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The easing of stay-at-home orders will not be a panacea for small businesses, many of which will have to continue changing how they operate in order to stay afloat, a panel of Duke experts said Wednesday.

And local media outlets, while critical to an informed citizenry, may be among the hardest hit by the COVID-19 pandemic.

Three Duke scholars discussed these topics and more Wednesday in a briefing for reporters. Audio and video are available here:

Here are excerpts:

ON WHAT AN ECONOMIC REBOUND WILL LOOK LIKE

David Robinson, finance professor

“I’m pessimistic that we’re going to experience what people refer to as a V-shaped rebound … a rapid recovery back to normal.”

“We’re not all going to go get three haircuts in the week that we can go back to the barber. We’re not going to get our teeth cleaned twice when the dentist opens again. So some of the consumption that has been lost over the last six weeks, two months, is just lost forever. It’s never going to come back.”

“It’s also important to realize just how fragile some household balance sheets are. A family earning the median income in the U.S., a third of them only make minimum payments on their credit cards from month to month. People are going to come out of this crisis with very strained household balance sheets, and that will put a drag on consumption.”

ON THE DAMAGE TO SMALL BUSINESS

Cathy Clark, faculty director at Duke’s Center for the Advancement of Social Entrepreneurship

“During the COVID-19 crisis, every business is really an impact business because they employ people. If they can’t pay their employees, those people could lose their jobs, and also their health insurance in the U.S.. Research shows small businesses have two to four weeks of cash on hand, and we’re now at least six weeks into the COVID-19 crisis. These are really tough times.”

ON WHAT A SMALL BUSINESS ACTUALLY IS

Robinson

“The Small Business Administration uses a 500-employee threshold as the definition. If you have fewer than 500 employees you fall into this bucket of small business. But let’s put that into perspective. You’ll hear people say there are 30 million small businesses in this country. I think that’s misleading.”

“There are only about 20,000 firms that have more than 500 employees. Those 20,000 firms employ half the U.S. labor force. The remaining half work in these so-called small businesses.”

“Of these 30 million so-called small businesses, about 25 million of them are non-employer firms. That means the only employee is the founder of that firm, the entrepreneur himself or herself. That leaves roughly 6 million employer small businesses. The vast majority of those have fewer than 20 employees.”

“That’s important to bear in mind. We’ve seen a lot of money go out the door in this Paycheck Protection Plan and we think about that plan as a way of helping organizations keep people on their payroll. It’s important to realize that the vast majority of small businesses have nobody on their payroll. They’re a payroll of one.”

ON SMALL BUSINESS RESILIENCE

Clark

“The most important thing when we talk to small businesses and non-profits … is to think about the cash you have on hand and what choices do you need to make around that.”

“What kinds of relationships do you have that you can renegotiate? We find people can access their lines of credit more easily at this time. If they have grant funding, they may be able to extend it.”

“You really have to become a little more of a CFO right now. Every business has to pay attention on a weekly basis what’s going on, what you can hold back, and what you can pivot to in order to bring in business.”

Robinson

“A lot of it has to do with what sector you’re in. If you’re a restaurant, you have to be very nimble in order to stay in business because you can’t take in traffic in the front door. Some restaurants move to curbside delivery, for example. You see steak houses basically become butcher shops.”

“Another key feature is just how strong your balance sheet was coming into this crisis. The vast majority of small businesses only have a few weeks of cash on hand. They’re run as very lean organizations.”

ON THE IMPORTANCE OF INNOVATION IN SMALL BUSINESS

Clark

“Everyday people are going to continue to face new and challenging problems -- which are opportunities. Why do we like innovation? It solves problems really fast. Entrepreneurship is almost a little R&D arm for society. ‘Let’s try this and see if it works.’ ”

“I just think we have so many issues, from community services within nonprofits to different ways consumers need to get their goods or seek products they might not be able to touch and feel in the same way. There are a lot of things that will be made possible by the constraints of this new environment. If it takes a year or two to get back to what we think of as normal … we’re also looking at a year or two of rapid innovation and learning.”

ON THE CHALLENGES FACING LOCAL MEDIA OUTLETS

Phil Napoli, public policy professor

“Our demand for news is peaking and we’re even seeing some increase in a willingness to pay. But on the other side, the ability or willingness for advertisers to advertise on these sites is plummeting. So the economics of journalism are not entirely tied to the demand for journalism.”

“We’re seeing advertisers blacklist, essentially, coronavirus news. That means using key words to make sure their ads don’t appear along stories on coronavirus issues. That creates an ironic situation where the news in highest demand is actually the type of news that is most economically vulnerable. That is the nature of what, I would argue, is a market failure.”

“Many of what we would call local news outlets are not in fact small businesses. We’ve seen this trend towards group ownership, conglomerate ownership of our local media sources. So these local outlets, as much as the outlet at the local level might be small, but the fact that they’re part of these larger media companies mean they have not yet been eligible for financial support.”

ON AN INCREASE IN NEWS DESERTS - AREAS OF THE COUNTRY WITH NO LOCAL MEDIA OUTLET

“These tend to be communities that are smaller, less economically robust to begin with. It would not surprise me to see news deserts spread in the wake of this pandemic. We’ll probably see in relation to that, a continued trend of consolidation of news workers. Today The New York Times, The Washington Post, a couple other national news outlets, account for a growing share of journalists working in this country.”

Meet the experts

Cathy Clark
 is faculty director at the Center for the Advancement of Social Entrepreneurship at Duke’s Fuqua School of Business. With more than 30 years of experience as a professional investor, philanthropist and consultant, Clark is researching resources that can help small business adapt to the pandemic. View the center's resources for entrepreneurs in need of COVID-19 .
cathy.clark@duke.edu 

Phil Napoli
 is a professor at the Sanford School of Public Policy and a faculty member at the DeWitt Wallace Center for Media and Democracy at Duke. He researches new ideas for social media regulation, “news deserts” and the contraction of news media.
philip.napoli@duke.edu

David Robinson
 is a finance professor at Duke’s Fuqua School of Business, where his research includes entrepreneurship and small business. He is the former vice chair of the World Economic Forum’s Global Agenda Council on Private Capital.
davidr@duke.edu
 
Duke experts on a variety of other topics related the coronavirus pandemic can be