The Outlook from Entrepreneurs and Business

By at 22 July, 2020, 7:27 am

by Raymond J. Keating-

The U.S. is more than four months into this pandemic, along with the related economic ills and shutdowns that transpired. So, what’s the latest thinking among small business owners?

A few recent reports provide some clues.

Optimism on the Rise, Sober on Economic Recovery

First, Gallup reported last week that small business optimism had ticked up from where it was in April. Perhaps most striking, Gallup noted, “Two-thirds (67%) of small-business owners are more optimistic than pessimistic about their business, up from 47% in early April but still off from the 80% in January, before the weight of the pandemic hit.” (The survey was taken May 29-June 5, 2020.)

In terms of challenges being faced by small businesses, 67% have experienced reduced revenue/sales, 58% fewer customers, 51% reduced business hours, 49% experienced the loss of regular paychecks or reduced amounts for owners and employees, and 46% had reduced staff hours. In addition, 31% had to temporarily close their businesses.

As for how long it will take to bounce back, it was reported, “The slight majority of small-business owners are not expecting to see rapid economic recovery from the impact of the virus once the restrictions are lifted. Only one-third say it will be weeks or a few months to recover — while slightly over half (52%) predict it will be up to a year or more before they can recover economically and 13% feel it is too soon to estimate.”

Large Number of Permanent Business Closures Anticipated

Second, Lending Tree released an analysis estimating the number of small businesses in danger of closing without a change in the state of the coronavirus and economy. It was noted, “According to LendingTree’s analysis, between 24% and 40% of small businesses in the nation’s largest 50 metro areas are in danger of having to shut down soon if business doesn’t return to normal.”

In terms of having more than one month of cash on hand, San Francisco had the highest percentage of small businesses in that position at 67.2 percent, while at the other end, 49.4 percent had that amount of cushion in Miami.

Operating Models and Expectations Shift Due to Pandemic

Third, a recent JP Morgan survey of business executives (77% at firms with fewer than 250 employees) served up some valuable insights, including:

● 53% expected “their companies to return to normal within the next 12 months.”

● 83% reported “operating at some level of reduced capacity.”

● 33% said “changing consumer habits due to the pandemic was a leading concern for their future.”

● 56% reported having made or planning to make “permanent changes to their operating model as a result of shifting to working from home.”

● 54% reported having shifted or planning “to shift their operating model to be more online in the future in response to the continuing pandemic and shifting consumer habits.”

● 47% “expect sales and profits to grow” and 71% “have cut back on capital expenditures for the duration of the year or plan to do so.”

● 82% of “executives at midyear said that they were readying their organizations to deal with a potential repeat of early 2020 disruptions.”

Current Pessimism, Future Optimism

Fourth, early this month, the Conference Board released its latest “Measure of CEO Confidence.” It registered 44 for the second quarter, up from 34 in the first quarter. A measure of 50 points or better means there were more positive responses than negative. Among the key findings were:

“CEOs remain very pessimistic about current economic conditions. All respondents said conditions are worse compared to six months ago, about the same percentage as in the second Q1 survey.”

However, “CEOs are generally optimistic about the economic outlook in the next six months. Now, 71 percent expect economic conditions will improve over the next six months, compared with 50 percent last quarter. Moreover, only about 16 percent expect economic conditions will worsen, down from 44 percent during Q1.”

We all know that entrepreneurs, businesses and workers are facing tough times right now and likely will for the coming weeks, and perhaps months. But the bulk of small business owners and executives expect improvements in their businesses and the economy in six months to a year.

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


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