A key takeaway from the May 2020 State of Small Business Report is that you are not alone. Like many small businesses, financial challenges likely top your list of business concerns. Understanding the current state of the small business landscape will help you take steps to propel your business forward.
Facebook and Small Business Roundtable teamed up to conduct a series of surveys of American businesses to determine their challenges and outlook. This first survey, planned before the pandemic struck, paints a picture of the coronavirus impact.
The mechanics of the survey:
- 86,000 respondents, including:
- 38,078 business owners and managers
- 39,104 business employees
- 8,694 operators of personal enterprises based upon their self-reported work status
- “Owners and Managers”: respondents who reported that they “manage day-to-day operations of a business” or “own a business”
- “Personal” businesses: respondents who reported “self-employed providing goods or services” or that they “produce goods sold for personal income”
Current State of Small Businesses
Not surprisingly, many small businesses shut down due to the pandemic.
- 31% of the businesses shut down in the last 3 months
- 62% shut down due to orders from government and health authorities
- Business interruption insurance was uncommon—only 7% of owners and managers and 3% of personal businesses carried coverage
Due to slowdowns and closures, employment took a hit. 44% of businesses that are still open reduced employee numbers. Fortunately, some closed businesses (19% of owners and managers and 9% of personal businesses) are still paying employee wages. But for those employees of closed businesses that were laid off, they may not get rehired.
- Only 45% of owners and managers businesses plan to rehire the same workers
- Only 32% of personal businesses said they would do the same
Finances top the list of challenges that businesses face.
60% of those surveyed have financial concerns. Those include:
- Paying their workers’ salaries and wages (29%)
- Paying their bills (28%)
For hotels, restaurants, and cafes, those numbers were higher:
- Paying their workers’ salaries and wages (44%)
- Paying their bills (55%)
Reopening is the first step in reducing financial challenges. The good news is that 2/3 of closed businesses expect to reopen in the future.
What do businesses need to reopen?
- 57% said the government has to allow operation
- 20% said they need to secure funds
If funds for reopening are the next financial challenge, where do business owners plan to get the funds needed to reopen? Many don’t know.
- Personal savings: 41% of owners and managers and 28% of personal businesses plan to use their own savings
- Unknown funds: 39% of owners and managers and 53% of personal businesses don’t know where they will get the funds
Money is also a factor for the 1/3 of closed businesses for owners and managers who won’t reopen—34% of those businesses expect to remain closed because they can’t pay their bills or rent.
Cash flow remains a concern now and for the next few months after reopening.
- 40% of businesses reported a cash outflow greater than inflow over the past 30 days
- 28% of business leaders cited cash flow as one of the greatest challenges over the next few months
Our takeaway to mitigate financial challenges—join the 28% of respondents who have a line of credit or a loan from a financial institution and proactively secure business funding for reopening or for your next phase of operations.
While financial concerns may top the list of concerns per survey respondents, businesses are facing other challenges as well.
Lack of Demand
Lack of demand is the next biggest challenge (20%) cited by business leaders. When businesses reopen, they need customers to survive.
Consider taking these steps to retain and attract customers:
- Calculate the lifetime value of your customer to allow you to focus on long-term gains
- Start marketing now—don’t wait until business is on the upswing
- Rebuild your customer list to retain existing customers and acquire new ones
Supply Chain Challenges
Getting supplies will be tough. Of those surveyed:
- 40% of owners and managers reported facing supply challenges, including:
- limited supplies of a specific product (61%)
- delayed shipments (56%)
- 47% reported facing sanitation or cleaning supply shortages
While there is no silver bullet for fixing supply chain issues, have a heart-to-heart conversation with your suppliers, and explore options for redundancy in your supply chain.
Focus on Technology
Don’t underestimate technology as a tool. Digital sales accounted for at least half of all sales for 56% of respondents that use online tools.
Support Family/Work Balance
Taking care of household members impacts small business owners and employees. One can’t work and take care of domestic tasks simultaneously. Per the survey:
- 23% of owners and managers cited the need for help taking care of household members to stay open
- 62% of respondents report spending 1–4 hours daily on domestic or household care activities
Solving the family/work balance problem won’t happen overnight but consider:
- Protecting your employee leave programs
- Offering remote work when feasible
- Focusing on family/work balance procedures
At first glance, the survey results paint a stark and gloomy picture of the current state of small businesses. But entrepreneurial grit is prevalent—57% of those surveyed reported being “optimistic or extremely optimistic about the future of their businesses.” Fuel your small business dream by taking steps to address your obstacles, including securing the funding your business needs with a small business loan.