Business owners and entrepreneurs are working hard to return their businesses to full operations after the COVID-19 crisis. The past three months have been almost surreal for many business owners, as the virus caused more than 105,000 deaths and more than 30 million jobs lost across the United States.
According to a SHRM survey of business owners, 62% of small businesses have experienced a general decrease in revenue. Various surveys show that anywhere from one-third to more than half many of small business owners expect their businesses to fail within the next six months. The most impacted industries include retail, food services and drinking places, and tourism-related industries.
Now it is largely up to small and midsize businesses to revive the engine of the economy and put the American workforce back on track. It is no wonder that many business owners and executives feel nervous about the future. They are also surprisingly resilient, confident and optimistic.
Funding is a challenge to reopening
Survey data collected by LendingTree in late May shows 46% of small business owners are concerned they won’t have enough money to reopen their companies. They cite funding as their biggest obstacle to reopening. Some government reopening guidelines further limit their ability to make money–for example by limiting restaurant seating to 25% or 50% capacity. Between capacity limitations and fears their customers won’t be as willing or able to make purchases, 39% of small business owners told LendingTree they’re concerned they won’t have enough sales to make reopening worthwhile.
Concerns about cash flow, yet optimism remains
Understandably, the level of anxiety about cash flow remains high among small business owners. More than three-quarters of the leaders of operational small and midsize businesses report being concerned about cash flow in the coming three months, according to a survey of 86,000 business owners and managers conducted by Facebook. About 40% of these businesses had greater outflow than inflow in the most recent 30 day period. Unlike large enterprises, only 28% of SMBs reported having an open line of credit or loan from a financial institution. A separate Goldman Sachs survey of small business owners revealed 51% said they would not be able to operate beyond three months in the pandemic economic conditions.
Prior to the pandemic, small business owners reported record levels of optimism about the economy and the future, according to National Federation of Independent Business surveys. In March, that measure of optimism fell by the most ever. In April, small business owners’ sales expectations deteriorated to the lowest reading in the survey’s 46-year history, as many businesses closed for government mandated shut-downs.
Now that they are reopening their businesses, entrepreneurs and small business owners are once again demonstrating indomitable can-do attitude and grit. Although small business owners anticipate the economy will weaken in the near-term, they expect to see improvement in their businesses over the next six months. A recent survey by the US Chamber of Commerce and MetLife found 57% of small business owners felt positive about the overall health of their businesses. And a Verizon survey conducted in May found 68% of small business decision makers believe their companies’ can recoup COVID-19 related losses.
Paycheck Protection Program helped
Short-term stimulus programs from the Small Business Administration, including PPP loans helped bridge some expenses during business closures. About two-thirds of small businesses applied for PPP loans or still plan to do so, according to SHRM. Moving forward, it will be important for small businesses who received PPP loans to ensure they comply with the rules to get those loans fully forgiven. Keep up with the latest information about PPP loan forgiveness at Asure’s COVID-19 Resource Center.
Calling back and rehiring workers
In response to the COVID-19 shutdowns, approximately 54% of small businesses laid off employees and 24% furloughed workers. US unemployment claims surged to levels not seen since the Great Depression of the 1930s. The big question now: How fast can the U.S. economy turn around and start putting people back to work.
According to the Department of Labor, even though another 2.1 million U.S. workers filed for unemployment during the week ending May 23, continuing unemployment claims dropped from 25 million to 21 million. That’s an encouraging sign that as businesses are reopening, they are bringing back furloughed employees and hiring.
More than half of small and midsize business owners and managers will not rehire the same workers they employed prior to the COVID-19 crisis, according to the Facebook survey. With so much flux in the labor market, some small businesses will be able to make strategic hires of exceptional talent. There is an opportunity to make changes to the make-up of teams to better align with business objectives and company culture.
Employee and customer safety
Business owners will have to evaluate how to best protect their employees and continuing operations in the future. The pandemic is not over, and it is still too soon to know if future waves are coming and how bad they will be. It will be important to have plans for switching back to remote work, staggering shifts, or cross-training employees in order for businesses to ensure they can both protect vulnerable workers and keep the business open.
When surveyed about how to keep employees and customers safe after reopening, executives indicated they were confident their businesses could do so. Seventy percent of CFOs felt very confident they can provide a safe working environment for employees and 75% are very confident they can make customers feel safe.
k to continue digital transformation
While 78% of small businesses suffered declining sales, fewer than one in four missed or withheld any bill payments, including rent or utilities, according to the Verizon survey. In response to declining revenue, most business leaders do plan to make some prudent expense reductions going forward. However, their plans reveal a desire to maintain focus on creating future strategic advantage. While 83% of CFOs believe they will defer or cut capital expenditures, fewer than one in five plan to cut investment in R&D or digital transformation.
When the pandemic necessitated a rapid shift to remote work, the importance of digital transformation became more evident than ever before. Digital transformation enabled many businesses to keep their employees working and continue serving their customers. Of those small and midsize businesses using online tools to continue operations, 56% make at least half of their sales digitally, according to the Facebook survey.
There’s no doubt SMB leaders are ready to get back to business. But they also recognize that things won’t go back to the way they were. Pressing forward with digital transformation across the company will be essential to continuing operations. Businesses will continue to adopt digital technology to help keep supply chains running, serve customers online or in person, and manage both remote and onsite employees.