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Facebook data finds Michigan leads U.S. in small business closings

October 9, 2022

By Jay Davis, published with permission from Crain’s Detroit Business.

The adversity facing Michigan small businesses just keeps coming, at least according to one measure.

Small businesses in Michigan this summer closed at a higher rate than any other state in the U.S., according to a survey released Tuesday by Meta Platforms Inc., the company that operates Facebook.

Of Michigan small businesses in July that responded to the survey, 28 percent reported they were closed, according to the report. That’s 8 percentage points higher than the 20-percent national average. Joining Michigan at the top of the list are New York and Arizona, both at 28 percent. At the other end of the spectrum were Virginia, North Carolina and Tennessee, with closure rates of 10 percent, 11 percent and 16.5 percent, respectively.

Small Business Association of Michigan President and CEO Brian Calley is not surprised by the findings. Calley on Tuesday told Crain’s he believes inflation is the biggest factor in the closures, along with a workforce that still lags behind pre-pandemic numbers.

“A lot of people don’t realize small businesses are hit harder by inflation than their larger counterparts because they don’t have pricing power as buyers or sellers,” Calley said. “(Small businesses) don’t deal in massive quantities. When inflation causes costs to go up, small businesses have little choice but to pay it, and yet as sellers they don’t have as much power to raise prices. They get squeezed on both ends.

“There’s definitely a demand for goods and services out there. But a lack of an available workforce results in many businesses leaving that demand on the table because they’re not able to meet it.”

Calley did say, though, that region, industry, and where a business is in terms of growth all factor into success. He said several industries are thriving, and the ones that are struggling rely disproportionately on staff.

“It’s a perfect storm. For small businesses, I think it’s unfair to look at the top line of economic statistics. You can see GDP on top, and it might look OK, but that’s not completely representative of what happens to small businesses.”

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