PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

COVID-19 Survey Roundup: Small Business Misery and Outlook

By at 14 May, 2020, 11:44 am

by Raymond J. Keating-The costs of the coronavirus and related government shutdowns have been brutal, and are evident – or should be – to most everyone. The latest numbers on, for example, GDP, jobs and income certainly confirm the breathtaking economic decline.

So, amidst the chaos and costs of a pandemic and deep recession, what’s the outlook emanating from the small business community? This is no idle question, given that small businesses truly are the lifeblood of innovation, and economic, income and job growth.

Negative Effects:  On May 12, Inc.com reported the following from a new survey of small businesses subscribing to Inc.’s This Morning newsletter: “About 55 percent of those polled in Inc.’s first monthly Small-Business Survey said their top priority when reopening is securing the health and safety of employees. Meanwhile, another 90 percent said their business has seen a negative or significantly negative effect as a result of the coronavirus pandemic. Around 28 percent of those surveyed said they have already pivoted their businesses.”

Long-Term Impact and Response: On May 11, Reuters reported: “Eighty-one percent of small U.S. companies surveyed by Veem, a global payments network, expect the new coronavirus pandemic to affect their business over the next 12-16 months, and nearly 90% are bracing for an economic slowdown, the company said Monday.”

Regarding liquidity and hiring, it was noted: “Liquidity remained a ‘key pain point’, the survey showed, with 52% of companies cutting operational costs and 59% applying for loans, the survey showed. Only 13% said they had not taken any measures to prepare for a slowdown. Nearly 54% of the companies said they were freezing hiring and 23% were downsizing staff, but nearly 18% said they planned to increase staff training and support.”

In addition, on the positive side, it was pointed out: “About 30% of the companies were more optimistic, suggesting that some industries were better positioned to thrive in the current environment, [Veem chief executive Marwan] Forzley said, citing online retailers and other e-commerce businesses… Nearly one-quarter of the companies were investing in new technology or aligning their information technology systems.”

Permanent Impact on Operations: According to the CNBC/SurveyMonkey Small Business Survey released on May 4: “Thirteen percent of small business owners say they can survive less than a month in an extended period of lockdown; 31% say their business would last ‘a few months or less.’ Just a little over one-third (35%) say their business could survive more than a year.” In addition, “72% of all small business owners say the outbreak is likely to have permanent effects on the way they run their business.”

The experience regarding revenue and revenue expectations, based on this survey, is telling:

“Revenue has decreased in the past two months for 69% of firms, according to the CNBC|SurveyMonkey Small Business Survey, with 49% indicating that sales had decreased ‘a lot.’ Eighteen percent of small businesses say they have been able to maintain the same level of sales; only 11% indicate a recent revenue increase.

“More troubling, though, is where these businesses see revenue going from here: Only 38% expect revenue to increase over the next 12 months, according to the survey, with almost an equal percentage (37%) expecting a decrease. Twenty-three percent expect revenue to remain at the same level.”

One of the key concerns looking ahead for small businesses according to this survey was regulations: “Looking further ahead, small business owners are daunted by the idea of keeping up with a continually changing gauntlet of regulatory hurdles. In the survey, conducted April 21–27, 38% of small business owners said they expect changes in government regulations to have a negative effect on their business in the next 12 months. That is the highest that value has been in the three-plus years of the survey, which reaches more than 2,000 small business owners in the U.S. every quarter.”

Layoffs and Business Closures: Released on May 1, a nationwide survey of more than 8,000 small businesses by researchers at Yale, Princeton, and Oxford universities found: “More than 60% of respondents reported laying off at least one employee due to the pandemic, and 31% stated that they expected to have layoffs within the next 60 days. A quarter of respondents don’t expect to ever recover, and 31% reported believing that they have a 50% chance of going bankrupt or out of business within the next six months.”

Outlook and Uncertainty: And on May 12, NFIB released its latest monthly take on small business optimism. Key points were summarized by noting that “real sales expectations in the next six months declined 30 points to a net negative 42 percent, the lowest reading in the survey’s 46-year history. The second-lowest reading was net negative 24 percent in April 1980. A net negative 11 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 19 points from March. The NFIB Uncertainty Index fell 17 points in March to 75, with most owners quite certain that the economy will weaken in the near-term. However, reports of expected better business conditions in the next six months increased 24 points, rebounding from a 17-point decline in March. Owners’ optimism about future conditions indicates they expect the recession to be short-lived.”

That last point of optimism is critical. This current recession already is historic in terms of lost output and jobs.

The question is: How deep will it go and how long will it last? The answer depends on myriad issues, including the pandemic itself, how businesses are allowed to re-open, what will business investment and hiring look like, and how quickly will consumers react (see this piece by Rieva Lesonsky for some important findings regarding consumer views)?

And of course, there’s the additional uncertainty of what governmental policies regarding taxes, regulations, spending and trade will look like. Unfortunately, uncertainty reigns.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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