(This column originally appeared on The Hill)
As someone who writes about small business, I receive lots of ridiculous surveys from companies and their public relations (PR) firms looking for a headline. But one that hit my inbox recently must be the most ridiculous of them all. It’s a survey sponsored by Alignable, a legitimate and popular online network for small businesses.
Alignable hired an outside firm to survey 4,392 small business owners between mid-June and mid-July and came away with this eye-grabbing headline: “47 Percent Of SMBs Risk Closing By Fall.”
What could possibly be the reason for such a devastating prediction? The company’s head of PR says it’s the consequence of “record-breaking inflation, higher-than-normal gas prices, rent hikes, labor issues, a still-broken supply chain, reports of reduced consumer spending, elevating interest rates, recessionary fears, and the fact that several businesses have not recouped losses from 2020–2021 yet.”
I run a firm that serves about 600 small and mid-sized clients. My clients are also facing these challenges. But none of them — at least to my knowledge — would say they’re going out of business because of them. And yet almost half of those in the survey apparently think they will. That seems very, very dubious.
Dubious because there are more than 30 million small businesses in this country. If 47 percent go out of business, that means nearly 15 million shuttered small businesses, greatly outpacing the 1.8 million that reportedly closed during the Great Recession.
In 2021, a year after a global pandemic that shut down all of the world’s major economies for periods of time, bankruptcy filings actually dropped compared to 2020, according to data released by the Administrative Office of the U.S. Courts.
For perspective, during the first 11 months of 1980 — a period at the height of a historic inflation/interest spiral — the New York Times reported that 10,727 businesses filed bankruptcy petitions, which was 52 percent more than the number filed in the same period in 1979, yet still only a small fraction of the total businesses in operation around the U.S.
Regarding “record-breaking inflation, higher-than-normal gas prices, rent hikes” and a “still-broken supply” chain — all these issues are real.
But gas prices — as well as many of the core material costs from industrial chemicals, packaging supplies, domestic shipping, iron and steel and lumber — now appear, after a period of spiking, to be plateauing. West Coast ports are returning to normal operations. Inventories are building, not declining. Inflation will likely remain elevated over the next year. But few are shutting their doors because of it. Most businesses are doing what businesses have done since the time of Cleopatra: raising prices, finding alternative supply, switching up products, watching their overhead, taking care of their customers.
Labor shortages and financing are a problem, but small businesses have been dealing with these challenges since before the pandemic. Even the National Federation of Independent Businesses acknowledges that half of small businesses still have job openings, and data from major banks like JPMorgan Chase, Wells Fargo and Citigroup show that Main Street is “humming along,” credit card spending “still looks healthy” and that “while banks are putting aside more money to cover bad loans, they aren’t seeing significant problems yet.”
Fifteen million small businesses aren’t going to close by fall — not even close. It’s already mid-summer. Restaurants are open and busy. Stores have traffic. Businesses are shipping products, building homes, performing services. Some more than others. Some less than others.
The survey makes small businesses look incompetent and inept. It gives the perception that small business owners are whiners who, unable to solve problems, simply quit. It makes it harder for small business owners to recruit employees and build credibility with prospective customers and partners. And it undermines their investors’ and lenders’ confidence in future projects.
And yet, as ridiculous as this study is — and, let’s be honest, because it’s so ridiculous — it gets covered in the media. But its main effect is not to inform but needlessly to create fear and uncertainly — two things we could all use a little less of right now.