It’s no secret that small businesses are suffering due to the coronavirus pandemic and the economic shutdowns that have come about in response. Most people know of at least 1 business that’s been forced to permanently close their doors as a result.
But just how bad the carnage is may not be fully grasped.
Bloomberg recently reported that business failures reaching into the thousands are going uncounted by economic data.
This prompts the question:
Who tracks small business data, and how?
Everyone who has started a small business knows how difficult the fight for survival and for prosperity is, even in normal economic circumstances. The Small Business Administration (SBA) reports only half of new enterprises last as long as 5 years.
What’s more, William Dunkelberg, chief economist for the National Federation of Independent Businesses, says that closures will significantly exceed the norm as a result of COVID-19 and the fallout.
Those looking for accurate data on small business closures have several sources to turn to, in fact.
Bankruptcy court filing
Most businesses that fail are going to file Chapter 11 or Chapter 7 bankruptcy. Those filings are a matter of public record, and while tallying up all the filings from each court in the country might be a tedious endeavor, it is doable. The American Bankruptcy Institute tracks this data and estimates that filings will increase by over a third when 2020 is finally in the books. Where the real shortcoming of this method lies is in tracking businesses that don’t file bankruptcy. These will most likely be the 1-person shops where the owner still has some money in the bank and doesn’t want to injure their long-term credit. They can read the writing on the wall during this pandemic and simply decide to cut their losses and close the doors. These closures will not be on file at the bankruptcy courts, and therefore not reflected in bankruptcy data.
Prominent online business directories
Online directories are vital for search engines and work diligently to maintain accurate information about businesses. After all, if you type in “pizza shop near me” and the top result is permanently closed when you call, your confidence in the directory and search engine will wane. The best online directories respond quickly if a reviewer informs them a location has been shut down.
The Yelp Economic Average, produced by one of the top online review sites on the internet, has data showing that from March to July 2020, 80,000 businesses permanently closed.
Small businesses account for nearly half of the American economy, whether you measure that by employment numbers or raw economic activity. Tracking the closures won’t make life easier for those affected, but accurate data may facilitate a faster recovery process.