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3 in 4 small businesses will be forced to shut down by September

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Being one of the world's largest creative communities, Creativepool is in a unique position to understand how the creative industry is struggling in self-isolation for the Coronavirus lockdown.

We had the power to make a difference by asking about the impact of the lockdown on businesses, employees and freelancers across our community. We created two surveys and launched them last week – one for full-time employees and freelancers, one for agencies, marketers and business leaders. Both included a section for unemployed creatives.

This is one of a series of articles which will look at the impact of COVID-19 on the creative industries. This article will examine the effects of the lockdown on small businesses, including considerations on clients, budgets, productivity and business survival.

Clients & Budget

Our COVID-19 survey has shown that there is much less work for the creative industries in these trying times.

Both small and larger agencies are on the same boat, as can be seen further below. In both cases, most agencies won't be able to survive for more than 6 months if the majority of the work dries up due to the pandemic, and a large number of projects have already been put on hold across the entire industry.

This was sadly expected, but our findings paint a picture much more grim than we anticipated. The majority of agencies has already lost clients due to Coronavirus. Work seems to be drying up, with most projects put on hold in some cases and clients backing out in others [Graph 1].

Small businesses are in a much worse spot, with 75.6% seeing considerably less clients due to the pandemic [Graph 2].

65% of the creative industry has lost a large number of clients due to the pandemic

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Graph 1

Small businesses are in a much worse spot: over 3 in 4 are seeing "considerably less clients" right now

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Graph 2

And with most projects on hold, budgets have been heavily affected as well. Almost 55% of the industry reports that their organisation’s budget plans have been “considerably affected”, with only 23.1% stating that they have been moderately-to-not-at-all affected by the lockdown [Graph 3].

The picture looks considerably similar in the case of smaller businesses [Graph 4].

Only 3 in 100 creative organisations have not changed their budget plans at all

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Graph 3

Small businesses are in a much similar situation

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Graph 4

Here are some comments from our respondents:

"My business was struggling already and this situation is putting the final nail in the coffin. However, that is also forcing me to consider reinvention and the myriad possibilities there are as exciting as they are frightening. The namesake of my company Oya is the goddess of change and ruler of the marketplace. She is a force of nature that manifests change as clearing the way for new growth to appear. That type of change is acute and painful but sometimes it's the only way to grow."

Executive Creative Director, Creative Agency, United States

"We have furloughed 9 employees out of 38. We still need staff to deliver the retained work but we have lost £90K per month of retainers put on hold until this blows over. We will need financial support to get through this but do we really want a huge loan to repay afterwards? It's catastrophic to most SMEs and I fear for many out there that have given their all to build a business."

Executive Creative Director & Owner, Marketing Agency, United Kingdom
 

Business survival

This will have consequences on the industry as a whole, especially if the pandemic lockdown goes on for too long. Most of the creative industry will not be able to survive more than 6 months if work dries up because of the lockdown [Graph 6].

The picture looks much bleaker for smaller businesses [Graph 5]. Though it is unlikely that the lockdown will keep going for so long, only 2.5% among small businesses believe they will be able to survive more than a year. A staggering 74.1% of small businesses will not survive more than 6 months.

3 in 4 small businesses will be forced to shut down by September

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Graph 5

Most of the creative industry will not be able to survive more than 6 months

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Graph 6

Sadly, this has already started happening, with a considerable percentage of agencies already ceasing operations due to lack of work across all sectors of the creative industries. Creative services (production/post-production agencies, sound engineers, etc.) have been hit the worst: 15.9% have already ceased operations due to lack of work [Graph 7].

Over 1 in 4 creative service organisations have ceased operations due to lack of work...

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Graph 7

The rest of the creative industry is mostly adapting by letting the entirety of the original staff work from home. At the time when the survey went live last week, only a small portion of the creative industries had been furloughed (11.6% across all sectors), though we can expect that percentage to go up as the lockdown protracts for the next few weeks/months.

Here are some more comments from our community:

"I am a UK national living outside the UK and working freelance on International productions. I have no work and no income at this time and I'm not eligible for any aid. I have a Malaysian company, I am still paying our full time staff their full salaries - but will only be able to continue to do this for a couple of months. The country-wide lockdown in Malaysia has forced all non-essential businesses to close for the time being."

Special Effects Supervisor, Post-Production Agency, Malaysia

"I own the studio and I am responsible for 30 people. I don't have the heart to think we will close. As we have so so much potential and we could do so much good. but the market is suffering and will clamp down on design, where in design is the solution. Sad and paradoxical, but true and unfortunate."

Principal Design & CEO, Brand & Communication Design Consultancy, India
 

Going back to normal

But the creative industries have demonstrated glimmers of hope in these past few weeks. After seeing some quite exciting work from self-isolating creatives, we decided to ask creatives if they believe the industry will ever go back to normal. Responses have been heartwarming.

Over 70% of creative professionals believe the industry will go back to normal or a new normal

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Graph 8

Some believe the sector will go back exactly to what it was (34,4%), but most believe that it will be a new normal (37.2%), a chance to reinvent ourselves and rise from the ashes with some newfound knowledge and insight.

Though it does not mean the consequences of the lockdown will not hit, nor that they will not hit hard. Most creatives are trying to keep realistic and remain focused on the current situation. Here are some comments from our community on long-term plans and change:

"I would say nearly all of our entire client base have put a hold on spend indefinitely, placed their entire marketing team on furlough or if they’re a frontline service (like a supermarket) they’ve been reallocated somewhere else in this business temporarily. Either way, all 3 of those scenarios are pretty dreadful for us. There's no real security moving forward because we have no idea when this will come back and how it will comeback, one thing is almost a certainty, it won't be normal and it won't be back anywhere near what it needs to be for a lot of companies to survive."

Senior Partner, Content Production Agency, United Kingdom

"We have run our company for 12 years now and almost exclusively service the hospitality and retail sectors which have hit the hardest due to current restrictions. Our clients have readily disappeared with no assurance of coming back.
Our business has successfully operated for the past 12 years and have managed to survive many challenges in the past, however this time, we cannot sustain the financial sacrifice we have been asked to do by our government in order to do our part to save lives.
Despite all that has happened and the many more challenges that are yet to come, we remain optimistic and hopeful that we will get out of this situation and adapt a new world where passion for our creative thinking and innovation will find a place and purpose for change, for better or for worse.​"

Founder & Creative Director, Design Agency, Australia
 

Creativepool's Coronavirus Survey Report

Here are some useful links to published articles:

Header image: Piotr Jaworowski
 

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