SMB owners and managers reported feelingburned out trying to take care of both business andhousehold responsibilities.
The results of this report are based on arepresentative survey of Facebook users conducted
between November 20 and December 20, 2020.
The survey captures the views of 11,203 online
SMB business leaders, 8,066 employees and 6,666
consumers across the U.S. This study summarizes the
key findings from December and compares them to thesituation in April, leveraging both surveys to analyze
cross-sectional data representing different stages ofthe pandemic.

2020 – U.S. SMB REPORT | BACKGROUND

08

D EF I N I TI O N S AN D L IM ITAT IO N S O F THIS REPORTD EF I N I T IO N SThis report distinguishes between several classifications of respondent, including:
SMB leaders: those who reported that they control business finances, manage day-to-day operations of abusiness, conduct other business management or leadership activity or own a business.
Personal SMB leaders: those who reported that they promote or sell goods and services, are selfemployed promoting goods or services or produce goods sold for personal income.
Employees: those who responded that they work at a business.
Consumers: a random subset of respondents who self-identified as an SMB owner or manager or an
employee at a business, and all those who did not self-identify as associated with an SMB.
SMBs in majority-minority neighborhoods: self-reported 5-digit ZIP codes were matched with
U.S. Census Bureau information on the racial composition of each ZIP code. If the ZIP code had amajority population estimated to be identifying as non-white, the business leader was labeled as
being in a majority-minority neighborhood.

L I M I TATIO N SThis report is based on a statistically representative sample of Facebook users across Pages, Marketplace,advertisers and the general population. Our hope is that it captures a wide range of SMB business leaders,
employees and consumers who were present online in November and December 2020. Considering that
85.8% of Americans have access to the internet and that Facebook is one of the most popular mobile
social networking apps in the U.S., our survey results reflect the experiences of a wide range of theAmerican population to the extent possible.
This report describes the differences in results between April and December 2020 and across dimensions
such as sector, gender and majority-minority neighborhoods. However, these differences have not beenstatistically tested.
When assessing or interpreting insights, it is important to consider that this report provides aggregate
figures for the U.S. These figures will vary geographically across the U.S. for several reasons, including
the varying stringency of lockdown measures and the different supports offered at the municipal level.
Despite these limitations, the analysis undertaken from this survey adds to the literature on the impactof the pandemic on SMBs, employees and consumers due to its broad depth of questions, allowing for the
analysis of many important topics, including the impact of the pandemic on business leaders at work andat home and how business leaders have adapted. Further information regarding the survey methodology
is provided in Appendix 01.

2020 – U.S. SMB REPORTC H AP T E R 01

Business challenges in 2020
SMB business leaders face a challenging environment, even in normal times. Roughly 10% of
SMBs were closed before the pandemic,3 and businesses found it hard to meet their targets.
One-quarter of SMBs stated that it took more than normal effort or extraordinary effort tomeet their targets in normal circumstances before the coronavirus pandemic. However, thechallenges of running a small business were amplified by the pandemic in 2020.
Although nearly one-third of SMBs closed in April, many have managed to reopen. However,
SMBs still operate in an environment of lower demand, which has put pressure on their cash
flow. In response, many SMBs reduced their workforce to lower their costs. SMBs have also
faced operational challenges, including difficulty hiring employees and supply chain delays.

09

2020 – U.S. SMB REPORT | CHAPTER 1: CLOSURE RATES

1.1 Closure rates
Across the U.S., government and health authority
orders have required many “non-essential” businesses
to close and have reduced customer traffic, leading toconsiderable uncertainty regarding SMBs’ prospects.
Although lockdown measures were eased in the
middle part of 2020, restrictions were tightenedin many states in November, which led to storesclosing, either as a direct result of restrictions or as
the restrictions compounded the financial challenges
many SMBs already faced.

10

CLOS U RE RATES FEL L BET W EEN APRI L
AND DECEMBER …
Closure rates fell slightly between April and December,from 31% to 25%. Closure rates were higher among
personal businesses4 (38%) relative to the average,
although this fell significantly from 52% in April.
Personal businesses tended to have opened more
recently and have fewer employees, characteristics
that were found to be associated with higher closure
rates. For instance, 33% of solopreneurs5 were closed
in December, compared to only 8% of businesses withmore than 50 employees.
In December, more SMBs were closed in customerfacing sectors and those deemed “non-essential”(Figure 2). For instance, closure rates were highest
in food and accommodation (35%) and arts andentertainment (34%), but much lower in humanhealth (10%) and transport (8%).

FIGURE 2: Closure rates, by sector and U.S. average

40%
35%

35%

34%

Closure rates

30%

30%

28%
24%

25%

23%
19%

20%
15%

13%
10%

10%

8%

5%
0%
Food &
Arts &
accommodation entertainment

Services

Manufacturing

RetailAgriculture

SectorInformation & Construction
communication

Human
healthTransport

2020 – U.S. SMB REPORT | CHAPTER 1: CLOSURE RATES

Of businesses closed in December, the most cited
reasons for closure were government restrictions(33%), financial reasons (30%) and reductions indemand (26%). This contrasts to April, when 62% ofbusinesses were closed due to government and healthauthority orders.6
In addition to a higher share of businesses closing
due to financial challenges, more businesses do not
expect to reopen. In December, only 37% of closed
businesses expected to reopen within 6 months,
compared to 66% that expected to reopen in April.
Moreover, fewer personal businesses expected toreopen in the next 6 months (30%) than theaggregate sample.

11

CLOS U R E R ATES W ER E HIGHER AMONGFEMAL E-L ED BU S INES S ES
Closure rates were higher among female-led
businesses (28%) compared to male-led businesses(22%). Although closure rates fell for both genders, thegap has increased slightly since April, when closure rates
were 33% and 29% for female- and male-led businesses,
respectively. This gender gap was also much greater
among personal businesses. In December, 42% offemale-led personal businesses were closed, comparedto 31% of male-led personal businesses.
This gender divide in closures was driven to some extent
by a greater representation of female business leaders in
sectors with higher closure rates (Figure 3). For instance,
only 2% of female-led businesses were in the sector withthe lowest closure rates, transport, compared to 7% of
male-led businesses. This is consistent with evidence
from other sources (Alon et al. 2020, Facebook/OECD/
World Bank 2020, McKinsey 2020a).

FIGURE 3: Proportion of female business leaders in a sector (vertical axis) against the proportion of male business leaders in a sector; thesize of the bubble indicates overall closure rates. For instance, the x-axis represents the distribution of male business leaders between
sectors, not the proportion of businesses in a sector owned by a male.

Proportion of female business leaders in sector

18%
16%

Higher proportionof female ownership

Arts andentertainment [34%]Services [30%]14%
Retail [24%]Food andaccommodation [35%]

12%
10%

Human health [10%]8%6%Construction [13%]4%Manufacturing [28%]2%Information andcommunication [19%]Higher proportionof male ownershipTransport [8%]Agriculture [23%]

0%
0%

2%

4%

6%

8%

10%

12%

Proportion of male business leaders in sector

14%

16%

18%

2020 – U.S. SMB REPORT | CHAPTER 1: CLOSURE RATESDomestic pressures also led to more female
businesses closing or not reopening. Householdrelated reasons were cited by 16% of female businessleaders as a reason why they closed, compared toonly 8% of male business leaders, and were the mostprevalent reason (28%) for female-led businesses that
did not expect to reopen. Among personal businesses,
nearly one-quarter (23%) of those led by women cited
household reasons as to why they closed, compared
to only 3% of those led by men.
M A N Y BUSI N E S S E S H AV E ADAP T E D THEIROPE R ATI ON S TO R E M AIN O P E R AT IN G OR
TO R EOPE N

12

Temporary closures were more common amongfemale-led businesses (37%) than male-led businesses(23%). This is supported by results from the April
survey, in which 71% of female-led businesses
expected to reopen, compared to only 62% of male-led
businesses; this pattern also existed in December.
SMBs have needed to respond and acclimatize to adifferent business environment to remain operating or
to reopen. Businesses have adapted by, for instance,
introducing social distancing measures (63%),
changing operating hours (25%) and giving workers
location flexibility (18%).
Among businesses that closed and subsequently
reopened, the most common enablers for businesses
to reopen were implementation of social distancing
protocols (40%), customer support (31%) and theeasing of restrictions (30%). More female-led SMBs
have adopted social distancing protocols and online
tools, whereas their male counterparts were morereliant on the easing of government restrictions(Figure 4).

Many businesses that were forced to close earlier
in the year due to the pandemic have managed toreopen. 32% of open businesses had closed andreopened since the start of the COVID-19 pandemic,
with approximately 30% having closed for 3 months
or more.

FIGURE 4: Most important factors that allowed businesses to reopen

45%

45%

43%

40%

Proportion of SMBs

35%

33%

33%
30%

30%

27%
24%

25%

22%

20%
16%

15%

11%

10%
6%

4%

5%

4%

3%

0%
Adapting tosocial distancing

Customer
supportEase ofrestrictions

Shifting toonline tools

Additional
finance

Factors helping SMBs to reopen
Male-led

Female-led

Securing
supplies

Changes to
products

2020 – U.S. SMB REPORT | CHAPTER 1: SALES

13

1.2 Sales

S MBS R EPOR TED ONLY S L IGHT
IMPROV EMENTS IN DEMAND

Throughout 2020, SMBs have seen lower levels of
consumer demand, with their in-person operations
often hampered by business closures or social
distancing measures. Small business revenue at thestart of April fell to a low of 50% of its value at thestart of the year and remained at least 20% lower forthe rest of the year (Chetty et al. 2020).

52% of SMBs reported that they had lower sales in
the last 30 days compared to last year. This reflectsa decrease of 4 percentage points since April, when
56% of SMBs indicated a poorer year-on-year sales
performance. Similarly, the proportion that reported
higher sales increased only slightly between April and
December, from 15% to 17%.

In response, SMBs have increased their use of digitaltechnology. Between March and November, there
was a 60% increase in the share of purchases madeby consumers through a digital channel (PYMENTS
2020). The pandemic has led to changes in the way
consumers shop across the U.S. According to the U.S.
Census Bureau’s Household Pulse Survey, between
November 20 and December 7, 53% of respondentschanged their spending due to concerns about goingto public or crowded places or having contact withhigh-risk people, and 24% changed their spending due
to a loss of income (U.S. Census Bureau 2020a).

Despite many SMBs continuing to report a reduction
in sales, the magnitude of these declines decreased
between April and December. In April, among businesses
that reported a drop in sales, 53% of SMBs reported afall of more than 50% relative to the same 30-day period
in 2019. By December, that had decreased to 44%.
Although personal businesses were less likely to reporta fall in sales (48%), compared to the average, they weremore likely to report that sales fell by more than half(56%). The greatest reductions in sales were in sectorsthat required in-person physical interaction (Figure 5),consistent with findings in the literature (Alexander
and Karger 2020, Cox et al. 2020). For instance, artsand entertainment had the highest proportion of SMBs
reporting that sales fell by more than 50%.

Proportion of business leaders that reported a reduction
in sales by more than, or less than, 50%

FIGURE 5: Proportion of SMBs that reported a reduction in sales, relative to the same 30-day period in 2019, by more thanor less than 50%, by sector

80%
70%

71%
62%

60%

61%

23%

52%

50%
37%

40%

57%
9%

52%

15%

43%

28%

41%

40%

13%

15%

30%
20%

7%

32%
9%

47%

48%
25%

10%

39%

33%

37%
24%

18%

28%

26%

Agriculture

Manufacturing

23%0%Construction

Food &
Arts &
accommodation entertainment

HumanhealthInformation &communication

Services

SectorSales reduced by less than 50%

Sales reduced by more than 50%

Transport

Retail2020 – U.S. SMB REPORT | CHAPTER 1: SALES

14

Although 52% of both female-led and male-led
businesses reported that sales fell, a greater proportionof female-led businesses (47%) reported that sales
fell by 50% or more compared to male-led SMBs(41%). Female business leaders also saw much lessimprovement between April and December. The
proportion of female-led SMBs that reported thatsales fell by more than 50% dropped by only
5 percentage points, compared to 13 percentage
points for male-led SMBs.
As sales have fallen, SMBs have faced increased
competition between businesses. 61% of SMBs
reported an increase in competitive pressure compared
to last year. Perhaps reflecting the lack of improvementin sales among female-led businesses, they were more
likely to report greater competitive pressure (72%),
compared to their male counterparts (51%).

THE INCREAS ED U S E OF DIGITAL CHAN N ELSBY S MB S HAS S U PPORTED S AL ES
The shutdown of physical premises combined withchanging consumer behavior is driving businesses
to become more digital; 34% of businesses haveincreased their use of online or digital tools since
the pandemic began, consistent with other research(Deloitte 2020). More female-led SMBs (37%)
reported increasing their use of digital tools comparedto male-led SMBs (30%).
In addition, more businesses started selling online forthe first time. The proportion making no sales throughdigital channels in the past 30 days fell from 35%
before COVID-19 to 13% in the 30 days prior to theDecember survey, and the proportion making 100% of
their sales online rose from 13% to 20% (Figure 6).

“The pandemic not only shut my doors, but it created massivecompetition should I even consider returning to operations”–SMB leader

FIGURE 6: The proportion of sales made through digital channels, before the pandemic and in the previous 30 days

40%

Proportion of SMBs

35%

35%

30%
25%

23%

15%

20%

19%

20%
13%

11%

13%

12%
9%

10%

13%

12%
9%

8%
5%

5%
0%
None

1-20%

21-40%

41-60%

61-80%

81-99%

Proportion of sales made digitally
Before COVID-19

Previous 30 days before survey

100%

2020 – U.S. SMB REPORT | CHAPTER 1: SALES

15

Businesses across all sectors have benefited from this
digital transformation (Figure 7). Among SMBs making
their first sales through digital channels, the greatest
increases were generally in sectors that had relatively
lower levels of digitalization before the pandemic began.
For instance, in agriculture, 88% were making sales
through digital channels, compared to 22% before thepandemic. The sector with the largest increase in digitalchannels accounting for at least 60% of sales was in
information and communication (27 percentage point
increase), where one-third of all businesses made 100%of their sales through digital channels.
Many businesses have also used digital channels toadvertise. 57% of businesses reported that they use
social media to advertise, second only to the number
using word of mouth (59%). In addition, 38% reported

that they advertised using their own website, 31% using
internet search engines and 21% using other websites.
However, some business leaders still faced barriers
to adopting electronic communications, including
preferences, a lack of tools and a lack of knowledge.
Among business leaders who have not conducteda transaction electronically, the business owner’s
preference for in-person transactions (34%) andperceived preferences of customers in disliking
electronic transactions (27%) were the mostcommonly cited reasons, along with believing thatelectronic transactions were not necessary (31%).
A proportion of business owners also stated they do
not have the necessary tools (15%) and do not know
how to handle electronic transactions (9%).

“With the introduction of COVID-19, we are forced to conduct businessonline in order to survive and remain profitable”–SMB leader

FIGURE 7: Proportion of SMBs making 0-60% and 60-100% of their sales through digital channels. The total of each column reflects
the proportion of SMBs in December that reported making sales through digital channels before the pandemic and in the previous
30 days before the survey, by sector.*

100%

97%
92%

88%

90%
80%

85%

79%
67%

62%

62%

50%

51%

47%

33%

58%

41%

33%

30%

28%

20%
10%

59%

45%

38%
22%

67%

58%

54%

47%

40%

72%

70%

67%

60%

30%

84%

76%

70%
Proportion of SMBs

88%

85%

83%

18%

34%

14%

0%
Agriculture

Arts &
entertainment

Construction

Food &
accommodation

Services

HumanhealthInformation &communication

Manufacturing

RetailSector
Before COVID-19: 60-100% of sales through digital channels

Previous 30 days before survey: 60-100% of sales through digital channels

Before COVID-19: 0-60% of sales through digital channels

Previous 30 days before survey: 0-60% of sales through digital channels*The transport sector is excluded from this graph due to a low sample size2020 – U.S. SMB REPORT | CHAPTER 1: SALES

16

TH E SAL E S P IC T U R E FAC E D BY
BUSI N E S S E S R E FL EC T S C H AN GES IN
CON S U M P T IO N B E H AV IO R
The pandemic has led to a reduction in consumer
spending, due to concerns over income, health andthe lack of in-person services. 41% of consumers
reported reducing their spending in the past 3
months compared to the same period last year.
Among those, 29% reduced spending by morethan half. In contrast, only 23% reported that they
had increased their spending.
The COVID-19 pandemic has also led toconsumers shopping differently. 32% ofconsumers changed at least one of the businesses
from which they regularly purchased in the past
6 months. When asked why, 38% of consumers
cited health concerns as a reason for changing

the business where they shopped. Similarly, 15%of consumers cited no delivery and 13% statedno online presence as their reason for switching.
More female consumers (34%) than maleconsumers (29%) switched businesses and citedhealth as a reason why (45% of female consumers
compared to 27% of male consumers).
Consequently, more consumers have switchedto shops with a digital presence (Figure 8). 32%
of consumers reported a shift to shopping at an
online business, second only to shifting to a local
business (33%). Reflecting their increased healthconcerns, more female consumers switched to an
online business relative to their male counterparts(37% compared to 23%) and to businesses
observing social distancing practices (32%compared to 14%).

“At this time, unless there is an online shop, I will find it difficult to
support local because I don’t feel safe”–SMB consumer

FIGURE 8: How consumers have changed which shops they regularly use, by gender40%

Proportion of consumers

30%

37%

35%

35%

32%
29%

25%

27%

29%

28%

27%

23%
20%

20%

20%

25%

16%

14%

15%

23%

21%

10%

8%

6%

5%
0%
Business
local to me

Onlinebusiness

Business that
supports the
local community

Business
Business
Business observing
that needed social distancing that delivers
products
supportpractices
Businesses that consumers switched toMale consumer

Female consumer

Smallbusiness

Business
observing
sanitation
practicesLargebusiness

2020 – U.S. SMB REPORT | CHAPTER 1: EMPLOYMENT

1.3 Employment
In response to falling revenue, SMBs have reduced theiremployment in an effort to cut costs. This is of relevanceto policymakers as SMBs account for nearly half of thejobs in the U.S. (SBA 2020). Many of the most vulnerable
jobs are in industries that offer the lowest wages(McKinsey 2020b) and so could disproportionately affectthose who can least afford it. Not only were high-wage
workers less likely to lose their jobs to begin with, but theyalso experienced a much more rapid recovery. By late May,
employment for high-wage workers had nearly returnedto the pre-COVID baseline. In contrast, employment
rates for low-wage workers remained roughly 20%
below baseline levels, even as of mid-September(Chetty et al. 2020).
A S A R E S ULT O F LOW E R S AL E S , BU S INES S ES
H AV E FACE D D IFFIC U LT IE S PAY IN G T HEIREX PE NS ES, LE AD IN G M AN Y TO R E D U C E
TH EI R WOR K FO RC E
Falling sales and resulting cash flow challenges have led
to SMBs experiencing difficulties paying their bills. 62% of
SMBs reported difficulty paying at least one bill, and 26%
reported difficulty paying employee salaries, the mostcited expense. More female-led SMBs reported difficulty
paying at least one of their bills, perhaps reflecting thegreater decline in sales among these firms.

17

To lower their costs, businesses have reduced theirworkforce. 31% of SMBs stated that they had reduced
employment compared to last year, although this figure
has demonstrated improvement since April, when 44%
reported they had reduced employment in response to
the pandemic.7 18% of firms have also adjusted employeecompensation in response to the pandemic.
However, this does not reflect the same level ofprogress as seen in reports on overall U.S. employment.
Figures from the Bureau of Labor Statistics show thatunemployment fell from 15% in April to under 7% in
November, suggesting that the recovery in employment
might have been driven by larger businesses.8
Employment fell more in sectors experiencing greater
reductions in sales (Figure 9). For example, food andaccommodation, the sector with the second highest
proportion of firms that reported a reduction in sales,
had the greatest reduction in employment; 57% offirms reported their workforce was smaller than thesame time last year.
“A lot of small businesses keep getting restrictions
changed from week to week and have dropped
their business sales to less than 45 percent of
their normal business, causing them to let go or lay
off several good employees, who then can’t findanother job to support their families”–SMB employee

FIGURE 9: Proportion of SMBs that reported they reduced employment (vertical axis) against the proportion that reported
a reduction in sales compared to last year, by sector

Proportion of SMBs that reported
a fall in employment

70%
60%

Food & accommodation

50%
40%

Arts & entertainment

Manufacturing
Services

30%

Human health

Construction

Information & communication

20%

Retail10%0%0%Agriculture
Transport

10%

20%

30%

40%

50%

60%

Proportion of SMBs that reported a fall in sales

70%

80%

90%

2020 – U.S. SMB REPORT | CHAPTER 1: EMPLOYMENT18

SMBS IN MAJORITY-MINORITY
NEIGHBORHOODS HAVE BEEN IMPAC TED
TO A GREATER EXTENT THAN THOSE IN
NON-MINORITY NEIGHBORHOODS

that reported lower sales than last year was
12 percentage points higher than for relative
businesses in non-minority neighborhoods.
Furthermore, 70% of SMBs in majority-minority
neighborhoods that reported lower sales had
sales fall by more than 50%, compared to 41% of
SMBs in non-minority neighborhoods.

Closure rates were higher among SMBs in
majority-minority neighborhoods (36%)
compared to businesses in non-minority
neighborhoods (22%). This was partly due tothe sectoral composition of these businesses.
For instance, 16% of SMBs in majority-minority
neighborhoods were in the food, services,
restaurants and accommodations sector, which
had the highest closure rates, compared to only
11% in non-minority neighborhoods. Businesses inmajority-minority neighborhoods were also more
likely to have opened more recently and to havefewer employees.

Businesses in majority-minority neighborhoods
were less likely to make a significant portion of
their sales online. Only 36% made more than 60%of their sales through digital channels, comparedto 46% of SMBs in non-minority neighborhoods.
As businesses in majority-minority neighborhoods
saw greater reductions in sales, it is no surprise that
more reduced their workforce (37%), compared to
SMBs in non-minority neighborhoods (30%).

This sectoral composition also led to poorer
outcomes with regard to sales. The percentage
of SMBs in majority-minority neighborhoods

FIGURE 10: Proportion of SMBs that closed, reported sales fell by more than 50% and reduced employment,by ethnicity of neighborhood

50%
46%

45%
40%

Proportion of SMBs

37%

36%

35%

30%

30%
25%

22%

22%

20%
15%
10%
5%
0%
Closure rates

Fall in sales greater than 50%

SMBs in non-minority neighborhood

Reduced employment

SMBs in majority-minority neighborhood

2020 – U.S. SMB REPORT | CHAPTER 1: EMPLOYMENT

19

TH ESE F I N D I N G S R E F L EC T T H E E X P ER IENCEOF E M PLOY E E S

Among the unemployed, 42% were looking for a job
in a new sector, and only 26% were looking for a jobin the same sector. Men were much more likely to belooking for a new job compared to women, whereas,consistent with the results above, women were more
likely to be home-schooling children while they were
unemployed (19% of women compared to 1% of men).

Employees have been greatly impacted by COVID-19,
with many losing their jobs as their employers closed or
reduced their workforce. Of those unemployed in the
December survey, 26% stated that their unemployment
was due to their employer closing or reducing theirworkforce because of the pandemic, although thispercentage was much lower than in April (Figure 11).
Family responsibilities were also a prevalent reason
for female employees; 20% stated that caring forchildren or children’s education at home was themain reason they could not work, compared to 3%
for male employees.

Even for those who have retained their jobs, thepandemic has continued to cause concerns. 34% of
employees were concerned about losing their jobs.
This reflects findings from the U.S. Census Bureau’s
Household Pulse Survey, which found that 31% of
respondents expected a loss of employment in thenext 4 weeks for themselves or a household member(U.S. Census Bureau 2020a).

“Stabilize school so that single parents can return to work”–SMB leader

FIGURE 11: Reasons given for unemployment, by survey wave

45%

44%

Proportion of unemployed

40%
35%
30%
25%

22%

20%

20%
15%

15%
11%

10%

12%

11%

10%

7%

7%
4%

5%

3%

0%
Businessclosed due to
COVID-19

Business reduced
workforce due to
COVID-19

Stay-at-homeordersSelf-isolating

Reasons for unemployment
April

DecemberTaking care ofchildren or theireducation at home

Not due tothe pandemic

2020 – U.S. SMB REPORT | CHAPTER 1: OPERATIONAL CHALLENGES

1.4 Operational challenges
In addition to the challenges of closures, reduced
demand and cash flow issues, SMBs also facesupply-side challenges, including difficulties in hiring
skilled staff and managing supply chain delays. It
is often more difficult for SMBs to manage supply
chain disruptions because they may be missing
the necessary resources, structures and processes
to adapt (Ritchie and Brindley 2000). However,
COVID-19 has exacerbated these issues.

20

This is consistent with research from the National
Federation of Independent Business (NFIB), whichfound that 33% of SMBs surveyed had open positions
they could not fill immediately, the highest level since
March (NFIB 2020).
Similarly, 9% of businesses listed attracting skilled
staff as their biggest future challenge. More SMBs in
sectors requiring skilled staff, such as manufacturing(18%) and construction (17%), saw this as their biggest
future challenge. Small businesses often compete withlarger firms, which have greater budgets to offer higher
salaries and benefits, and so often find it challenging to
attract employees with the required skills.9

SMB S S EE K I N G TO H IR E WO R K E R S H AV E
FACE D CH A L L E N G E S
Few SMBs have been net hirers in 2020. Only 8% ofbusinesses in December reported that their workforce
had increased from the same time in the previous year,
and 51% of SMBs reported they had not rehired anyone
in the past 3 months who had been either furloughed orlaid off since March.
A lack of skilled staff can have serious consequences
for SMBs. 31% of SMBs stated that employees werethe most important factor for their survival during
the pandemic. However, SMBs that wanted to hire
workers faced difficulties. 34% of businesses found it
challenging to find adequately skilled employees.

BU S INES S ES HAV E FACED S U PPLY-S IDECHAL L ENGES
A lack of supply can have serious implications for asmall business. 20% of consumers who switched fromone of their regular shops cited the lack of supply as areason for switching.
However, in aggregate, 68% of SMBs reported facing
at least one supply challenge. The most prevalent
supply-side challenges faced by SMBs included
limited supply (42%), delayed shipments (42%),
more expensive supply of products (40%) and more
expensive logistics (37%) (Figure 12).

FIGURE 12: Supply-side challenges faced by business leaders
45%

42%

42%

Proportion of SMBs

40%

40%
37%

35%
30%
25%
20%

18%
15%

15%

11%

10%
5%
0%
LimitedsupplyDelayedshipment

More expensive
supplyMore expensive
logistics

Domestic
supplier delays

Supply-side challenges

Locating
new supplier

Foreign
supplier delays

2020 – U.S. SMB REPORT | CHAPTER 1: OPERATIONAL CHALLENGES

BUSI N ESS L E AD E R S H AV E WO R K E D H AR DER
TO COPE WI TH T H E S E C H AL L E N G E S
Combined, the challenges faced by SMB leaders anddiscussed so far in this report have made managing
their businesses more challenging; 60% of businessleaders reported that it had been harder to manage
their business compared to last year, and 57% reported
spending more time at work.

21

As a result, 51% of business leaders reported thatwork was impacting their ability to take care of theirhouseholds either moderately, a lot or a great deal. Thiswas much greater for female business leaders (64%)
than male business leaders (35%), which likely reflects
the greater burden of household tasks carried byfemale business leaders, as discussed in Section 2.2.

“After 26 years as an owner of this business, we are very close tototal collapse”–SMB leader

60%

of business leaders reported it had been
harder to manage their business compared
to last year57%

of business leaders reported they werespending more time at work2020 – U.S. SMB REPORT | CHAPTER 1: FINANCIAL SUPPORT

1.5 Financial support
Given their importance to the economy and relative
vulnerability compared to larger businesses, somegovernment support has been targeted specificallyat SMBs. The two largest measures were the
Paycheck Protection Program (PPP) and the
Small Business Administration’s Economic Injury
Disaster Loans program. The former provided loans
to businesses to cover costs such as payroll andrent, with the loan principal being forgiven if SMBs
maintained their employment. The latter provided
low-interest loans for working capital to SMBs
suffering substantial economic injury due to COVID-19(OECD 2020). States and cities also introduced local
support measures for SMBs. For instance, New York
City and Chicago introduced low- or zero-interest
loans, and Iowa and Massachusetts introduced
grants for small businesses. Due to the importanceof financial support for businesses, a rich academic
literature about its impacts and effectiveness has

22already developed. With regard to PPP, some researchfound that it increased the employment, financial
health and survival of small businesses (Hubbard
and Strain 2020). However, other research has citedconcerns over cost, estimated at U.S.$377,000 per job
saved (Chetty et al. 2020), and whether it targeted
those most in need (Granja et al. 2020).
ALTHOU GH FEW ER THAN IN APR IL , MA N Y
S MBS S TIL L APPL IED FOR FINANCIALS U PPOR T IN DECEMB ER
In December, 37% of businesses had applied forexternal sources of capital in the past 6 months,
whereas in April, 53% had applied for support in theprevious 30 days.10 Of those that applied in December,
70% received funding from their applications, 13%
had their applications denied and the remainder were
waiting for approval.

37%of businesses had applied for externalsources of capital in the past 6 months

53%
had applied for support in theprevious 30 days

2020 – U.S. SMB REPORT | CHAPTER 1: FINANCIAL SUPPORT23

The most common support options for whichbusinesses had applied in the previous 6 months
were PPP (18%) and government grants (11%).
These results suggest a rather more limited amountof support than other surveys indicate. The Small
Business Pulse Survey found that by December,approximately 73% had received funding from PPP
since March (U.S. Census Bureau 2020b).
Among SMBs that did not apply for support, only 40%
reported that they did not need it, 21% that they were
not eligible and 26% that they did not want to get into
debt (Figure 13). This may reflect the large proportionof support obtained through government loans in the
U.S. The Global State of Small Business Survey foundthat, of businesses receiving support, 34% in the U.S.
were receiving government loans compared to 15% in
aggregate (Facebook/OECD/World Bank 2020).

FIGURE 13: Reasons given by business leaders for not applying for financial support

Proportion of business leaders thatreported they did not apply for support

45%
40%

40%

35%
30%
26%

25%
21%

20%
16%

15%
10%

8%

5%
0%
Did notneed itDid not want to
get into debt

Not eligible

Did not know
how to apply

Application process
was complicatedReasons why business leaders did not apply for support

2020 – U.S. SMB REPORT24

C H AP T E R 02

Domestic pressures
The challenges facing business leaders have led to difficulties in paying their usual household
expenses. Similarly, among employees, more have been concerned about having enough money
to sustain their families.
Business leaders and employees, especially women, also face a greater burden of domestic
tasks, such as home-schooling or distance learning, which is impacting their ability to focus on
their businesses and jobs.

2020 – U.S. SMB REPORT | CHAPTER 2: FINANCIAL PRESSURES AT HOME

2.1 Financialpressures at home25

BU S INES S L EADER S AND EMPLOYEES HAVEFACED FINANCIAL PR ES S U RES AT HO ME...

Closures and lower sales have increased financialpressures at home for business leaders. Similarly,
increases in unemployment, or reductions in hours
or pay, have led to concerns among employees andconsumers about their ability to support their families
and afford rent or basic household needs. According
to the U.S. Census Bureau’s Household Pulse Survey,
between November 20 and December 7, only 40%
of respondents reported that they were not facing
any difficulty paying their usual household expenses,
with more difficulties seen among minorities andlower-income groups (U.S. Census Bureau 2020a).

The closing of businesses and the reduction in sales
have impacted business leaders’ ability to pay theirbills. Between April and December, the proportion of
female business leaders that stated it was difficult orvery difficult to pay their usual household expenses
increased from 34% to 55%, while there was a small
decrease among male business leaders (Figure 14).

“Apart from my business suffering from COVID-19, I also struggle to pay
the bills…Also, it’s been harder to keep household essentials, as well as
food, due to everything rising in price”–SMB leader

FIGURE 14: Proportion of business leaders that reported difficulty paying their usual household expenses, by gender and survey wave

Proportion of business leaders that reported
difficulty paying their usual household expenses

60%

55%

50%

40%
33% 34%

30%

31%

20%

10%

0%
April

December

Male business leader

Female business leader

2020 – U.S. SMB REPORT | CHAPTER 2: FINANCIAL PRESSURES AT HOME

Similarly, 55% of employees were concerned about
having enough money to sustain their households,
an increase from 51% in April. The consumer sample
provided some insights into which bills were ofgreatest concern: 15% listed rent and 11% listed basic
household needs as their main concern.
… A N D H AV E A P P L IE D FO R S U P P O R T TO
A SS I ST TH EM AN D T H E IR FAM IL IE S
Workers have also applied for support in response
to job losses and pay cuts. 13% of employed andunemployed workers in the sample applied forgovernment or nongovernment organization
assistance in December, slightly higher than in April.
Among this group, 27% were receiving food stamps
and 44% were receiving unemployment benefits.
Another 27% were not receiving any support at thetime of the survey, despite having applied.

Female workers were much more likely to receive foodstamps (36% compared to 14% of male workers), butless likely to receive unemployment benefits (37%compared to 55%).
Among those who did not apply, fewer responded thatthey did not need it, falling from 54% in April to 49%
in December. Similarly, the proportion that reported
they were not eligible rose from 24% to 31%. Female
employees were much more likely to report they
were not eligible (34%) compared to male employees(25%). Furthermore, 29% of employees reported in
December that they had no access to financial orchildcare support if it was needed in the future.

“I’m terrified that I won’t be able to recover from the pandemic
financial issues”–SMB employee“We are living on unemployment, my spouse’s wages and savings. I worry
what will happen if our savings runs out before everything can return
to normal. Without extensions on unemployment benefits, that will
happen soon. I worry what my options for work may be after a careerin a now-decimated industry”–SMB employee

26

2020 – U.S. SMB REPORT | CHAPTER 2: DOMESTIC RESPONSIBILITIES

2.2 Domestic
responsibilities
At the same time as they are dealing with workplace
challenges created by the pandemic, business leadersand employees have encountered a sharp rise in thelevel of domestic responsibilities, such as caring forchildren and their education from home. According to
the U.S. Census Bureau’s Household Pulse Survey inDecember, 87% of households with children had theirchildren’s education moved to a distance learning
format (U.S. Census Bureau 2020a). These domestic
responsibilities have increasingly fallen on women.
According to Facebook’s Survey on Gender Equality
at Home, women in North America were more likely toundertake several domestic tasks including, cleaning,cooking and household management (Facebook 2020).

27

FEMAL E BU S INES S L EADER S ANDEMPLOYEES HAV E FACED ADDITIONALRES PONS IBIL ITIES AT HOME R EL ATIVE TO
THEIR MAL E COU NTERPARTS …
While business leaders and employees have beennavigating the challenges generated by COVID-19,
they have also faced greater domestic responsibilities,
which have increasingly fallen on the shoulders offemale business leaders and employees.
Female business leaders have reported spending
an increased amount of time on domestic tasks,
including housework, the education of children athome and caring for children (Figure 15). This is in linewith a recent study that found among the population
working from home in the U.S., UK and Germany
during the lockdown, women spent significantly
more time caring for children and supporting homeschooling relative to men (Adams-Prassl et al. 2020).

FIGURE 15: Proportion of business leaders that reported spending more time on caring for children, the education ofchildren at home and housework and spending more than 4 hours per day on domestic responsibilities

Proportion of businessleaders or employees

60%

56%

50%
40%

35%

31%

30%
20%

26%
14%

25%

29%
21%

14%
7%

10%
0%
Caring forchildren

Education ofchildren at home

Housework

Business leaders spent more time on in the last 6 months
Male

Businessleaders

Employees

4 hours or more on domestic responsibilities
Female2020 – U.S. SMB REPORT | CHAPTER 2: DOMESTIC RESPONSIBILITIES

More female business leaders than maleleaders reported spending 4 hours or more
per day on domestic tasks (25% compared to7%), with this divide increasing significantly
since April (31% compared to 27%). Similarly,
more female employees reported spending
4 hours or more per day on domestic tasks
in December (29% compared to 21%) and, as
discussed in Section 1.3, female employees
were more likely to be unemployed as a resultof caring for children or home-schooling.
These results reflect the findings in the
Global State of Small Business Survey, whichfound that the U.S. had the greatest genderdifference in Wave VI in terms of businessleaders spending more time on domestic
tasks due to COVID-19 (Facebook/OECD/
World Bank 2020).

28…W HICH IS IMPAC TING THEIR ABIL ITY TO
PER FORM THEIR WORK RES PONS IBIL ITIESDomestic responsibilities were also impacting businessleaders’ and employees’ abilities to focus on their businesses.
In December, female business leaders were 31 percentage
points more likely to report that domestic tasks impacted theirwork a moderate amount, a lot or a great deal compared tomale business leaders (Figure 16), increasing from a differenceof 10 percentage points in April. Similarly, the percentage offemale employees who reported that domestic responsibilities
were impacting their work was 6 percentage points higher in
December relative to male employees.
The extra effort at both work and home is taking its toll on
business leaders. 24% of female business leaders (compared
to 13% of male business leaders) listed their physical wellness
as their main concern, the most commonly selected response.
Physical wellness was also the top concern for employees (28%).

“I have three kids and a husband in a 1,000-square-foot house. Findingtime to focus on work for my side business is really hard these days”–SMB leader

FIGURE 16: The proportion of business leaders in December who reported that domestic responsibilities were impacting their work, by gender

Male business leaders

Female business leaders

5%

13%

16%

28%

12%
13%

21%
15%

41%

36%

A great deal

A lot

A moderate amount

A little

Not at all

2020 – U.S. SMB REPORT29

C H AP T E R 03

Looking into 2021
Although the majority of SMBs were optimistic, the level of optimism fell slightly between
April and December. SMBs also anticipate that the challenges they currently face, including
cash flow, a lack of demand and government restrictions, will remain a challenge in upcoming
months, with many SMBs expecting their operations not to recover to normal levels within thenext 6 months.
As business leaders continue to face challenges, they will need both financial support to aid
their businesses and well-being support to help them handle the increased pressure and strain
they face.

2020 – U.S. SMB REPORT | CHAPTER 3: FUTURE EXPEC TATIONS

3.1 Future expectations

30

SMBs continue to encounter difficulties in theiroperations. The three most cited challenges for the
next 6 months were cash flow (26%), government andhealth authority restrictions (18%) and demand (13%),with large variation by sector (Figure 17). Cash flow
was the greatest concern among more than one-thirdof businesses that are currently closed. As discussed
in Section 1.4, many businesses also faced supplyside challenges in 2020, which was the most citedchallenge in the manufacturing sector.

The challenges that SMBs still face are affecting
the optimism of business leaders. The NFIB Small
Business Optimism Index fell by 5.5 index points
between November and December, driven largely
by gloomier expectations for improvements in theeconomy over the next 6 months (NFIB 2020).
SMB S WER E O P T IM IS T IC FO R T H E
FU TUR E , BUT S T IL L FAC E S IG N IF IC ANTCH A L L EN G ES AH E AD

The challenging sales environment faced bybusinesses in majority-minority neighborhoods has
been reflected in what they consider their biggest
challenges moving forward. Among these businesses,
cash flow (42%) and a lack of demand (27%) werethe most commonly cited challenges they expect toface over the next few months, much higher than forbusinesses in non-minority neighborhoods.

Over half (54%) of business leaders reported they
were optimistic or very optimistic about the futureof their businesses, although this has decreasedslightly since April. This decrease was driven byfemale business leaders, with a decline of 8
percentage points between April and December.
At the sector level, optimism was highest in
information and communication (68%) and humanhealth (63%). In contrast, less than half of businesses
reported they were optimistic in the food andaccommodation (42%), transport (44%) andarts and entertainment (44%) sectors.

FIGURE 17: Future expected challenges cited by SMBs, by sector

40% 39%36%

Proportion of SMBs that statedfuture challenge

35%

32%

30%

28%

27%

27%

26%

24%

25%
22%

21%

20%

20%

16% 17%

15%

20%

24%

22%
19%
17% 16%

16% 15%

13%
10%

9%

10%
5%

28%

5%

4%

4%

Agriculture

Human
Health

12%

11%

0%
Food &
Information &accommodation communication

RetailArts &
entertainment

Services

Construction

SectorCash Flow

DemandGovernment or health authority orders

Manufacturing

Transport

2020 – U.S. SMB REPORT | CHAPTER 3: FUTURE EXPEC TATIONS… A N D PR E D IC T A LO N G ROAD
TO R ECOV ERY
Business leaders expect it will take a long time for
their businesses to return to normal. One-third ofbusiness leaders think it will take at least 6 months toreach normal levels of operations and 10% think they
will never recover. This is consistent with evidence
from the Small Business Pulse Survey, which foundthat in December, 46% of SMBs expected it would
take more than 6 months to return to a normal level ofoperations (U.S. Census Bureau 2020b).

31

A greater proportion of businesses expected therecovery to take over 6 months in sectors that haveseen greater reductions in sales and employment(Figure 18), such as food and accommodation(43% expected it to take longer than 6 months).
Similarly, over half of businesses in majority-minority
neighborhoods (52%) reported that it would take over
6 months to return to normal, considerably higher thanfor businesses in non-minority neighborhoods (32%).

Proportion of SMBs that expect it totake longer than 6 months for operations
to return to normal

FIGURE 18: Proportion of business leaders who reported they expect it to take longer than 6 months to return to a normal level ofoperations (vertical axis) against the proportion who reported a reduction in employment

50%
Human health40%

Food &
accommodation

Construction
Arts &
entertainment

Services
Information

30%
Transport

20%

Manufacturing

RetailAgriculture

10%

0%
10%

20%

30%

40%

50%

Proportion of SMBS that reported a reduction in emploment

60%

70%

2020 – U.S. SMB REPORT | CHAPTER 3: ONGOING SUPPORT

3.2 Ongoing support
Should economic conditions persist, SMBs are likely toneed further support to mitigate the above challenges
and to ensure they can continue to operate. A survey
from December 2020 found that 48% of businessleaders think their 2021 revenues will be below what
they need to survive and 48% said further support
would be critical for survival (Alignable 2020).
M A N Y BUSI N E S S E S AN D E M P LOY E E S W IL L
CON TI N UE TO N E E D FIN AN C IAL S U P P OR T
I N 20 21…
Despite efforts made by SMBs, such as reducing theirworkforce and adapting digital technologies, many
still reported cash flow challenges. 30% of SMBs, inaggregate, reported that their cash flow was currently
negative. Among female-led SMBs, 39% reported
their cash outflow was greater than inflow.

32

Such conditions could lead to businesses collapsing in
2021. Among open businesses, 14% did not expect tolast beyond 6 months if current circumstances persist.
Without access to sources of capital to cover thesecash flow shortages, more businesses could close.
43% of businesses had no access to private capital
and, without further support, could struggle as states
introduce new restrictions. In the 2 weeks before thesurvey, 25% of business leaders had gone to otherpeople for financial support, increasing to 41% among
personal business owners. Similarly, 13% of employees
had gone to other people for financial support in the 2weeks before the December survey.
Further financial support would also help closed
businesses to reopen. Whereas in April, 57% statedthat relaxation of restrictions would help them reopen,
by December this had fallen to 24%. Instead, securing
funds was the most commonly cited support thatwould help businesses reopen (36%).

14%

of SMBs do not expect to last beyond
6 months if current circumstances persist

2020 – U.S. SMB REPORT | CHAPTER 3: ONGOING SUPPORT

While over one-third (38%) of closed SMBs planned touse personal savings to reopen, many planned to use
government grants (14%) and government loans (9%).
However, 33% were unsure of the funds they would use
to reopen. Female business leaders were less certainof the financing source they would use relative to theirmale counterparts and were less likely to be planning to
use government grants or loans (Figure 19).

33

53% and 47% of business leaders required emotional
support and advice, respectively. Similarly, 38% of
employees required emotional support.
Among both business leaders and employees, women
were more likely to require well-being support. For
instance, 63% of female business leaders had sought
advice in the previous 2 weeks, compared to 31% ofmale business leaders.

… A S WELL A S W E L L- B E IN G S U P P O R T
However, business leaders and employees also needwell-being support to cope with the challenges atwork and home. In the 2 weeks before the survey,“Almost zero business income, not able to get a job, not qualified forsmall business loans…I have no idea of what or how to move forward
at almost 60 years old, without putting myself at a greater risk ofcontracting COVID-19”–SMB leader

FIGURE 19: Sources of finance that leaders of closed businesses planned to use in order to reopen, by gender40%

38% 38%37%

Proportion of closed SMBs

35%
30%

28%

25%

23%
19%

20%

17%
15%

15%
10%

8%

10%

11%

12%

10%
4%

5%

4%

6%

8%

2%

0%
Personalsavings

UnsureGovernment
grantsBusiness
assetsCreditcards

Government Investments
loans

Sources of finance SMBs plan to use in order to reopen
Male-led

Female-led

Family
loan

Bank
loan

2020 – U.S. SMB REPORT

Conclusion
This report has provided an update on how the impacts of COVID-19 on U.S. SMBs havedeveloped between the start of the pandemic and the end of the year. In general, businessoutcomes improved slightly between April and December, with closure rates falling andfewer businesses reporting lower sales and employment. Some SMBs have also adapted
their business models—for example, by increasing their use of digital tools and sales—which
could strengthen their resilience against future downturns.
Employees and consumers were also affected by the pandemic. Job losses in 2020 led toincreased job uncertainty among employees and to concerns over sustaining their families.
Improvement in job prospects and the relaxing of restrictions could also lead consumers toincrease their spending.
However, there are still an array of challenges facing business leaders, including cash flow,a lack of demand and government restrictions. Business leaders face difficulty in balancing
the increased workload they have in dealing with these challenges, including increased
responsibilities at home.
Businesses also face uncertainty due to potential resurgences in the pandemic and extended
periods of lockdown. Should recent trends continue, with further tightening of lockdown
restrictions, the financial pressures on SMBs could intensify further, placing strain on bothbalance sheets and the family lives of business leaders. Government support is likely toremain an important factor in supporting SMBs and maintaining levels of employment, which
can have significant impacts at home and on vulnerable groups.
Further research could build on this report by delving more deeply into the report’s
conclusion. For instance, as SMBs in majority-minority neighborhoods were impacted
by the pandemic to a greater extent, this suggests that these communities may be more
affected by the pandemic. Further research could investigate in detail the geographicalimpacts of the pandemic. Furthermore, with COVID-19 vaccine availability, we expect thatthe situation will shift over time to a more hopeful situation for SMBs, employees
and customers.
The data collected in the U.S. State of Small Business Survey represents a valuable resource
to inform future research programs and provides policymakers with insights into the impact
of COVID-19 on SMBs in the U.S.

34

2020 – U.S. SMB REPORT35

A PPE ND I X 0 1

Survey methodology
SAM PLI NG M E T H O D O LO GY
The sample for the survey was based on 4 populations. 2 of these, Facebook Pageadministrators and active Marketplace sellers, were oversampled, whereas Facebook
advertisers and the remaining Facebook population were undersampled. This samplingstrategy ensured coverage of all SMBs, employees and consumers. Within each population,
users were randomly selected.
After accounting for eligibility and non-response, the survey captured the views of 11,203
online business leaders, 8,066 employees and 6,666 consumers across the U.S.
The graphs below show the sample distribution among business leaders, employees
and consumers.

FIGURE 20: Summary characteristics of business leaders

GenderGenderNumber of
Numberof employees
employees

428 131

87

979

2831

3419

889

3369

2435
Male

FemaleOther

1 person (just me)

2 to 4 people

5 to 9 people

10 to 49 people

50 to 249 people

250 to 499 people

2020 – U.S. SMB REPORT | APPENDIX 01

36

FIGURE 20: Summary characteristics of business leadersAgebusiness
Age of businessBusiness
type
Business Type
4000

3610

Number of SMB leaders

NumberofofSMB
Number
SMBleadersleaders

4000

3000

2000
1512

1000

651

541

1352

757
187

3543

3000

2807

2000

0

1678
874

1000

595

766

610

0
6 months Between Between Between Between 10 years Unknownor less 6 months
1 and
2 and
5 and
or moreand 1 year 2 years
5 years 10 years

Sole
Partnership Limited Corporation Charitable Unknown
proprietorship
Liability
organization
Company

Time
time

Other

Business
typebusiness type

SectorRetail and wholesale tradeor motor vehicle repair
General, personalor business services

605
901
176

Manufacturing321

Construction
Food services, restaurants& accommodations

372
117

Transportation & storage
Agriculture, farming,
forestry or mining

198

Information, programming,
publishing & communication

393

Human health& social work activities
Arts, entertainment,
sports, cultural & recreation

384
1015
1292

Others

0

200

400

600

Number of
NumberofSMB
SMBleadersleaders

800

1000

1200

1400

2020 – U.S. SMB REPORT | APPENDIX 01

37

FIGURE 21: Summary characteristics of employees

GenderGender
86

2529

Male

3854

FemaleOther

AnnualhouseholdincomeAnnualhouseholdincomePrefer not to say

1072

Unsure299

IncomeIncome$200,000 or more

215

$150,000–$199,999

268$100,000–$149,999

655
1555

$50,000–$99,999
1266$25,000–$49,999
633$15,000–$49,999
689

Less than $15,000

0

500

1000

Number of SMB employees
Numberof SMB employees

1500

2000

2020 – U.S. SMB REPORT | APPENDIX 01

38

FIGURE 22: Summary characteristics of consumers

GenderGender

70

1907

Male

2979

FemaleOther

Annualhousehold income
Annual household income
Prefer not to say

854

Unsure259

IncomeIncome$200,000 or more

151

$150,000–$199,999

186$100,000–$149,999

448$50,000–$99,999

1128$25,000–$49,999

936
502

$15,000–$49,999

613

Less than $15,000

0500
Numberof SMBconsumers
consumers
Numberof SMB

1000

1500

2020 – U.S. SMB REPORT | APPENDIX 01

39

FIGURE 22: Summary characteristics of consumers

Age

Age

Number of SMB consumers

1400
1228

1200

1106
946

1000
822

800
647

600
400
200
63

158

0
Youngerthan 18

18 to 25
years old

26 to 35
years old

36 to 45
years old

46 to 55
years old

56 to 65
years old66 years
old or older

2020 – U.S. SMB REPORT | APPENDIX 01

SU RV E Y I N V I TAT IO N S AN D
QUE S TI ON A L LO C AT IO N
The survey invitation was shown on the sampledindividual’s Facebook News Feed. Opening thesurvey, responding to the survey and completing thesurvey partially or fully were all entirely optional. If
respondents chose to skip any question in the survey,
they were allowed to do so with no reminders orprompts to answer of any kind, and the questionnaire
flow took them to the next logical question.
Respondents were not compensated in any way for
either starting or completing this survey.
Respondents could have seen a total of 136 questions
or statements in the survey, but questions/statements
were allocated in a semi-random fashion to ensure
the overall length of the survey included fewer than
30 items for the longest path. All respondents wereasked a core set of questions around demographics
and certain business-focused questions. Businessowners and the managers and operators of personal
enterprises were randomly assigned to one offive thematic question blocks. Employees, closed
businesses and unemployed people were given
separate sets of questions with deterministic content.

40

DATA TR EATMENT
Weights were applied to account for differences in
non-response rates between groups, and all reported
results only use weighted data to ensure they
represent the Facebook user population. It is therefore
important to clarify that the sample of SMBs,
employees and consumers used for this analysis was
representative of Facebook users only, rather than thewider U.S. population.
To reduce any potential for disclosure risk, to preserve
the confidentiality of our survey respondents and tomaintain precision, results are not reported wherea given question had fewer than 100 respondents.
Where statistics are reported by sector, gender,
majority-minority or business size, these were
calculated using the whole sample, treating each
respondent as an individual observation.
Further information regarding the survey
methodology can be found here.

2020 – U.S. SMB REPORTA PPE ND I X 0 2

Additional community voices
The following is a selection of some of the most common words and responses to the
open-ended survey questions across SMB leaders, employees and consumers.

SMB Leaders“Stabilize school so that single parents can return to work.”“After 26 years as an owner of this business, very close to total collapse.”“The pandemic not only shut my doors, but it created massive competition should I
even consider returning to operations.”“Apart from my business suffering from COVID-19, I also struggle to pay the bills,

my child’s education is being limited, my child is unable to do her homework that
requires her to have internet and complete on her iPad, and that causes her grades tobe impacted because she is required to turn that in to be able to be counted on her
remote days. Also, it’s been harder to keep household essentials as well as food due toeverything rising in price. COVID-19 has impacted us a significant amount and is why I
am currently attempting to start another business.”41

2020 – U.S. SMB REPORT | APPENDIX 02“Available time is so much harder. Now that everyone is home more, there is no privacy andyou are unable to go to coffee shops, etc. to work if you don’t have an office. I have threekids and a husband in a 1,000-square-foot house. Finding time to focus on work for my sidebusiness is really hard these days.”“Breakdown in family structure and friendships. Feelings of financial hopelessness and simple
bills causing stress.”“Business today is changing at a rapid rate. It can no longer be supported by means thatwere traditional as little as 3 years ago. With the introduction of COVID-19, we are forced to
conduct business online in order to survive and remain profitable.”“Emotional health is an issue for everyone. A staff member’s emotional health has a profound
impact on their performance—as does the general health of their family members.”

Employees“A lot of small businesses keep getting restrictions changed from week to week and have
dropped their business sales to less than 45 percent of their normal business, causing
them to let go or lay off several good employees, who then can’t find another job tosupport their families.”“Due to COVID-19 my hours have been cut substantially.”“I feel that the main difficulties currently are that I don’t see a return to work being

possible soon because of the lack of available precautions. There’s so much extra that wewould have to do to keep it safe for ourselves and clients, and we’re already overrun withwork and tasks outside of the actual job duties, it becomes too much to also make surethat we’re safe inside the work environment.”42

2020 – U.S. SMB REPORT | APPENDIX 02“I think the medium businesses that have managed to stay open are making a very big

effort. Short- and long-term job insecurity negatively affects the population. Besides,
it’s valid to clarify that workers with full-time contracts have been cut off, as is mycase. And we’ve had to get out of our savings, the ones we have. Because many don’t.
And because we retained jobs, we don’t qualify for help. If you add that family life getscomplicated, then older people who don’t pay for household expenses are a very
big burden.”“I worked for the last 20+ years for a family-owned travel and tourism business. COVID-19
decimated the industry and little to no funds were available. The company closed in
March. I was brought in for a few hours over the summer but we were unable to secure
funding necessary to cover minimal costs. I was told to expect a recall in January 2021
but expect the company will never reopen. With schools closed, it’s impossible to search
for work with small children in the home. We are living on unemployment, my spouse’s
wages and savings. I worry what will happen if savings runs out before everything canreturn to normal. Without extensions on unemployment benefits, it will happen soon. I
worry what my options for work may be after a career in a now-decimated industry. ”“It’s difficult to balance childcare and work.”“It’s easy to be overlooked for raises and promotions. Hours have been varying badly due
to the pandemic. There just isn’t enough money to go around. ”

43

2020 – U.S. SMB REPORT | APPENDIX 02

Consumers“All things being equal, I would always favor purchasing from a small business. In thecontext of the pandemic, I make an extra effort to do so. ”“As a customer, I prefer small and medium businesses. I think it is important to support

local workers. I am very concerned at how many local small and medium businesses have
had to close permanently. Especially independent restaurants. Something must be done tohelp them if we continue to have the restrictions that COVID-19 has brought upon us. ”“As much as I would love to support small businesses, I need to be more careful of how I
spend money at the time.”“Because they may be small, they also may operate in a small space, therefore social

distancing may be difficult. So, even though I try to use them when they are convenient,
I watch for timing when they are not full of other customers. Also, if they deliver or offer
curbside pickup, I would be more inclined to use them. ”“Bigger businesses tend to be more convenient for online ordering and cheaper, but I

definitely prefer small local businesses, especially those who are showing solidarity with
their community by giving back/serving when and how they can. Businesses owned bytheir employees are the future of all business!”“Convenience and availability are the two reasons for online shopping increases. Drivingfrom store to store is fruitless to find needed items. Identifying items online and thenmaking a one-stop shop is the best way to increase shopping efficiency. ”“Due to my age, I would prefer not to interact with anyone except online.”“I do prefer to shop at small businesses, but during the current situation that is hard.
Many do not have websites online.”

44

2020 – U.S. SMB REPORT

Endnotes
1. The University of Oxford COVID-19 Government Response Tracker (Hale et al. 2020) tracks
information on several different common policy measures, such as closing schools andrestricting gatherings, that governments have implemented to respond to the pandemic.
A full list of indicators is available at: https://github.com/OxCGRT/covid-policy-tracker/blob/master/documentation/codebook.md and the methodology for constructing the index isavailable at: https://github.com/OxCGRT/covid-policy-tracker/blob/master/documentation/index_methodology.md
2. IHS Markit estimates monthly GDP in a method conceptually consistent method with thatof the U.S. Bureau of Economic Analysis. Available at: https://ihsmarkit.com/products/usmonthly-gdp-index.html
3. This is estimated using the number of businesses in the April survey that had closed
before March.
4. Personal businesses promote or sell goods and services, are self-employed promoting goods
or services or produce goods sold for personal incomes.
5. Businesses with no employees.
6. The question was slightly different between April and December. In April, respondents wereasked for the most important reason they had closed, whereas in December they could
choose multiple reasons.
7. The question changed slightly between April and December. In April, respondents wereasked, “How many employees and workers has this business let go since the same month
last year?”, and in December, they were asked, “Compared to the same month last year,
how has the number of full-time employees and workers for this business changed?”
Furthermore, in December, an additional option of “Don’t know” was available and chosen
by 9% of respondents.
8. Official U.S. unemployment statistics are released by the U.S. Department of Labor, Bureauof Labor Statistics. Available at: https://www.bls.gov/bls/newsrels.htm
9. https://www.marketplace.org/2020/10/09/small-businesses-having-hard-time-hiringdespite-high-unemployment/
10. The selected lists of sources of capital were different between the two survey waves.
Therefore, this could impact the results.

45

2020 – U.S. SMB REPORT

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Acknowledgements
Thank you to everyone who took the time to help us prepare this survey. Thank you toeveryone who took the time to fill it out. Thank you to the researchers who processed theresults, the writers who wrote this report and our partners who took the time to review it.

49

JA NUA RY 20 21
U.S . S TATE OF S M AL L BU S IN E S S
20 20 – A CH A L L E N G IN G Y E AR FO R S M BS
M A I N R EPOR T
SAFA A A M E R , P H D
EC ONOM I CS A N D P O L ICY R E S E ARC H
D EM OG R A PH Y AN D S U RV E Y S C IE N C E SFACEB OOK