Small Business, Big Challenges

At ENGINE, we’ve been actively tracking consumer behavior and sentiment on a number of fronts related to the pandemic, and recently fielded a CARAVAN Small Business study of over 500 small business owners/decision makers regarding the impact the crisis has had on their operations and their bottom line.

The life of a small business owner is blended; lots of time in the backroom, a fair amount of working with customers, some coaching, and lots of caretaking – for people, places and profits. As crises go, there’s never been a scenario like the COVID-19 pandemic that has so dramatically altered – by government mandate – the lifeblood of the American Economy. Small businesses in America employ over half of all workers and, disproportionally hit, are accounting for much of the nation’s unemployment claims as owners/operators work to adapt and sustain. At ENGINE we have quick access to broad populations for poll taking and omnibus work and, fortunately in times like these, we also have access to respondents from specific populations of interest . As we remain firmly in the grip of COVID-19 there’s no more significant population related to the economy than small business owners/operators.

Well, how are they feeling? When asked, 72% of business owners reported a decrease of at least 20% of their anticipated revenue with 32% reporting over 50% of revenues lost since the crisis began. And, they feel the losses will sustain for some time with 53% noting they expect it will take 3-8 months to return to normal.

So, what are they doing about it? A sudden reduction in revenue instilled uncertainty and has been the catalyst for changes small business operators are making to keep staff and customers safe, control costs and, as we learn to live with the virus, stimulate demand. As far as costs are concerned, 20% of respondents report reductions in staff/hours, 11% report a decrease in their number of suppliers and 13% report an increase in automation. And, on the flip side – in an attempt to modify operations and develop safe servicing environments to get customers “back to the counter” – a quarter of small business have installed signage to help guide social distancing, 29% are requiring masks for customers and 47% are requiring masks for employees. All of this inspires optimism, right? Well, optimism is a stretch – but for small businesses they report hopefulness as 50% feel that the economy will somewhat or significantly improve in the next 12 months. Although, given the state of small business at the moment a swing of the pendulum back to center could be interpreted as “significant” improvement.

In a time when small businesses need help from above – a note on federal government support and stimulus. 34% report applying for funding through the Payroll Protection Program (PPP) with 47% not feeling they need PPP assistance and still many, 32%, reporting not wanting to take on additional debt in spite of varying degrees of need and the opportunity for forgiveness. When coupled with the high percentage of applicants who plan to repay a portion or all of the borrowed funds (68%), the desire not to bear the burden of additional debt may explain the reason more small business owners are choosing not to apply for assistance.

Also, kudos to large and small banks alike who mobilized to support the processing and funding of federal assistance in a condensed time period. Despite the scale of the program, the urgency with which it was rolled out and the deluge of applicants, most applicants report relatively high satisfaction levels with their PPP experience (66% satisfied/very satisfied) and a strong majority (71% well/very well) feel they understand the loan forgiveness terms and conditions of the program.

So what does this all mean? Hard to say except that will and tenacity are as consistent as traits of successful entrepreneurs as curveballs are in the economy – perhaps the two wouldn’t exist without each other. While according to the Small Business Administration new business applications have ground to a halt due to the crisis, I’d bet with careful management, hard work and the help of a good banker the current set of tough-going small business operators will weather the storm and come out stronger to inspire a crop of willing entrepreneurs to forge ahead in writing America’s next economic chapter. We will have to stay tuned.

Written by Jim Nelson, SVP at ENGINE Insights.