The world is faced with a crisis that has every chance of overshadowing the financial crisis of 2008-2009 and even becoming the deepest economic downturn in the last century. Trying to understand what are the chances of overcoming it with minimal losses, many closely monitor the development of the situation in the US.
What is happening with small business?
Small business owners are now in an incomprehensible situation. They fear that their small enterprises and firms may go bankrupt within a few months if the blockages by the state caused by the coronavirus are not stopped. Many of them are also worried that starting a business too early may have the same outcome and fate.
Not so long ago, Main Street shared an impressive new study on how confidence in small businesses has fallen to 48 in the second quarter from 64 in the first of 2020. CNBC began its small business research for the first time in three years. A few years ago, the mood on Main Street was negative.
The threat is existential, 13% of small business owners believe that they can survive less than a month for a long period of blocking. Also, 31% say that their business will last several months or less and 35% of people are confident that their business can survive for more than a year.
According to Molly Day, vice president of public relations at the National Small Business Association, such a drop in confidence was obvious and should not be overlooked. Recent findings from a survey conducted by her group also show that confidence has fallen to a record low and is now well below the level that reached the bottom during the Great Recession.
A small business survey of small and medium-sized businesses by CNBC for the second quarter of 2020 was conducted among 2200 small business owners in the US. According to statistics, 90% of all respondents were business owners of approximately 20 or less employees. Only 2% had more than 100 employees on wages. These people run businesses in a wide range of industries, from catering and restaurants, real estate and finance, to retail and transportation.
The survey showed the extent to which this instability of small business can not only be stopped by Covid-19, but can change it forever. About 72% of small business owners consider that this outbreak is likely to have permanent consequences for their business in the future.
According to Marilyn Landis, managing director of the small business consulting company Basic Business Concepts, 2019 was seething for many small businesses and their rapid growth.
Now the survey has shown that 62% of people say that demand for their services and goods has declined over the past two months. In turn, 42% say demand has declined significantly.
Some permanent change can lead to bankruptcy. According to small business experts, one of the drawbacks of the federal Wage Protection Program is that it worsens the loss of confidence among many owners of Main Street depreciation and does not help to strengthen it.
Small Business bankruptcy concerns
In 2020, the United States will see waves of bankruptcies parallel to unemployment, then worsen the situation when state budgets narrow and disrupt supply chains.
Bankruptcy of small businesses in the coming months will be the result of counting the owner that they would rather have bankruptcy status than have structural debt. Most likely, the second wave of small enterprises will be burned if the country does not develop a more effective policy. Then there will be another wave, and it will be more painful and will affect people who thought they were protected from recession.
Radically reduced costs will be required by small businesses over the next few months. According to CNBC, revenue for the past two months is 69% of firms, with 49% indicating that sales have declined a lot. Also, 18% of small enterprises say that they were able to maintain their previous level of sales and only 11% have a slight increase in revenue.
State-to-state economic recovery
State-to-state economic recovery remains a source of uncertainty for business owners. Businesses in other states are worried that gradual opening can create competitive imbalances in market share, supply chains and hiring. Ohio began to open in stages and firms from Pennsylvania could watch workers enter into supply contracts, market share and poach.
Small businesses also fear that larger companies will be in a better position and will benefit from re-opening. This makes people worry about the exacerbation of the second wave of coronavirus cases, resuming under conditions that will inevitably include both customers and high-risk workers.
Since the lockdown, data have appeared about a record increase in the number of American unemployed in one week. The indicator exceeded the March 2009 result by about five times, becoming the largest in the history of collecting such statistics.
According to experts, a reopening is fraught for businesses, because there are a lot of costs involved in increasing purchases of supplies, marketing, hiring, advertising and other things. The CNBC survey says that only 15% of small businesses expect staff growth over the next year. Moreover, 63% believe that their staffing will remain the same and 21% expect a decrease.
In their turn, 52% of enterprises that have laid off employees plan to hire them all back once the situation returns to normal. Another 37% say that they will return some of them back and 9% say that work is lost forever.
What to expect in the future?
National Small Business Association Day emphasized that lack of trust is not a complete loss of confidence in the future. People are afraid that everything will never be the same again, although confidence is falling and business is in place, there is still a belief in the future and that everything will be fine.
The CNBC study found that 71% of small businesses said they did not apply for an SBA loan for economic injuries. According to this survey, 16% of applicants for loans from economic damage are still waiting for an answer, and only 2% of the applications submitted were approved and received funds.
In order to survive the crisis, small businesses should be well organized in times of recovery and a stable period of the economy. It must be profitable and constantly evolve. Then the recession is not so terrible.
Prepare morally for a pandemic and concomitant recession to last at least a year. Cut costs right now where it’s not a threat to business security. Involve the team in the cost reduction process. But remember that reducing staff costs is the last item on this list.
When managing finances, it should be borne in mind that part of the resources should always be at hand. For example, several reliable banks, a lot of cards and cash. Everything that does not bring money should be sold or preserved for the time being whenever possible.
Neither recession nor crisis can last forever. Someday this will end and everything will get back to normal. Small businesses that survived crises come out of them stronger. And the experience gained during the crisis helps this business to develop and improve.
How to support small business during Covid-19?
Learn to work from home in difficult conditions. The faster and more harmoniously you build processes in your family, the more effective you will be. Share your successful experience with the team, set the task to reach a debugged distance control within a week.
Try to build high-quality remote work at all levels, delegate authority as much as possible, issue the necessary powers of attorney to lawyers and accountants.
Assign the person responsible for organizing distance work as an independent and important business project. Provide reliable Internet and duplication of all documents in case of emergency.
Remember that during a pandemic and quarantine period, your relationships with employees go beyond the scope of the Labor Code. Unreasonable requirements for staff to continue to work full-time can cost you administrative fines and even result in criminal liability if an employee becomes infected or infects someone else during working hours, as well as on the way to and from work.
Carefully study staff employment contracts and do not immediately try to reduce costs, possibly even firing employees. After the end of the regime of self-isolation or quarantine, the courts are likely to side with the dismissed, and you will lose more. Try to come to an agreement and find a compromise that will suit everyone.
Daily monitor what support measures in your niche power launches. Make the most of every opportunity, learn to use this help. If there is no specialized specialist, take someone outsourcing and in the future one such costs will pay off. Assistance may not be enough for each enterprise, so it is better to be in the forefront.
Remember that crises come and go, but the sediment after it remains. It depends only on you and your activity, inner strength and desire, will you come out of it stronger or make a company for those who go bankrupt.