Current and Future Challenges: The Small Business Landscape in San Francisco
June 2022
Supplementary District Reports:
District 1
District 4
District 7
Introduction
Over the past 2 years, small businesses have struggled, adapted, shown tremendous resilience, and, in many cases, closed in the face of the COVID-19 pandemic. In San Francisco, small businesses are a vital economic engine that represent the cornerstones and cultural fabric of the city. Their vibrancy and character define the eclectic culture of the neighborhoods they’re a part of, and as a whole, the identity of San Francisco. The implications of the success of small businesses extend far beyond their front doors, and the challenges they face reflect the intersectional and nuanced challenges of San Francisco broadly.
In pursuit of better understanding the challenges faced by small businesses in San Francisco, SF New Deal launched its $1 Million Microgrant Debt Relief Program in 2021. The program disbursed 400, $2,500 microgrants to small businesses across the
City of San Francisco. A wide net was cast to solicit applications directly from individual businesses, as well as nominations from the community. From over 600 applications, the 400 selected recipients represent a broad and diverse cross section of all 11 Supervisorial Districts in San Francisco. 96% of these owners and operators are among systemically under-resourced groups that historically have experienced the greatest barriers to access capital and opportunities including BIPOC, immigrants, LGBTQ+ and women. 85% of selected businesses employ 5 or fewer workers. By centering the challenges and needs of the most vulnerable small businesses, we believe we’ll be able to catalyze quality of life improvements for all San Franciscans.
For more information on our application process and selection criteria, please see Appendix A.
San Francisco Districts and Neighborhoods
This report makes references to Supervisorial Districts and neighborhoods across San Francisco. The map below depicts the current district lines and a selection of neighborhoods. Please note that the surveying and data analysis in this report reflect the district lines prior to the recent redistricting.
Survey Summary and Proposed Solutions
The problems outlined in this report cannot be sustainably addressed without the active engagement, leadership and financial support of City agencies, local officials, community groups, business associations, nonprofits, and individual San Franciscans who shop, dine, and rely on these small businesses for goods and services every day.
The road to a thriving business ecosystem begins with listening to business owners and workers, identifying what needs are most exigent, and working with urgency and accountability in collaboration with the individuals and groups best situated to provide timely solutions.
SF New Deal’s microgrant recipients participated in an in-depth digital survey designed to identify their challenges and current needs. From the experiences and perspectives the grantees shared, we strengthened our understanding of where SF New Deal, along with other community and governmental organizations, should invest resources and programmatic support to catalyze the greatest impact for small businesses, and in turn, the entire City of San Francisco.
The survey looked at three areas: business structures, financial standing, and specific
challenges and needs arising from the COVID-19 pandemic and its exacerbation of preexisting systemic inequities. Our key findings in each area expose the limitations of what supportive programs have been able to accomplish to date, and provide a roadmap for new initiatives in the months and years to come.
Local challenges require localized solutions, and not all districts in San Francisco face the same difficulties. The summary below offers an overview of our findings and suggestions for how to direct efforts and resources. Our hope is that
these findings inspire dynamic dialogue and catalyze direct action. Over the coming months, SF New Deal will introduce a series of programs and services both independently, and in collaboration with others, to address the challenges laid forth in this report.
1
67% of small business owners reported earning less than $25,000 in 2020.
2
Many grantees used the microgrant to reduce their overall debt, but 77% continue to carry debt. For 30% the debt is $150,000 or higher, and 33% have more than one creditor. 37% of grantees reported accumulating debt as their single biggest challenge.
3
73% of grantees reported moderate to large decreases in demand for their goods and services since the start of the pandemic.
4
39% of the small business owners surveyed identified finance and accounting services as their greatest need and what they believe would be most helpful to their future success. 50% of all surveyed businesses reported not being comfortable reading and understanding cash flow statements and budgets.
5
Asked to rank challenges they have confronted since the start of the pandemic, 41% of the small business owners surveyed chose hiring and staffing as their primary concern.
Key Findings
Takeaways and Actions
SF New Deal advocates for small businesses and works with urgency to meet their needs. As an organization, we serve both as a programmatic operator and an advocacy partner. The actions below represent both policy suggestions and the opportunity for programmatic investment.
Takeaway:
Small businesses, particularly those with 5 or fewer workers, owned by historically under-resourced groups: BIPOC, immigrants, LGBTQ+, and women are at high risk of closure due to lower demand for goods and services, mounting debt, and lack of familiarity with bookkeeping and financial management. Many small business owners, having personally guaranteed their loans, are at a high risk of needing to declare personal bankruptcy.
Takeaway:
Hiring and staffing remain the greatest challenge with small businesses unable to compete with a more demanding workforce and a high cost of operating.
Action:
In partnership with District Supervisors, SF New Deal will pilot programs to connect small businesses with professional services including: bookkeeping, financial, legal, and marketing/business development at no or low-cost, prioritizing those most at risk of imminent closure due to bankruptcy or eviction.
Action:
Distribute public transit vouchers for small business workers to enable improved intra-Bay Area hiring.
Action:
Allocate funds for expanded small business grant programs (not 0% interest or low interest loans), tax credits, basic income, and fee rebates or waivers.
Action:
Provide supplemental income programs for small business owners and workers to cover the delta between minimum wage (Full Time Equivalent = $35,000 annually) to actual cost of living wage in Bay Area (Full Time Equivalent = $64,000 annually).
Action:
Offer more accessible and approachable government contract opportunities for small businesses that provide reliable and recurring revenue.
Action:
Allocate government funding to expand SF New Deal’s 2021 pilots, which introduced programs to improve employee retention, advancement opportunities, and organizational culture for owners and workers. These programs focused on building management skills, expanding dual language proficiency, and amplifying awareness of job opportunities.
Action:
Create incentive programs that support entrepreneurs looking to start new businesses in otherwise vacant storefronts.
“We can’t afford administrative help anymore so I spend my time doing paperwork instead of business development and marketing. During the pandemic a lot of energy was diverted to grant applications, most of which didn’t come to fruition. Regulatory issues also chew up time.”
- Grant Recipient, District 8
Supplementary District Reports:
District 1
District 4
District 7