47% Of SMBs Risk Closing By Fall

POLL RESULTS | TREND TRACKER | INFLATION ISSUES: Boston, MA, July 14, 2022 -- Released today, Alignable's Small Business Revenue Report reveals that 47% of small business owners say their businesses are in jeopardy of  closing by the fall.  

Even more daunting, this figure is up 12% from last summer, when 35% of businesses were on the brink.  

So, what's causing these concerns?  To put it simply, cumulative hurdles confronting small business owners over the past year or more.

These challenges include record-breaking inflation, higher-than-normal gas prices, rent hikes, labor issues, a still-broken supply chain, reports of reduced consumer spending, elevating interest rates, recessionary fears, and the fact that several businesses have not recouped losses from 2020-2021 yet.

Conducted among 4,392 small business owners from 6/10/22 to 7/13/22, the Revenue Poll asked participants two questions to assess the degree of financial risk they face right now. The questions were:

• What percentage of revenue from Summer 2021 do you expect to earn this summer?
• What percentage of revenue from Summer 2021 do you need to earn this summer to ensure that your business stays afloat into the fall?

As you can see from the chart below, by combining each respondent's answers to the two questions, we were able to determine the percentage of businesses that are in jeopardy of closing before the fall, if conditions do not improve for them.  

Unfortunately, 47% was much higher than we had expected. But it shows just how difficult the recovery is for many businesses this summer, given the multitude of hurdles they're facing while trying to improve the financial health of their companies.

More insights about SMB finances can be found by looking at the answers to the first question, as well.  Here's a snapshot:

Less than one-quarter (24%) of small business owners said they expect to make more than they earned last summer. 

In stark contrast, more than twice as many (54%) expect to make less money than they generated in the Summer of '21. 

Summer of '22 Is Worse Than Last Summer

This negative financial picture becomes even bleaker when you compare the percentage of small businesses that were fully recovered last summer to the percentage now.

In June 2021, 33% of all small business owners told Alignable that they were earning the same monthly revenues (or more) compared to what they generated prior to COVID.

However, that figure has dropped seven percentage points from last summer, landing at only 26% of SMBs saying they've fully recovered now.

Given these statistics, it's no wonder that in another recent poll, 63% of small business owners said inflation has been more damaging to their business than COVID. 

These findings pretty much confirm what many have suspected -- that the Summer of '22 is not proceeding well for the majority of small businesses, especially in industries like retail, construction and automotive. 

Retailers At Risk -- Restaurants, Too

Examining what's happening among key industries shows that the risk of shutting down is even more intense for 59% of retailers, 52% of construction firms, 51% of car dealerships and auto repair shops, 51% of small health and wellness practitioners, and 50% of restaurants.

In the case of retailers, we also learned in this poll that 50% of them have decided to cut back on their inventory orders for Q4. This is a significant and rather disturbing shift, as many in retail count on a strong showing during Q4 to survive into the next year.

But by reducing their Q4 inventory orders, these retailers are more concerned with avoiding a big loss vs. surging ahead in December. Of the 50%, 38% said they're reducing their orders by more than 20% compared to the quantity of products they ordered for Q4 2021.

As the chart above shows, right after restaurants, you can see that 48% of beauty salon owners, gym owners, and manufacturers are worried about inflation and related issues forcing them to close soon.

A significant percentage of real estate agents -- 45% -- are in a precarious financial position right now, too, largely because of a lack of inventory for them to sell, as well as increasing interest rates. 

Many have experienced robust business success through much of the pandemic, but some are concerned that rising home prices and interest rates will make purchasing increasingly prohibitive for many clients. 

Owners of marketing/advertising firms (46%) also expressed concerns, as did 43% of lawyers and travel professionals. Based on the poll comments, both lawyers and marketing experts fear clients will reduce their spending, as their clients have less money due to inflation.

In the world of travel and lodging, while many consumers are still taking trips, the high cost of gas is starting to curtail some local, family-oriented trips, causing more cancelations.

Women-Owned Firms Top The List Of Those In Jeopardy

Looking at the demographics around this survey, the majority of both women-owned firms and minority-owned companies are at risk of not staying afloat into the fall. 

As you can see in this chart below, 53% of women who own their small business might not earn enough money this summer to keep them going for the rest of the year -- and for minorities, that figure is 52%.

While the percentages of nonminority-owned businesses at risk (46%) and veteran-owned firms (45%) are lower, those figures are still daunting and a cause for concern for all of these groups. 

Based on a related poll, 57% of all small business owners say this has been a challenging summer economically, and this chart certainly shows many business owners, regardless of their demographics, are having a rough time.

What's Happening In Different States Or Provinces?

Across most states and provinces, the concern over not earning enough money this summer to keep a business going is widespread. But the situation does differ to some extent when comparing a few states and provinces.

In the U.S., small business owners in Colorado, Michigan, Ohio, Pennsylvania, and Texas top the list in terms of SMBs in jeopardy. 

As the chart below indicates, Colorado is No. 1 at 54%, Michigan is a close second at 52%, and Ohio, Pennsylvania, and Texas all share the third spot with 51% of small businesses in those states fearful of potentially closing by the fall, if their economic conditions don't improve. 

Other states show some concerning "at risk" percentages, as well.  

Nearly half (49%) of North Carolina's small businesses are struggling to stay afloat, 47% of California's SMBs are in the same boat, along with 46% in Illinois, and 43% in Florida, New York, and New Jersey. Finally, 41% of Georgia-based small businesses are at risk of closing based on their responses to this poll.

In Canada, the figures are similar -- as the national average is 47%, the same figure we have for the U.S. However, the overall rates in key provinces are lower than in many of the states listed. 

British Columbia's small businesses are most at risk with 47% responding that they're having significant issues keeping their businesses going. Ontario is similar at 46% and finally, the situation is still concerning, but looks comparatively better in Alberta at 38%. 

To see other specific poll data related to industries, states or provinces, please contact me at chuck@alignable.com. To review past poll results, go to the Alignable Research Center. 

About The Alignable Research Center

Alignable is the largest online referral network for small businesses with 7 million+ members across North America. 

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.