Gusto enables more than 100,000 small businesses across the United States to take care of their teams, with full-service payroll, benefits, compliance, expert HR and more. Throughout the past 4 months, we have actively tracked small business actions in response to the COVID-induced economic crisis. Our payroll data provides a direct lens onto small business headcount and our reporting to date has generally focused on employment actions. To better understand the ongoing financial situations of small businesses, we surveyed nearly 1000 customers on impact to their revenue, cash flow, and economic outlook. 

Our study found that the revenue recovery curve is steep. 70% of small businesses expect their revenue to remain below pre-COVID levels for the next three months, with more than a quarter of small businesses (27%) expecting to earn less than 50% of what they made in revenue before COVID. 40% of small businesses say their revenue for the next three months will hover between 50-75% of what they made prior to COVID. 

Despite the substantial hits to expected revenue, Gusto’s study found just 21% plan to decrease headcount over the next 3 months. However, while headcount may hold steady, people may work fewer hours and earn less money than they did pre-COVID. Previous data pulled from Gusto’s platform in June 2020 reveals that the gap is widening, with hour and pay rate reductions accounting for the largest percentages of reduced wages for the month (33% and 27% respectively), with furloughs accounting for 25% of reduced wages. 

Approximately 5 million businesses have received government aid via the Paycheck Protection Program—15% of the country’s 30 million small businesses. And while those 5 million companies employ 84% of the 58.9 million small business workers, the numbers show that federal aid went to larger businesses, while many of the smallest businesses were left out. However, the requirements of this program have resulted in partially decoupling employment decisions from small businesses’ cash flow due to real economic activity. 

Even with the PPP, Gusto’s study shows that the clock is quickly running out for small businesses with nearly half reporting that they have 6 months or less to continue staying in business. And with the recent spike in COVID-19 cases around the country, millions of businesses will fail if the government does not take bold action and fix structural flaws in how aid is distributed. 

Key Findings

  1. The Revenue Recovery Curve is Steep: 59% of small businesses reported a major decrease in revenue since COVID first led to the necessary shelter-in-place orders went to effect in March (defined as a loss of 25% or more). Almost two-thirds of small businesses (63%) expect their revenue to remain at pre-COVID levels for the next six months, with more than a quarter of small businesses (27%) expecting to earn less than 50% of what they made in revenue pre-COVID. 
  2. Runway is Limited: Less than half of small businesses feel they have enough cash on hand and revenue coming in to stay in business for the next six months. 20% think they can stretch to make it 7 months to a year. 6% of small businesses have less than 1 month to continue operating. 
  3. Headcount Remains Steady: 60% of small businesses expect to maintain their current headcount for the next 3 months and only 20% expect current headcount to decrease during this time period. 

Overall findings

76% of respondents reported experiencing either a major (>25%) or moderate (5-25%) decrease in revenue since the start of the COVID-induced economic crisis, with 58% reporting a major decrease (defined as 25% or more). 

49% of respondents reported that their business can stay afloat for less than 6 months given their current cash position and revenue, with 6% responding that their current cash position and revenue would last them less than one month.

Responding businesses also were not confident that their revenue would recover in the near future – only 30% reported that they expected their revenue to return to pre-COVID levels or better in the next 3 months, with 70% responding that they expected their revenue to stay at or below 75% of pre-COVID levels for the next 3 months. 

The majority of respondents did not expect to make significant changes to headcount in the next 3 months, even with these declines in revenue – 60% expected to stay about the same size, while the remainder were only slightly more likely to report expecting to reduce headcount (19%) versus increase headcount (21%).

Table 1 provides overall response data for all questions on the survey.

QuestionResponsePercent of respondents
How has your business’s revenue changed from February (pre-COVID) to today?Major decrease (25% or more)58%
Moderate decrease
No significant change (<5%)10.7%
Moderate increase8.5%
Major increase (25% or more)5.4%
How long can your business stay afloat with its current cash position and revenue (including all aid, grants, loans)?Less than 1 month5.8%
1-6 months43%
7-12 months19%
12+ months22.3%
I don’t know9.9%

How do you expect your revenue to change over the next three months?
Return to pre-COVID levels18.3%
Return to 50-75% of pre-COVID levels39.1%
Return to less than 50% of pre-COVID levels30.4%
Be greater than pre-COVID levels12.2%
How do you expect your headcount to change in the next 3 months?Stay about the same size60.2%
Increase headcount18.7%
Decrease headcount21.1%

Industries most heavily affected by job cuts early in the crisis continue to report lower revenues and more negative outlooks.

We grouped the seven industry categories that experienced the largest job losses during the first two months of the crisis together (n=200) and compared them to the rest of the respondents. The seven industries grouped as heavily affected were: Tourism, Accommodations, Food & Beverage, Sports & Recreation, Salon & Spa, Arts & Entertainment and Other Personal Services. These industries all showed greater than 5% declines in headcount during the month of March 2020, and continued to lose headcount in April 2020. 

Respondents in heavily affected industries reported poorer current revenues and cash flow situations: they were more likely to report moderate or major revenue decreases (89% vs 72%) and the ability to stay afloat for six months or less (55% vs. 47%). These businesses also had poorer outlooks for the next 3 months:  they were more likely to report that they expected revenues to stay at or below 75% of pre-COVID levels for the next 3 months (84% vs 65%), and to expect to reduce headcount (35% vs 17%). While business owners in the most heavily affected industries certainly still find their businesses to be in a very fragile state, it is clear from these results that many businesses in less heavily affected industries are also struggling to stay afloat.


A random sample of 25,000 Gusto customers were invited to take this survey via a notification while the customer was logged into Gusto’s website. The notification appeared as follows:

All users who received this notification were payroll administrators at the respective Gusto customer. While payroll administrators at small businesses are likely to be owners of the business,  In order to ensure that these users were, we asked the following qualifying question at the beginning of the survey:  “Do you make any financial decisions for your business (e.g., borrowing or raising money, expenses and budget, hiring and expansion, real estate)?”. Respondents who answered either “Yes – I make these decisions myself” or “Yes – I make these decisions along with others” (95.8%) were prompted with the questions in Table 1, while respondents who answered “No – I don’t make these decisions” (4.2%) were not asked further questions. 

Since multiple respondents from the same company could receive a survey invitation, the first response from a given company was chosen to be included in the analysis. The final sample size of 897 reflects the total number of responses after excluding non-owners and additional responses from the same company. 

Industries reported in this document are based on self-report from customers within Gusto’s product. The methods used to calculate which industries were included in the “heavily affected industry” grouping above was based on the same data and methods used to calculate net headcount changes in our monthly Small Business Trends in the Quarantine Economy reports. 

Survey respondents were more likely to be in heavily affected industries than the overall Gusto customer population: 22% of respondents were in heavily affected industries, compared to 12% of all Gusto customers. This difference was slightly less extreme when companies with missing industries were excluded – 23% of survey respondents with non-missing industry categories were in heavily affected industries, compared to 14% of all Gusto customers. 

Daniel Sternberg Daniel Sternberg leads the Data Science team at Gusto. Daniel is passionate about using Gusto’s payroll and employment data to help small businesses thrive. Prior to joining Gusto, Daniel earned a PhD in Cognitive Psychology, studying human learning first academically and then in industry. He lives in San Francisco with his wife and daughter.
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