Epidemics and pandemics have been hitting humans for years. In the 1830s, France was affected by a cholera epidemic that killed at least 3% of Parisians, affecting the economy and destabilizing the political situation. Years later, many countries in Europe and the United States suffered a similar fate with the Spanish flu that killed almost 50 million people and caused the closure of several businesses.
While both scenarios are related to unfortunate events, when you look deeper into the consequences of the epidemics to the economy of the countries affected, the first one mentioned, influenced the Industrial Revolution in France, and the second example provided new opportunities for the creation of new businesses.
Although COVID-19 has provoked an unprecedented downturn in the global economy, it is currently showing patterns that suggest that although many countries have been affected by the effects of the pandemic and several businesses have been shot down and thousands of people have lost their job, there may be a light at the end of the tunnel.
Who has been more affected by COVID-19?
The impact of COVID-19 has widened inequalities. For example, it is a fact that women work disproportionately more in industries that have been severely affected by the pandemic. Therefore, female small business owners face a greater probability of losing income than male small business owners.
The recreation industry has also been hit hard. Businesses such as gyms, theaters, cinemas, restaurants, and nightclubs have experienced more than 50% loss in sales compared to years before COVID-19. In addition, the accommodation sector, such as hotels and small guest houses, has faced high levels of vulnerability, increasing the challenges to stay in the market.
Small businesses have not been the only ones affected by COVID-19, in fact, many large companies rely on small businesses as suppliers or even subcontractors for specific services. So if small businesses experience job losses and decreased opportunities, large businesses are affected too. This relationship causes a chain effect that can negatively impact the economy in general.
What makes small businesses vulnerable?
A study done on past recessions in the US showed that small business owners are more vulnerable. They estimate that without effective government intervention, 25-40% of small businesses with fewer than 20 employees were more likely to shut down permanently during the first four months of COVID-19.
Similarly, your geographic location influences your level of vulnerability. Government and public health responses around the world have marked differences from country to country.
Most of them have taken a variety of measures to support small businesses, countries like the UK, Sweden, Thailand, China, Qatar, Russia, and Portugal have implemented various measures, from financial assistance, tax relief, lower interest rates, and loan guarantee.
While countries such as Liberia, Montenegro, Pakistan, and some countries in the African region have only implemented financial assistance aid.
Furthermore, vulnerability increases for those with a lower educational level. Business owners with less than a high school degree faced more risks as their businesses tend to be in less resilient sectors such as maintenance, repair, and construction services.
What kind of businesses has thrived during COVID-19?
The pandemic has forced several companies to close around the world, creating the highest levels of unemployment in history. However, there are some types of businesses in specific sectors that have been able not only to survive the crisis but also to prosper.
Online shopping, food delivery, cleaning services, fitness equipment companies, and the tech and telecommunications industries are some of the businesses that are enjoying a boost in sales thanks to the coronavirus.
Is there still hope for small businesses and entrepreneurs?
According to the Chief Economist at IHS Markit, COVID-19 has caused an economic shock three times worse than the 2008 financial crisis. However, crises are seen as opportunities. Over the years, many of today's most recognized companies have taken advantage of their capacity for innovation and creativity to transform themselves after periods of crisis.
Companies such as Airbnb, Netflix, Microsoft, and Apple seized the opportunities they found and turned their companies not only into thriving businesses but recognized leaders in their industries.
As Albert Einstein said:
“The crisis is the greatest blessing for people and nations because the crisis brings progress.
Creativity comes from anxiety as the day comes from the dark night.
In the crisis that is inventiveness, discoveries, and great strategies.
Those who overcome the crisis, overcome themselves, without being overcome.’’
After almost 2 years of dealing with this global health crisis, the innovation that has emerged from it is undeniable.
New businesses have emerged mainly in the digital environment, and existing ones have seen greater demand. Mastercard's Recovery Insights: Small Business Reset report shows that small businesses experienced a boom. According to the report, 32% more SMEs were formed worldwide in 2020.
Countries around the world have seen unprecedented growth in new business formation, in some cases as high as 30% or more.
It is a fact that the global economic market rarely reacts in the same way to changes, and is less likely even after the impact of a crisis.
However, this scenario may be the beginning of a great transformation of the global landscape for business e-commerce.
Overall, the coronavirus pandemic has been a significant economic challenge for millions of small businesses around the world. It has not been the same situation for all businesses, though. Since those that required people gathering, such as hotels, restaurants, travel, and sports centers, have been more affected by closures and social distancing restrictions.
However, as the facts have shown, crises are times when innovation and creativity flourish, and while many companies have faced their darkest times, others have remained resilient and adapted to the new reality, and other daring have been born.
Is there still hope for small businesses and entrepreneurs? The answer seems to be a big YES.
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