As the coronavirus pandemic hits the 1-year mark in the United States, there’s hope that this traumatic ordeal may be coming to an end. Healthcare professionals are administering more than 3 million vaccine doses per day as of April 2021. Now is the time to evaluate the damage from the past year—and begin picking up the pieces.
Let’s look at a few industry-leading surveys on reopening to understand how small business owners feel and how consumers are behaving. These insights can give us a better picture of how entrepreneurs and owners can move forward.
Here are a few important numbers about reopening and what they mean for small business owners.
Each state has taken its own approach to the reopening process. Disney World in Florida opened up back in July, while Disneyland in California has yet to reopen—with a projected date of April 30. This is just 1 of many examples of the different approaches states have taken to reopen, with some being more careful than others.
However, businesses across the country reached a significant milestone in early 2021. According to a survey of 550 business owners by Kabbage, an American Express company, 57% of small businesses are fully open without any local operating restrictions.
“Fully open” means that companies aren’t limited by how much income they can make. Back when restaurants were operating at 25% capacity in some states, owners could only seat a few tables at a time, and waitstaff were only earning a fraction of their tips. However, our society has learned to live with the coronavirus, and many businesses are now operating—with new policies—at their pre-COVID levels.
With all the excitement of reopening, it can be easy to forget the severity of financial stress and turmoil felt by struggling small businesses during the lockdown. You may see a packed restaurant and assume it’s turning a profit. However, many companies are still hurting from months of lost revenue, new loan obligations, or other pandemic-related financial stresses.
According to the 2021 Small Business Credit Survey by the Federal Reserve, 64% of business owners plan to apply for additional government assistance if it’s made available. Even more shocking, 39% of firms said that they likely wouldn’t survive without some sort of assistance, at least until their current sales levels return to normal.
Business owners consider 2 key factors: lower sales expectations and debt accrued from the past year. As states remove pandemic limitations, they’re also removing many of the rent protections and other safety nets that kept small businesses afloat. As case numbers drop, it may become easier to “forget” the pandemic and think that the struggles of small businesses are behind us—but that’s not the case.
Multiple surveys have revealed that the pandemic was a catalyst for online shopping. Consumers stayed home to stop the spread of the virus and used online options whenever they could. Everything from banking to grocery shopping became a digital experience.
The Kabbage survey asked small business owners about their online income pre- and post-pandemic. Before the pandemic, online sales made up around 37% of the monthly income for small businesses. As of February 2021, online orders made up 57% of sales from survey respondents.
The companies that invested in digital infrastructure before the pandemic were likely in the strongest position to thrive when cities and states started shutting down. These businesses were able to promote their existing online features rather than scrambling to invest in an e-commerce website, online patient portal, or online ordering system, depending on their respective industries.
While business owners might see a small drop in online sales as the pandemic ends, this is likely a lasting behavioral change overall. The consumers who enjoy digital features will keep using them, even when they can return to in-person gatherings. Within the next few years, consumers will be more likely to choose the companies they patronize based on their digital adaptations and experiences.
Some small business owners face a longer road to recovery than others. The Small Business Roundtable and Facebook released their 2021 US State of Small Business Report. This survey found that 70% of small businesses in minority communities reported lower sales in 2020 compared to 41% of owners in non-minority communities.
Furthermore, minority business owners reported higher closure rates because of the pandemic: 36% of small businesses in minority communities reported being closed, compared to 22% of their non-minority community counterparts.
Throughout the pandemic, minority communities have faced a harder time securing PPP funding from the CARES act and experienced lower sales numbers because their community members were more likely to lose their jobs. Even as there is hope that the pandemic will end, some minority business owners will spend the next few years trying to stabilize their businesses.
For many business owners, regardless of their gender, the pandemic has blurred lines between professional and personal finances. Fewer owners took home salaries last year, and some dipped into their personal savings to cover professional operating costs. However, the US State of Small Business Report found that female business owners were more likely to struggle personally because of the pandemic.
From April to December 2020, the percentage of female business owners who found it difficult to pay their monthly household expenses rose from 34% to 55%. The percentage of male business owners who found it difficult to pay their monthly household expenses decreased slightly.
Similarly, the burden to complete domestic responsibilities also increased for women, with 87% reporting that household work directly impacted their professional time and abilities. About 72% of male business leaders agreed with the same statement.
While business owners were impacted professionally, they also faced many of the same challenges as everyone else personally. Childcare and virtual education unexpectedly burdened parents who suddenly needed to watch—and teach—their kids each day while somehow still working full-time to keep their businesses running.
Despite the fact that many previously closed small businesses are fully or mostly open, owners and entrepreneurs wouldn’t necessarily say that they’ve recovered from the pandemic. The first 3–6 months took a serious toll on businesses.
Many had to shut down entirely for a brief period, while others operated at such a small capacity that they lost money. Expenses like rent and business insurance piled up without any income.
So what does a full recovery look like? According to the Kabbage survey, here is how business owners will know that they’ve recovered from the pandemic:
Even if a business is able to open at full capacity, owners and employees are still experiencing lower levels of foot traffic and fewer sales than before the pandemic started. These pandemic business metrics show that some customers aren’t yet ready to leave the house and return to normal.
According to the Federal Reserve survey, 59% of small business owners believe weak demand for products or services will negatively impact their sales in the next 12 months. This is the leading cause for concern, even more so than government-mandated closures at 53%.
Interestingly, supply chain disruptions (37%) and labor shortages (26%) also keep small business owners up at night. In the same way that different states reacted to the pandemic at varying levels, different countries took unique steps of their own.
Business owners across the country have reported unique supply chain issues from items that are normally delivered from China, Mexico, the Dominican Republic, and other regions of the world. These countries shut down their production, limiting inventory and causing bottlenecks throughout the supply chain.
In some cases, demand for items worsened the supply chain issues as consumers rushed out to buy what little inventory was available—like for refrigerators.
Most small business owners hope to use this year to stabilize their operations: they want to secure inventory from their vendors, hire their staff back full time, and bring back their customers. Each of these steps needs to happen before a business owner can feel like they’ve recovered fully from the COVID-19 pandemic.
Just because a state rescinds its pandemic orders and a company fully opens doesn’t mean it’s business as usual. There are multiple factors out of a small business’s control that determine whether or not they can turn a profit.
Do customers feel safe in the business, or are they waiting for lower case numbers? Do customers have money for your business, or were they impacted financially by the coronavirus?
While some companies are fully open, that doesn’t mean the economy has recovered. It will take time for people to pay off their debts and build themselves back from the pandemic. This means that small businesses might have a tough year ahead before they can feel confident in their growth potential.