Alignable: Road to Recovery Report (August 2020)
DATA INSIGHTS | PRESS RELEASE |
Alignable’s State Of Small Business Report (August 2020)
The Road to Recovery
By Eric Groves – Alignable, Inc.
In This Report
- Current Impact Levels
- Reopening Status & Business Closures
- Recovery Concerns
- Customer Demand & Revenue Levels
- Hiring & Anticipated Employee Growth
- My Money Stays Local Movement
- Alignable Research Center & Poll Demographics
Overview
Alignable has collected over 500,000 business owner responses, since mid-March, mapping the weekly spread of the Coronavirus Impact on Small Businesses Owners across the United States and Canada. Unless otherwise noted, polls in this report were conducted during the week of July 27, 2020.
This month’s report was written during the first week of August. At present, the big unknown is how the resurgence in cases will impact small business and local recovery. To understand the impact reopening speed plays, we adopted grouping criteria used by the Washington Post, where state business restrictions were classified as: None, Minimal, Moderate or Major. Of the 7,000 business owners who responded to our late-July poll: 50% were in the None/Minimal restrictions states, and 50% in the Moderate/Major restrictions buckets. We use these classifications to call out specific differences, where appropriate.
JULY CORONAVIRUS IMPACT LEVEL
- 74% Experiencing Negative Impact
- Significant Negative Impact Drops Below 50%
- Coronavirus Lift Experienced by 12%
- States with Moderate/Major Restrictions see higher levels of improvement
- Canadian impact levels are slightly lower than the US
The Overall Business Impact declined in July to 74% with 1% improvements in both the number of businesses starting to feel the impact and those who believe the impact has started to decline. We also started to collect information from business owners who’ve experienced an increase in their businesses due to the outbreak. Approximately 12% of respondents fell into this bucket.
For the first time since April, we saw the number of businesses reporting significant negative effects fall below 50%.
"I am a massage therapist. I cannot work from 6 feet away, so I have to get up close and personal with my clients. People are afraid. If government shuts me down again then I will have an even more difficult time returning to work. There are no good guidelines for what I should be doing to be safe, although most of the practices that I have seen, were already did do prior to the outbreak."
"I'm paying rent on an empty office, while we do telecounseling from home. At some point, we'll have to decide whether to keep the office, or switch completely to telecounseling."
Here’s how the data looks when comparing the level of impact based on differing government restrictions.
States with higher levels of restrictions saw slightly higher overall impact: however, the allocation of the impact was more favorable towards recovery.
States with the lowest levels of business restrictions saw higher percentages of businesses that are starting to feel negative effects from COVID-19. These owners also report fewer declines in impact.
When comparing US and Canadian businesses, across the board Canadian businesses are currently showing better signs of recovery with only 40% in Canada vs. 49% in the US reporting significant financial impact.
REOPENING STATUS & BUSINESS CLOSURES
- Closed business rate decreases 2% in July to 14%
- Majority of closed businesses (92%) still intend to reopen
- Less restrictive states see 7% more fully reopened businesses
We continued to see further improvement in the number of fully reopened businesses in July. The percentage of businesses fully reopened increased 6% to 56%. The number of permanently closed businesses remained constant, while 92% of closed businesses reported that they plan to reopen.
Not surprisingly, less restrictive states saw a higher percentage (59%) of businesses return to fully opened status than states with higher restriction levels (52%). The delta was split roughly in half between reopened businesses operating at reduced levels and those still temporarily closed.
The outlook for a return to a "new normal" was similar across the board with the vast majority of business owners looking beyond October to fully reopen, hopefully expediting their recovery.
These member quotes offer added perspective:
"It will take months for events to be reorganized, scheduled and actually happen. It will probably be next spring at the soonest."
"Our business is a straight up bar, cocktail lounge. I doubt we'll be able to open until after the new year, or until everyone is vaccinated. We are selling a few manufactured, sealed products, but those products sell only because our customer base wants to help us."
At the state level, business owners in the more regulated states were more satisfied with the approach taken by government with a 51% approval rate vs. just 46% in the less restrictive states.
Canadian businesses followed similar trends to the overall US averages with 55% reporting that they're fully reopened, 30% currently in a partially reopened state, and 1% that have permanently closed.
GREATEST RECOVERY CONCERNS
- Government reclosure becomes No. 1 concern
- Concerns over financial resources & customer fear remain high
- Highest restriction states fear reclosure the most
- Similar fears expressed by Canadian business owners, but to a lesser extent
In June, we saw a significant increase in concerns related to reclosures due to rising levels of Coronavirus cases. This trend continued in July, with 25% the 5,738 business owners polled listing it as their top concern.
Worries over financial resources running out (23%) and Customers Being Afraid to Return (21%) rounded out the Top 3 concerns.
"My work is dependent on clients who were near ruined by the virus, so it will take at least a year or more to come back. I may need to reinvent my business."
Businesses in states with the most restrictive reopening policies saw slightly higher (2%) concern over government reclosures, while less restrictive states were more concerned with financial resources running out.
While the Top 3 concerns of US business owners are shared by Canadian business owners, the extent of their concern is lower in most cases. However, one area where Canadian business owners showed greater concern was in the cost of supplies: their level of worry was almost twice as high as it was for US business owners.
CUSTOMER DEMAND
- Continued improvement in customers returning
- 32% of open businesses report return to pre-COVID levels
- No material difference between restriction levels
- Canadian businesses slightly ahead of US in recovery
In this chart, we are looking for the 3 column sets on the left with downward trends and the 2 on the right growing in comparison.
For the second month in a row, we’ve seen steady improvement as more customers return to small businesses. However, we still have a long way to go with 36% of reopened businesses operating with 50% or less of their Pre-COVID customer levels, and 15% yet to reopen. But it’s encouraging to see the 8-point increase from 24% to 32% of businesses operating at or above where they were in January 2020.
Despite some of those encouraging statistics, many small business owners are still trying to cope with several COVID-related troubles. Here's what just a few of them had to say:
"As a service provider, many of my potential clients have lost their jobs or there are so many people who feel that they have no options to address their concerns. I am trying to reach out to the community to reassure families that I can still help them, but this is a difficult time to market my services."
"Customers are reducing their spending due to their revenues being significantly lower than what they had before the crisis began."
"I’m a musician, so as far as performing in concerts, I think that social distancing requirements might make it very difficult to financially make concerts worth it. Plus, many venues are closing, and house concert hosts are afraid of having people in their home. This is how it is now and probably will be until at least Spring 2021 at this rate. But hopefully concerts can resume at some point in the future."
As the more restrictive states work through their phased reopening strategy, it’s encouraging to see that there is little to no difference in the level of customers returning to businesses based on state restriction levels.
Canadian small business recovery seems to be on par or slightly ahead of what we're seeing in the US.
We also asked all small business owners what they anticipate over the next 30 days. You can really notice the impact on the overall small business economy as owners of the 14% of businesses currently closed are added to the mix.
When comparing the full group month over month, one can see how the businesses that are open and able to continue rebounding are optimistic about further recovery, while those at the far left who are struggling to reopen and rebuild their businesses are not anticipating much change in their predicament one month later.
When it comes to business in states with high levels of restrictions there seems to be little to no difference in how they are thinking about recovery in comparison to businesses in less restrictive states.
REVENUE LEVELS
- Revenue growth lags customer growth
- 4% more businesses are returning to pre-COVID levels
- Canadian businesses on par with US businesses revenue-wise
The most important component of economic recovery is returning to pre-COVID levels of revenue generation. This will require both a return of customers along with the purchasing behavior they had prior to the crisis.
In the chart below, you can see how revenue growth is lagging behind customer growth. With our new dependency on major online providers delivering products to our front doors, it’s going to take a concerted long-term effort to retrain consumers to shift their purchasing back to local providers.
See the section below on the #MyMoneyStaysLocal Movement for more details.
Our members filled us in on the revenue challenges they're still experiencing:
"Construction projects seem to be on hold. People are holding on to their money to outlast the virus."
"I've been denied for the EIDL loan, because my credit score is too low. I’m using personal credit cards to stay open. I don’t know what the SBA expects. We are sinking everyday. I have zero customers, because I am an event business."
"Social distancing for safety results in a decreased number of clients per hour -- this will have a long-term economic impact on my business and many others."
Overall, revenue improvements in July were mixed with 26% of businesses reporting a return to pre-COVID levels (a 4% increase), and 47% of the business owners reporting operating revenues at or below 50% of where they were prior to the crisis.
Businesses in less restrictive states saw slightly (1 to 2%) higher revenues than businesses in more restrictive states.
Businesses in Canada saw similar revenue trends as those in the US -- 46% of Canadian businesses are currently operating at 50% or less in terms of their pre-COVID revenue levels. But 27% have found their way back to the same revenues they earned prior to the crisis.
HIRING & ANTICIPATED EMPLOYEE GROWTH
- Employee growth stalls in July
- August outlook more favorable
- Optimism continues for a full recovery by January 2021
In June, we saw a significant lift in employees returning to payrolls along with an anticipated slowdown in July.
The projected slowdown in July came to fruition, but now business owners are anticipating a return to further growth in August.
Businesses continue to remain optimistic about a full recovery by January 2021.
MY MONEY STAYS LOCAL
We encourage you to join the movement to help local businesses and our local economies recover more quickly
As mentioned earlier, economic recovery can only happen with a massive change in human behavior.
The Coronavirus Outbreak caused us all to shift into Survival Mode. As local businesses were forced to close, we shifted the vast majority of our purchasing power to online businesses who delivered products directly to our door.
While that was great for companies like Amazon, the impact of this change in our behavior was devastating to local business owners.
That's why we have just launched the #MyMoneyStaysLocal movement -- to help reverse this shopping behavior. We want to send more consumers back to Main Street to save local businesses and their own communities.
I did the math to figure out how much of what I currently spend is with local businesses and found that, for Alignable, that number was 66%, and for myself, it was 44%. So I'm going to be sure to increase those percentages moving ahead.
And I encourage everyone reading this report to do the same and share your numbers with others.
Only by bringing awareness to these levels can we create the movement necessary to ignite the change required for our local economies to recover.
Changing our behavior for a day in November when we are all encouraged to Shop Small on Saturday isn’t going to solve this problem.
We need a long-term shift in consumer behavior within all of our communities.
We believe the first step in moving in this direction is for us all to simply do the math and understand as business owners and consumers how much of what we spend currently stays within our communities and how much goes elsewhere.
You can learn more about the #MyMoneyStaysLocal Movement here and join our effort to benefit your own community.
ABOUT THE ALIGNABLE RESEARCH CENTER
Alignable is the largest online referral network for small businesses with over 5.5 million members across North America.
We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.
For more details about any of these findings, including the methodology behind our polls, please contact Chuck Casto at press@alignable.com.
FOR ADDITIONAL COVID-RELATED POLLS & INSIGHTS FROM ALIGNABLE: