(For more from this article: https://www.mckinsey.com/featured-insights/americas/which-small-businesses-are-most-vulnerable-to-covid-19-and-when?cid=other-eml-alt-mip-mck&hlkid=7499140e9ccc43c9a2c06c6fc7cc5a35&hctky=10391094&hdpid=a4997f62-946f-47c1-b9fc-47a6c68dd16a Courtesy McKinsey & Co., 6/18/20 by Dua, Ellingrud, Mahajan & Silberg)
The potential fallout from the pandemic goes deeper the longer it plays out. An additional two million small businesses compete in sectors, such as construction and manufacturing, which have fewer businesses that now report negative effects from the pandemic but are also less financially resilient. The longer the economic impact from COVID- 19 continues, the more risk these sectors face. Construction, for example, is believed to be highly sensitive to the economy’s overall health, so a more protracted recovery, combined with relatively low resilience, could lead to significant vulnerability later.
Determining each sector’s level of immediate vulnerability provides a clearer view of the magnitude of the challenge small businesses face in the first few months of the crisis. Surveys of small-business owners helped us generate a range of estimates. At the low end, half of small businesses experiencing a “large negative effect” from COVID-19 could become vulnerable to closure, according to these owners. At the high end, an additional quarter of small businesses, experiencing a “moderate negative effect,” could become vulnerable to closure.
Differences between sectors depend on how much COVID-19 has affected them and how likely affected businesses are to close (Exhibit 3). 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.