In just a couple of months, the small business landscape has dramatically changed, in some instances forever. The medical impact of COVID-19 continues to be a focus of concern. The adverse economic impact—how long it will last and how deep it will be—remains to be seen.
Having been through other economic setbacks in the past, albeit nothing like this one, I’ve had a number of surprises related to COVID-19 that I’d like to share with you.
Surprise 1: How unprepared many (most?) small businesses have been
Being a Floridian, business closures of a week, 2 weeks, or more for hurricanes are routine. Shops get boarded up and no business gets done for this period of time. Small businesses are used to this short-term disruption. They re-open and few if any such businesses go under as a result of this type of closure.
But there have been longer disruptions, too. Given that there have been other dramatic economic crises before (most recently the Great Recession, which officially lasted from December 2007 through June 2009), you’d think that more businesses, especially those traumatized in the past, would have been better prepared to withstand greatly diminished revenues for a period of time.
Of the small business owners I’ve spoken to, many of them do not have enough cash flow to carry them more than a month. We hear the Dave Ramseys and Suzie Ormans telling individuals to have 4 to 6 months of savings for emergencies. But it seems that most small businesses don’t have these rainy day funds. In bad times they scrape through and in good times, to paraphrase a New Jersey CPA I’ve spoken to, “they spend, spend, spend.”
While the Paycheck Protection Program (PPP) may help them get through this crisis, the lesson for the long term is to be better prepared financially for other disruptions. Unfortunately, because it’s likely to take a long time for businesses to recovery from COVID-19-related financial woes, the lesson may be forgotten when good times return. I hope not.
Surprise 2: Information overload
It seems to me that every individual, every company, and every person with access to posting on social media is disseminating information and advice on how to handle things. As a company — Big Ideas for Small Business – that solely provides information to the small business community on tax, financial, and legal matters, I find it amazing that now everyone is an expert. I’m not disparaging most of what’s been posted, I’m only saying it’s become information overload, which makes it difficult for business owners to find what they’re looking for.
My suggestion to business owners seeking usable information is to stick with their CPAs and check key government posts. For example:
Surprise 3: New business models
This really shouldn’t be a surprise. Small businesses wanting to survive this crisis have adapted, as businesses have always done when dramatic changes arise. Local sandwich shops now provide curbside pickup. Small retail shops are actively online selling gift cards to bring in revenue now and capture customers for the future. Larger companies are advertising heavily about services that are “contactless,” from pizza pickup to buying new cars.
What will be most interesting is how many of these new business models will continue once people are no longer barred from engaging up close and personal. Businesses should take this opportunity to think about how they can create multiple revenue channels for the future.
Surprise 4: Definition of essential services
Perhaps you’re like me and never thought which types of businesses are “essential.” When the Florida Governor issued a “safer at home” executive order, it exempted essential services. These include (but are not limited to) many small businesses, such as:
- Auto repair shops
- Farmers and food manufacturers
- Funeral homes
- Groceries, convenience stores
- Healthcare providers
- IT services
- Landscapers and pool care service providers
- Media workers (reporters; studio technicians)
- Pest control
- Pet supply stores
- Plumbers, electricians, and other tradespeople
- Residential and commercial real estate services
- Restaurants—carryout only
- Transportation-related services (trucking, roadside assistance, delivery drivers)
For those in other states, there may be different exemptions. For general information, check the list of essential industries from the U.S. Department of Homeland Security.
Small businesses that are essential services have continued to function through the COVID-19 shutdown, although many have a reduced amount of business activity. What is interesting for the long run is whether businesses that are not currently offering essential services can expand their activities to become part of this group and be able to operate when there’s a future pandemic or other disaster requiring nonessential businesses to be closed to the public.
Surprise 5: Extent of goodwill
Again, it shouldn’t be a surprise that businesses are reaching out to the public in many ways to make things easier. Companies are deferring customers’ payments, waiving interest on newly-financed purchases, and doing giveaways. The charitable foundations of large corporations are providing COVID-related assistance. Some auto insurers, such as Allstate, Geico, and Liberty Mutual, are giving COVID-19 refunds or credits of premiums (driving is down so accidents are down too). Even some utility companies are cutting bills temporarily (e.g., Florida Power & Light is issuing a one-time decrease of nearly 25% for residential customers). Businesses of all sizes are offering words of support to the public and continuing to maintain goodwill, while keeping their brand out there.
I hope that when we begin to re-open the economy as a whole, customers remember this goodwill and re-patronize restaurants, retail shops, and other small businesses…if these businesses are still here to re-open.
Who knows what the economy will look like in a few months? I sure hope there’s a quick bounce back (though this is doubtful). It’s more likely that we’re in for a recession, which may be short or long. I also hope that lessons can be learned so we can be better prepared for the next pandemic or other disaster.
A clip from the University of Minnesota Center for Infectious Disease Research and Policy in 2007 said:
“Medical historians tell us there have been nine influenza pandemics in the past 300 years. So one every 30 to 35 years or so, or roughly three per century, is everybody’s best guess about the future frequency of influenza pandemics.”