How did COVID impact Small Businesses?

There is no doubt that the ongoing COVID pandemic has completely disrupted the world. It literally turned the world upside down, as we all went from doing things a certain way to being forced to adapt to the new normal. 

Most of us moved to working from home (raise your hand if you are still working from home!), embraced the digital route and the 24/7 pyjamas life. This was a very drastic change for most organisations, and has far-reaching consequences. Our article last month looked at the future of workplace ecosystems in detail, which is the future of work.

The pandemic not only changed individual lives, it equally impacted businesses as well. With a shift away from the physical work space and restrictions in movement, many businesses were in a tough position where they had to adapt and react to survive. While some of them were able to do it successfully, some businesses struggled to make sense of these changes.

In this article, we’ll dive into how the pandemic impacted small businesses and the tough road ahead of them for survival.

Small Business and Entrepreneurship

Before we look into how small businesses have fared, let’s understand what a small business is. As the name suggests, an independently owned and operated company which is limited in size and in revenue depending on the industry can be called a small business. (Source: 

A local bakery that employs 10 people is a small business. So is a manufacturing facility employing less than 500 people. A design agency like ours, is also a small business, as we are a compact team that powers through with lots of grit and many cups of coffee!

Entrepreneurs are the power behind any small business. It is their drive, spirit and vision that helps propel a business in its initial stage. These small businesses or startups, as they are more commonly known, have helped transform India’s economy with their innovation and quality employment opportunities. 

Some of these startups reach unicorn status, i.e. attain a value of over $1 billion through VC funding. While it’s a long and difficult journey, it’s extremely transformative, and is a triumph of all the sweat and tears that goes into the business. To know more, check out Inc 42’s piece on 2021’s unicorn startups.

COVID and Small Businesses

While COVID did not adversely impact the startups mentioned above, not all small businesses were able to wade through it successfully. Small businesses have limited resources, money and even time to scale. It is no surprise that many of them struggled to make ends meet due to the sudden change in circumstances and limited government support. The effect was felt on all sides as a lot of employees lost their jobs or were forced to work with pay cuts, so that the businesses could stay afloat. Some of these small businesses have also shut down. 

Most businesses had to go online to keep things going. While this was easy for firms with digital products or with a partial online presence, it was tough for firms in traditional sectors. Small companies in all sectors faced a tough time, especially with imposed lockdowns. It was definitely not an easy time to stay afloat. They have had to rethink the way they operate and become more adaptable.

The transportation sector (airlines, trains, buses) faced massive losses and layoffs. Cottage industries and small-scale manufacturing units had to be shut down or operate with minimal employees. Hotels, restaurants, sports/yoga classes, retail boutiques and other smaller stores- they are all still reeling from the effects of the pandemic and the interruptions to their business.

With the pandemic, Marketing and Advertising activities were also affected. As businesses re-evaluated their spending habits to account for the losses and uncertainties, marketing and advertising budgets shrunk significantly. Consumption habits and spending was also down, which is usually what drives an economy forward. Influencer Hub’s survey carried out in late March 2020 and September 2020 has some interesting findings about these changes:

  • Online shopping has become the norm, and an overall 5.9% growth in search ad spending this year is expected.
  • In-person marketing engagement reduced by 97% and 67.2% customers were less likely to make a purchase.
  • About 69% of businesses were expected to reduce their ad spends this year.
  • 65% of businesses noticed a decline in spending in March 2020.
  • 74% of the surveyed brands mentioned that they were posting less on their social media accounts. 

Dun & Bradstreet carried out a survey of 250 small businesses across 7 major cities in India to study how the pandemic impacted them and the challenges they faced. Some of the key findings paint a grim picture on the road to recovery:

  • More than 82% of the businesses surveyed have suffered a negative impact due to COVID-19. Plus 70% of them expect it will take more than a year to go back to pre-pandemic levels.
  • 70% of businesses remained disrupted till August 2020 and 40% till the end of February 2021, even though restrictions were eased in late 2020.
  • The three main challenges to recovery were- better market access, improving overall productivity and access to more finance. Big businesses were able to recover better and faster, as they don’t face these challenges.

The Way Forward

  • Technology is definitely the way forward. As we move more and more towards a digital marketplace, it is extremely important to connect with customers and enable growth. The Dun and Bradstreet survey report also listed adoption of technology, along with better credit facility and better marketing support as the three main support measures needed for growth post the pandemic.
  • Adopting technology does not mean that only business transactions happen online. Customers need to be engaged with your brand so that they will help you grow. It’s a good idea to use social media platforms to connect with them and market yourself accordingly. This article published in SHRM magazine talks about how certain small businesses in the US used technology to revamp themselves and stay afloat.
  • More governmental support is required, specifically for small businesses. Efforts must be taken to promote entrepreneurship, enable effective skill development for individuals and improved financial support. While the Indian government has done its best to promote startups and make it easier to do business in India, they could not help mitigate the risk of the pandemic. 
  • Finally, none of this will work, until you support small businesses. Big businesses have always overshadowed the smaller firms in all sectors and COVID has only made the discrepancies worse. So, it’s extremely important that we lend our help to ensure that small businesses come out of their struggles. Let’s buy from small, local businesses and spread the word so that more and more people get on it! 

If you’re not convinced, read this piece from the London School of Business- it takes a detailed look into how small business owners have been weathering the pandemic. While we know that small businesses have a tough road forward, they also have a lot of grit and a determination to survive and thrive! Remember, support a small business today, and you are contributing towards a more equitable society! 

Finally, if you are looking for a small design business- go no further than Pixels and A Pen. Let’s connect to discuss your design needs and obtain a personalised experience!

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