Spread out in November 2019 in China, Covid-19 engulfed this whole universe at a speed of light affecting everything from daily routines to businesses. This pandemic took our lives to the new horizons of precautions where social distancing is inevitable, and not-shaking-hands are indispensable.
Well, in this whole scenario, a major recipient of damages done by Coronavirus is business across the globe, including the USA. Sudden closure of business of all sizes and variants and then partial reopening once lockdown lifted in many states across united states have impacted adversely to their financial stability.
7 Effects of Covid-19 that Destroyed Businesses Financially
In this blog post, I’m going to discuss in detail how that finance in business impacted greatly during the Covid-19 time.
A sudden drop in performance is one of the first financial impacts on business. Because performance is what makes a business mover-and-shaker of an industry, and since, this whole world has been in quarantine. Most businesses could survive mortality because of a lack of resources, customers, and opportunities to serve.
It was studied that most of the companies with employees ranging from 25 – 99 suffered 38%, under 25 suffered 24%, and all businesses where 100 – 499 people were working had to face 18% decline in their overall performance.
Unfortunately, businesses with a company size of 25 – 99 had to face drastic reductions.
Reduction in Spending
Covid-19, lockdown, and quarantine did severe damage that is going to take years of fixing. Alike reduced performance, reduction in spending is what destroyed the financial backbone of almost all businesses belonging to different domains.
Layoffs and a spike in unemployment have forced people to spend less money on unnecessary things that also turned out to be the nail in the coffins for the majority of business.
In an article published by Forbes.com, it was stated that global retail spending is about to drop by over $540 billion dollars, which is a huge loss that will consume years for compensation.
Loss of Revenue
This rampant spread of Coronavirus and quick and highly-monitored lockdown brought businesses to their knees. You know, ‘A business can struggle to regain performance; it can compensate spending, but what it can’t afford to entertain – loss of revenue’. And, this pandemic shook the financial stability of businesses to their core.
It is expected that vaccines will be available in many countries by the beginning or the mid of 2021, but many business experts speculate that it is going to take more than a year for a business not just inside the USA but outside of it to get momentum and reshape their revenue-generation.
Travel Bans, Events Cancellations, and Household Impact
On March 11, 2020, President Trump imposed a travel ban from most of the European countries, which might have seemed mere inconvenience at first. Sadly, it has destroyed the travel and tour industry greatly.
Likewise, numerous seminars, conferences, and research trips there planned for 2020 were canceled till the end of the year. Although virtual meetings and working from home were adopted as alternatives, the loss of income for the convention and travel industry is continued to grow.
As all key sporting events have been canceled, i.e. Olympics, Wimbledon, the NBA, businesses attached these sporting events are facing severe economic contraction. For employees of these companies, event cancellation means no income at all.
Covid-19 has marked a severe financial impact on business. Especially, for individuals involved in International trade, loss of jobs – temporarily or permanently – has diminished the quality of life. It is expected that unemployment will be on the rise where job seekers will be ready to work on low wages as fewer jobs are available.
Insufficient State and Local Assistance for Small Business Owners
In an article published in bookings.edu by the title of ‘Small businesses have received uneven relief from COVID-19 federal aid’, it was discussed in detail that insufficient state and local assistance for small business owners hampered small business owners financially.
Technically, geography coupled with levels of lockdown and severity of pandemic played a vital role in measuring the intensity of crisis during Covid-19 for businesses.
46% of small and medium-sized businesses seemed to be complaining about effective financial assistance that further complicated the already present business situation for companies across the USA. It was surveyed that 66% of small businesses lost their revenue in the second quarter, but it varied among metro areas.
Prolonged Financial Uncertainty during Covid-19
A friend of mine residing in Tempa, West Virginia, was working for dissertation assistance on the topic ‘Covid-19 and Financial Stability of Businesses across the Globe’ with his college mate, where they interviewed a few local business owners and found that ‘prolonged financial uncertainty’ is the root cause of pervasive depression in the business community because things don’t seem to set any soon.
Financial instability is a worsening situation. Although, partial reopening is seeming a ray of hope because customers are coming to their respective suppliers but one thing that we should bear in mind that no business can thrive in chaos.
And, this chaotic situation doesn’t seem to fade away any sooner.
Layoffs and Shutdowns
Only in the month of June 2020, U.S employers laid off more than 30 million people due to the Coronavirus and shutdowns. There are also other data which show that these layoffs might have crossed 40 million but only 20 million availed of unemployment benefits, etc.
No matter what but the job loss due to pandemic is historical and has left lasting effects on U.S economy.
A decline in Marketing ROI
For understanding the decline in Marketing ROI and Coronavirus, the best example is the ‘Tourism industry’. Since people are working from home and virtual meetings are on the rise, all money that tour operators spent for their marketing at the beginning or during the COVID-19 went wasted.
Consequently, it led to a quick decline in the marketing ROI of such businesses. Therefore, it will be good for tour companies, event management services to not spend further money on marketing and advertising, and they should save money until this pandemic is not gone for good. Plus, it will be better for them to work on their branding, which will help increase sales once everything is normal.
Drastic Decrease in New Business Formations
When all companies and businesses that were already established are going through the rough patch of their corporate life, bring new business into formation will be tough-nut-to-crack. That’s why; Coronavirus pandemic led to a drastic decrease in new business formations.
For the majority of business owners, it is not risk-worthy to begin a company when everything seems at the verge of financial havoc. At this time, to open even a start-up even full of challenges that can make-or-break any entrepreneur.
Business Closure and Partial Reopening
Although, businesses have been allowed for partial reopening, however, it’s not going to fill the void of the worst financial impact that was created by the pandemic. Partial lockdown is still a big hurdle in the quick recovery of the business.
Also, federal and state governments should step ahead to stop business closure. Otherwise, we should be prepared for historical unemployment that will come out of business closures.
In the end, nobody can deny the fact: As Coronavirus turned into a pandemic, it’s taken lives of millions of people worldwide, and it has equally derailed the business community from its track of progress and caused ten severe financial impacts on business that I’ve already covered in this blog.
Feel free to share your thoughts about the financial impact on business during the time of Covid-19 and enjoy.