A Look into the State of Small Business: Q1 2020

At what point have you realized that COVID-19 would actually hurt your business, or even threaten its existence at some point? All of us are struggling to figure out what looks like a very uncertain path ahead of us. For that reason, we believe that it is critical to equip business owners with the best insights available. This will help you understand what others in your situation are doing- and a broader perspective on mitigating the impacts of COVID-19. Long story short, we’ll go over a report that will help you understand the state of small business, today. 

Earlier this month, Facebook released the details of a study in partnership with a small business roundtable of over 80,000 business owners, with some being personal businesses. Reading this allowed us to discover some key takeaways that we wouldn’t be able to find out otherwise. Let’s dive right into what is happening to small businesses, how employees are impacted & what businesses are doing to survive.

Key Stats

  • 31% of owners and managers reported that their SMB is not currently operating. 
  • 28% of SMBs said the biggest challenge they would face over the next few months was cash flow. 
  • 20% said their biggest challenge would be a lack of demand. 
  • 51% of businesses report increasing online interactions with their clients. 
  • 36% report that they are now conducting all of their sales online. 
  • Only 45% of owners and managers of SMBs reported that they would rehire the same workers when their businesses reopened. 
  • 57% of SMBs report that they are optimistic or extremely optimistic about the future of their businesses.

Own a Business But You Are Not Allowed to Operate? You’re Not Alone. 

Almost one-third of SMBs have shut down in the last 3 months according to Facebook data. This means that one out of 3 of us have to stay at home, worry about how we are going to save our business. Thinking about how much time and effort went into building a company like yours, you would probably do pretty much anything to avoid losing it. Unfortunately, there’s not much a business owner can do if a government-issued order is keeping your doors shut. Staying at home all day with nothing to do doesn’t help your case either- times really are tough.

Cash Flow is King

This is a phrase that a lot of people can get behind, which is even more important these days. All of us know cash flow is what keeps our business afloat- we have an endless list of things that need to be paid every single month. Rent, employees, bills from companies that you forgot they exist and more. Now, the question is, how do we maintain a positive cash flow if our doors are closed? That right there could be the million-dollar question. We don’t have the answer to that, but many businesses have turned to funding options available to them- and we’ll explore what business owners like you feel about these programs. 

Half of the respondents reported that they have applied for some form of capital support program, and many others are reviewing their options such as emergency grants as part of the CARES act, and Paycheck Protection Programs.

This is a phrase that a lot of people can get behind, which is even more important these days. All of us know cash flow is what keeps our business afloat- we have an endless list of things that need to be paid every single month. Rent, employees, bills from companies that you forgot they exist and more. Now, the question is, how do we maintain a positive cash flow if our doors are closed? That right there could be the million-dollar question. We don’t have the answer to that, but many businesses have turned to funding options available to them- and we’ll explore what business owners like you feel about these programs. 

Half of the respondents reported that they have applied for some form of capital support program, and many others are reviewing their options such as emergency grants as part of the CARES act, and Paycheck Protection Programs.

Based on my conversations with other business owners, these programs really haven’t taken care of most of the concerns us business owners have. Many complain that they were not able to access much-needed funds, and even if they did, they have their own share of reasons why it wouldn’t be a long term solution.

As you can see, businesses need policies that they deem essential to keep their businesses afloat. It all makes sense, hotels, for example are facing very serious long-term challenges that will put almost unbearable pressure on their finances, and they are scrambling to find ways to cover their fixed costs. There seems to be a consensus on most policies that are being thrown around these days.

Some of the voices heard around the SMB roundtable seem to confirm these stats:  

“We definitely need financial support without the fear of being charged enormous amounts later.” 

“Most of our staff was laid off from other employers. Though we have assets to compensate them for two pay periods, we’re not sure when sales and distribution will become ‘normal’ in this post-quarantine environment. A grant COULD assist with this.”

Going 100% Digital: It’s not for everyone, but it can save you. 

The moment some business owners realized that they are going 100% digital– they took their chances and it paid off. Some businesses that have gone fully online report no changes in revenue. In fact, this has been the most popular strategy among SMBs during the pandemic. 36% of operational SMBs conducting all of their sales online. 

56% of business leaders that use online tools said their business makes at least half their sales digitally. The report has also found that women-led businesses are making more use of online sales, with 59% saying at least half of their sales are digital compared to 54% of businesses led by men. 

How can a local retail business go fully online? 

If you are in the business of selling physical goods, and never had an online presence before, trying to go online could be a great way to re-connect with your local audience. This would obviously result in a completely different interaction with your most loyal customers, but many have found success by starting to sell online. 

In most cases, using a platform like Shopify is the easiest approach. We like Shopify because of the convenience it provides for a small business owner without any experience running an online store. The best part is, it takes long to grow out of it, many stores averaging over 7 figures per month stick to this platform. 

Some of the alternatives are Magento, Square and BigCommerce. No matter which platform you choose, you’ll find that it is very possible to launch your own online store and start getting some sales there! If this is a project you had in mind long before the pandemic, here’s your opportunity. 

When you’re ready to launch your online store, you should also prepare to manage the shipping & handling process. Shopify provides an easy way to purchase and print shipping labels directly from the order page, but we also have clients that use tools like Sendle, which directly integrates with most of the platforms we mentioned.

When you have a successful online store with a positive cash flow, accounting might take quite a bit of your much valuable time, and sometimes it’s difficult to fully understand accounting for e-commerce businesses. Our client Polaris Tax & Accounting specializes in e-commerce accounting with packages for businesses of all sizes.

If your local business has been shut down by the pandemic, and you are looking to seize the opportunity to go fully online- we want to help. If any of the above steps were confusing, or you have any other questions, please feel free to message us anywhere- and we will be happy to guide you as you launch your online store. This is the least we can do to help our community during a time like this, and watching small businesses thrive makes our day, every day.

How can a service-based business go fully online?

Depending on the type of service, it may or may not be possible to go fully online. Facebook survey shows that 51% of interactions between businesses and clients need to be conducted in the same physical location. However, 79% of businesses were able to make a change to operations to accommodate clients and customers by implementing things like digital payments, and online service delivery tools.

Some of our clients have implemented systems that allow them to meet with clients online, and this seems to be a very common trend lately. In addition, electronic signatures and cloud-based collaboration tools allow for operations to continue for many service-based businesses. 

Here are some questions that you can ask to figure out if this transition is viable in your case. 

  • What aspects of our operations are currently handled in-person or in the same physical location? 
  • What percentage of these can be conducted online using the tools we currently have in our arsenal? 
  • Which operations MUST be conducted in-person? 
  • What percentage of our operations or service offerings rely strictly on in-person interactions?

At Locate, we have always had online tools that allow for remote work and online collaboration. Although we have an office which is walking distance from some of the best pizza places in the entire state of New Jersey- we recently switched to Microsoft Suite, meaning that almost all our interactions could be conducted online. The only thing we miss is being able to meet with our clients in-person, and we know for a fact that we will be continuing that as soon as we can! Based on our experience, if you have a digital-based service, there are hundreds of tools out there, and the right combination can give you a huge advantage during a time like this.

Moving your operations online should satisfy two requirements, it has to be convenient for your employees and it has to deliver a good experience for the end-user (your clients). If the client goes through 20 extra steps to get something done, you need to revise your online business strategy. Your clients must have a clear understanding of how the process will work. Try to keep it simple and as similar as possible to the pre-pandemic experience you used to deliver, but not at the expense of overcomplicating things.

While you are looking for tools, try to avoid these mistakes: 

  • Don’t use too many tools which don’t integrate with each other.

For our online meetings, we used to combine calend.ly (scheduling) and Microsoft Teams (video calls). This didn’t work well, because the two applications didn’t work with each other. Our client would schedule a meeting on calend.ly, and we would have to send a manual video call invite. It was confusing for the clients, and a lengthy process for us.  

The solution was simple, change the scheduling tool. We switched to Microsoft Bookings, which now automatically creates the meeting invite, and the process is as simple as it gets.

  • Make decision too quickly about the online tools you will use.

We all understand that the whole pandemic situation is forcing our hand, and we have to find solutions, fast. However, the ‘new normal’ concept suggests that online interactions are here to stay, and your decisions now will have long term impacts. It’s better to do it right the first time as opposed to looking for quick fixes. Have a plan, consider all alternatives, and know what you are looking to accomplish in the long term with the new set of tools you will acquire.

The New-Normal: Preparing to Reopen

57% of business owners and managers stated that the most important action that had to take place for their business to reopen was for the government to allow operation. We all know that SMBs can’t survive too long with a negative cash flow.

The truth is, that time will come, and we will find ourselves in the ‘new normal’. It’s hard to predict how consumer and corporate spending will impact demand, and it will take some time for business to pick up some pace. Despite the uncertainty being felt in almost every industry, most business owners remain optimistic, with only 11% of operating businesses expecting to fail in the next three months. 

While we wait until the external factors define the ‘new normal’ for us business owners, we have some tips to help you get back to business.

  • Stay in touch with your loyal customers or clients: If you have loyal customers, you have offered them something remarkable at some point that makes them keep coming back. Use social platforms, live videos and much more to stay connected.  
  • Show support to your community: in times of need, many people and communities need support, and being there when needed the most is the best thing you can do. Today’s consumers want brands to give back to their community, and that has a significant impact on how they perceive your brand. According to a survey conducted by EY, 62% of consumers say they will be more likely to purchase from companies that try to do good for the society when the pandemic is over. 
  • Try to plan for changes in demand and consumer behavior: Impacts of this pandemic were felt unevenly across different industries, with some like hotels and entertainment taking huge hits. The post-pandemic world will present new challenges, and it is critical to anticipate how people will react. The EY research on changing consumer behavior reflects that people will likely spend more on vacations & leisurewhile demand for household products and sporting equipment are likely to shrink. 

SMB owners are resilient and have overcome many obstacles growing their business over the years. Taking the right steps now to survive the pandemic might seem difficult at times, but with the right information, you are already have a head start. Any comments/questions? Message us! 

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