The Impact of COVID-19 on Small Businesses

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As agents, we need to be resilient. That means keeping an eyes-wide-open awareness of larger business trends – both positive and negative – so that we can shore up against potential problems and be continually poised for opportunities to grow. 
a street scene illustration of small businesses

COVID-19 has had a seismic impact on small businesses. We all know that. We learn about it in the news and see it every day as we go about our daily lives; we hear it from our insureds and our colleagues. As local agents, we have a real-world, ground-level view. But for a macro look at what’s happening, we point you to a report by global consultants McKinsey & Company: Which small businesses are most vulnerable to COVID-19—and when. And for another view, see McKinsey’s interactive: US small-business vulnerability during the COVID-19 crisis.

Here’s an eye-opening summary:

“The sectors most affected by the coronavirus and the least financially resilient sectors include 1.7 million small businesses, employ 20 million workers, and contribute 12% of US business revenue. A long-lasting COVID-19 crisis could continue to affect these sectors disproportionately and make more of their firms vulnerable to permanent closure.”

McKinsey analysis showed that before accounting for intervention, 1.4 million to 2.1 million of vulnerable businesses could close permanently as a result of the disruption from just the first four months of the COVID-19 pandemic.

The report looks at several characteristics of these businesses:

Industry sector: Using various visuals and graphs, the report shows industry sectors by impact. The first graph plots 18 industries on axes of financial risk and how affected each industry is by COVID-19. It notes that the sectors most affected by the coronavirus are the least financially resilient.

“Differences between sectors depend on how much COVID-19 has affected them and how likely affected businesses are to close. It isn’t only the kinds of small businesses with well-known challenges, such as restaurants and hotels, that are greatly affected. So are other small businesses, in educational services, healthcare, and social assistance. Many private-sector educational services, childhood-education centers, sports classes, and art schools, where physical distancing would be a challenge, could become vulnerable. Similarly, small businesses in the healthcare sector—including ambulatory care (such as dentists’ offices) and small private practices that patients may be reluctant to visit in person—are also highly affected.”

Demographics: Low wage and minority businesses are disproportionately represented in vulnerable businesses.

“Minorities own a quarter of small businesses in the most affected sectors, compared with around 15 percent in the less affected ones.”

Size of business: The smallest businesses are among the most vulnerable.

Geography: The report also looks at the geographic impact in terms of states with the highest percentage of vulnerable small businesses. It should be noted that this report was published in June and since that time, the mix of states that have experienced large outbreaks has expanded.

For more views of how COVID-19 is affecting our lives and our businesses, see more of McKinsey’s interactive data displays: Tracking the impact of COVID-19. Among the many interactives, we point you to these in particular:



As agents, we need to be resilient. That means keeping an eyes-wide-open awareness of larger business trends – both positive and negative – so that we can shore up against potential problems and be continually poised for opportunities to grow.

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About Renaissance Alliance

Renaissance Alliance is the premier alliance for independent property casualty agencies. Founded by agents for agents in 1999, we are a pioneer in agency groupings, offering far more than expanded markets and profit share. Distinct from agency aggregators, we provide state of the art technology solutions, a full-time staff of more than 90 industry experts and a proprietary agency growth acceleration process that delivers superlative results.

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