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The rapid changes brought about by COVID-19 have also induced fast, and sometimes large shifts in the business environment.

A nationally representative survey of 850 business owners conducted between April 7 and June 2, 2020, reveals changes in the perception of the business environment under COVID-19 conditions. Business owners included in the survey held current or recently closed businesses, and were included regardless of registration, employer status, business size, and revenues.

Effect of COVID-19 on Business and Industry

A majority of business owners (57%) indicated that COVID-19 had a negative effect on their business. Similarly, more than 6 out of 10 business owners perceived a negative effect on their industry (63%). A substantial share of business owners indicated a neutral effect on their business and industry: 29% and 22% respectively. A relatively small but not unremarkable share of business owners indicated a positive effect on the business (14%) and on their industry (15%).

A bi-weekly examination of the perception of COVID-19 effects reveals some variation. No less than half of the business owners reported negative effects overall in each bi-weekly period, including about 6 in 10 between April 20 and May 3 (61%) and May 4 to May 17 (57%).  Reporting of extremely negative effects was 40-41% between April 20 and May 17, and lower in the period May 18 to June 2 (28%).

Reporting of extremely positive effects was relatively low throughout, with an uptick in the period of April 20 to May 3 (12%).

Effects of COVID-19 on Demand and Supply Perceptions

A closer look at some of the effects of COVID-19 reported by business owners reveals important dynamics related to demand and supply. Overall during the eight-week study period, almost 6 in 10 business owners reported decreased sales or revenues (58%) and nearly half reported decreased overall demand (49%). This compares to almost 1 in 10 that reported increased demand (9%) and increased sales or revenues (9%).

With respect to supply perceptions, almost 3 in 10 business owners reported more difficulty accessing materials and goods (28%), while a small share reported easier access to materials and goods (3%).

Bi-weekly trends reveal quick responsiveness of business owner perceptions to the external environment. The time between April 6 to April 19 and April 20 to May 3 appear to have been particularly difficult for sales and revenues. Difficulty accessing materials and goods for the business was highest during April 20 and May 3.

• April 6 – April 19: 60% of business owners reported decreased sales or revenues, 44% reported decreased demand, 17% reported difficulty accessing materials and goods for the business, and 16% reported increased demand for the business.
• April 20 – May 3: 60% of business owners reported decreased sales or revenues, 51% reported decreased demand, and 35% reported difficulty accessing materials and goods for the business, and 11% reported increased demand.
• May 4 – May 17: 47% of business owners reported decreased sales or revenues, 43% reported decreased demand, and 19% reported difficulty accessing materials and goods for the business, and 9% reported increased demand.
• May 18 – June 2:  51% of business owners reported decreased sales or revenues, 41% reported decreased demand, and 26% reported difficulty accessing materials and goods for the business, and 9% reported increased demand.

There are also important differences in business owner perceptions based on business age. Owners of businesses less than one year old tended to be less likely to report decreased sales or revenues than in older businesses, and somewhat more difficulty accessing materials and goods. Interestingly, owners of these newest businesses were most likely to report increased sales or revenues (23%), which is more than twice what was reported by owners of businesses 1-5 years (10%), more than three times what is reported by owners of businesses 5-10 years (7%), and more than four times what was reported by businesses older than 10 years (5%). Owners of businesses aged 1-5 years tended to report being impacted more on some of the demand and supply dimensions than in other businesses.

Effects of COVID-19 on Perceptions of Challenges Faced by Business Owners

Challenges facing business owners are shaped to a large extent by the external environment. A comparison of the challenges facing business owners prior to COVID-19 and during COVID-19 reveals a shift in the perception of several key challenges, as shown in Table 3 and Figure 5 below.

Prior to COVID-19, business owners faced substantial challenges related to finding customers (62%) and skilled employees (53%). Under COVID-19 conditions, finding customers was reported by 72% of business owners. Skilled employees was reported by 36% of business owners as a challenge – a substantial change from pre-COVID-19 conditions, and not especially surprising given the rise in unemployment brought about the pandemic. This also represents the largest shift in perceptions of challenges among business owners.

Self-doubt and fear seemed to be more present among business owners, with half of business owners reporting this as a challenge under COVID-19 conditions (50%). This reflects an increase of 8 percentage points before the pandemic (42%). In addition, business owners reported that finding time to devote to the business has become less problematic: 31% compared to 39% before the pandemic.

Some of the challenges that have become somewhat more difficult include funds to grow the business, location, region or geography, and inclusion. Some challenges that have become somewhat less problematic for business owners are networks and connections and mentors.

About the Data

The data come from nationally representative surveys conducted by Global Strategy Group with 850 business owners during the eight-week period between April 7 and June 2, 2020. Adjusting for demographics and sampling strategy results in a weighted sample size of 800 entrepreneurs. Descriptive statistics reported here use population weights. The data in surveys is self-reported by the business owners and provides insight into their perceptions; it does not condition on whether a business is registered or unregistered, or if it is an employer or not. Therefore, the figures reported here include self-employed sole proprietors as well as owners of businesses with employees. Note that this reflects business owners, and is not a representative sample of businesses by industry, size, or other business-specific characteristics. Pre-pandemic data come from a similar nationally representative survey with 405 business owners in late 2019, reported in Looze and Desai (2020)¹.

Notes: (i) The period May 18 – June 2 is longer than other periods to meet response targets.

Sources: (1) Looze and Desai. 2020. Challenges along the entrepreneurial journey: considerations for entrepreneurship supporters, Ewing Marion Kauffman Foundation.

This is a publication by the Ewing Marion Kauffman Foundation utilizing content and data from multiple sources and external contributors. Every effort has been made to verify the accuracy of the information contained herein, and it is believed to be correct as of the publication date. Nonetheless, this material is for informational purposes. Readers are solely responsible for validating the applicability and accuracy of the information in any use they make of it.

The overall trends show that entrepreneurs respond quickly – even on a weekly basis, and sometimes sharply – to changes in the COVID-19 environment.

Featured highlights:

• Over the 19-week period, new business applications increased by 5.34% in Missouri and declined by 19.57% in Iowa, 8.33% in Kansas, and 9.68% in Nebraska. This compares to an overall national decline of 4.81% over the same period.
• Missouri has more new business registrations than the other three states, which is not surprising given the size of the state economy and population.
• New business applications respond quickly, with substantial week-to-week variation that is not apparent when examining the overall trends.
• Kansas and Missouri largely trend in the same direction with the national trend.

Examine search trends associated with three topics – new business help, new business exits, and new business opportunities – from January 2019 to April 29, 2020, to get a sense of relative interest during “normal” conditions and in the COVID-19 context.

Featured highlights:

• Between January 1, 2019, and April 29, 2020, interest in Google searches related to new business help was highest in the weeks of March 16, March 30, and April 20, 2020, respectively.
• Over the same period, interest in Google searches related to new business exit was highest during the week of March 16, 2020.
• Interest in Google Searches for open a business, new self-employed, and new small business was highest in the week of March 23, 2020, and interest in searches for independent contractor and how to work for yourself were highest in the weeks of March 30 and April 13, 2020, respectively.

Featured highlights:

• Half of employer business owners did not seek business advice or mentoring.
• The most common reason to seek business advice or mentoring was related to taxes and accounting (33.9%), followed by legal (15%), and increasing sales (13.8%).
• The most common sources of business advice or mentoring were legal and professional advisors, colleagues, and family. This was the case for employer business owners regardless of business age (66.2%, 48%, and 22.3%, respectively), and for owners of businesses less than 2 years old (61.8%, 51.6%, and 30.4%).