25% of Small Businesses Won’t Survive a Month if Income Drops by 50%
The Canadian Federation of Independent Business (CFIB) released a report today that highlights just how precarious the success of many small businesses in the country is today.
From the report, two worrying statistics stand out above the rest:
- 50% of Canadian small businesses have already seen a drop in sales due to COVID-19
- 25% of small businesses would not be able to survive for more than a month with a drop in business income of more than 50%
Four in 10 of the small business that have reported a drop in sales reported a greater than 25% decline. Meaning, many are already well on their way to the 50% breaking point.
Other key findings from the report include:
- The sectors most negatively affected are hospitality, arts/recreation, retail and personal services;
- The average cost to those affected by the economic impacts of COVID-19 is about $66,000;
- 43% have reduced hours for staff and 20 per cent have started temporary layoffs;
- 38% have experienced supply chain issues;
- 42% said they will have zero sales if face-to-face contact becomes impossible.
CFIB is advising all small business owners to listen and respond to the advice of public health officials in order to keep their employees and customers safe,” says Dan Kelly, CFIB president. “However, we must recognize that calls for self-isolation have massive economic consequences for many Canadian small businesses, especially as close to two-thirds of small firms would not be able to quickly shift more than 10 per cent of sales to online or telephone options.”
When asked what additional measures governments should put in place to help them, 91% said the government should offer direct financial support for firms experiencing a significant drop in sales.
In addition, small business owners suggest governments:
- Provide temporary tax relief on income, payroll and sales taxes (69%)
- Cancel planned tax increases such as CPP/QPP and carbon tax (66%)
- Delay tax filing deadlines and eliminate penalties for late payments and remittance (65%)
- Introduce wage subsidies for businesses to retain staff (58%)
- Create incentives to boost consumer spending (46%)
This report comes on the back of RBC suggesting the COVID-19 pandemic will contribute to pushing Canada into a recession over the next two quarters, and the Bank of Canada lowering its key overnight interest rate earlier this month in response to the outbreak.
If it is possible to remain safe and support your local businesses, please consider doing so. They might not be around much longer if you don’t.