Alignable: Road to Recovery Report (August 2021)

Delta Variant Stymies Recovery Efforts   

• 76% Concerned with Delta Impact
• Anticipated Recovery Dates Shift Out a Full Quarter
• Revenues & Customers Continue to Build
• Inflation & Hiring Challenges Grow

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Table of Contents:

• COVID’s Current Impact on Small Business Recovery  
• Reopening Status
• Customers and Revenue
• Operating and Employee Costs
• Alignable Research Center and Poll Demographics

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Overview: 

This month’s report, unless otherwise noted, features July 2021 data collected among 5,262 business owners from 7/31/21 to 8/10/21, and historical data from over 640,000 poll responses collected since March 2020, as we’ve mapped how the Coronavirus Crisis has impacted the Small Businesses Economy across the United States and Canada.

For more details about any of these findings, including the methodology behind our latest polls, please contact Chuck Casto at chuck@alignable.com.

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IMPACT OF COVID-19 IMPROVEMENT STALLS 

• Delta Already Shifting Anticipated Recovery Out a Quarter
• Significant Negative Coronavirus Financial Impact Increases to 26%
• Resurgence in Businesses Starting to Feel Impact

The surge in Delta variant COVID cases has over 60% of business owners concerned about their ability to recover, and they see it as a broad-reaching concern across the entire small business economy, as well. 

We asked over 5,200 business owners about their level of concern and here’s how they responded. First, in terms of the overall small business economy, only 11% of business owners felt the Delta variant was not a concern with 63% indicating that it put the entire small business economy at greater risk.

And on a personal level, 76% revealed some concern over the potential impact of COVID-19's Delta variant on their business recovery. But more than one-third (34%) of the business owners polled said they’re highly concerned.

When we look at the current impact levels this past month in comparison to previous months, we see a significant jump in businesses starting to feel an impact once again. Whereas last month we had roughly 4% starting to feel some impact, this grew to 14% this past month, which was the highest level in over a year.

We saw a higher percentage of businesses stating that COVID had not impacted their business, as well. But the percentage who previously indicated that they felt the impact was over dropped in half this past month, reversing a positive trend from the previous four months. 

The US clearly took a major step backwards this past month. We had noted in previous months that the lack of available vaccines had a detrimental impact on Canada in comparison to the US.  However, given the surge in US Delta variant cases over the past month, once again, it’s clear that the health of the small business economy is dependent upon getting everyone vaccinated. 

Here’s what some of the business owners we polled had to say about the current state of their recovery. Several are feeling the effects of the Delta variant already, while others say their recovery is progressing well.

“At the beginning of the summer, my business running a children’s theater was slowly starting to come back, though I only had 28% of the number of bookings I had before COVID. However, 50% of my bookings cancelled, THIS WEEK, due to several POSITIVE cases of COVID IN YOUNG CHILDREN and schools having to SUDDENLY CLOSE. My business is currently in a ‘wait and see’ mode. I don't foresee that I will be operating again, until the Delta virus is under control.”

“COVID has had a great effect on our travel agency and continues to be challenging -- for both vaccinated and unvaccinated customers. COVID will forever change the travel industry. And the new variant has a lot of travelers concerned again and therefore we’re seeing more cancellations and more restrictions.”

“While it’s good to be back and continuing our law practice, we really do not believe that we will return to business as it was pre-COVID. Major pieces of our business received a devastating set back and we had to move into other areas as a partial offset. COVID will have a long-term effect on our business, but we are still hoping to return to former areas of our business which were obliterated by it. However, this will take a number of years to accomplish.”

“We install marble and granite countertops and we’re doing fine. Even with product delays in other aspects of construction, people are remodeling with new countertops. I do believe we will continue well into the fall -- our peak time -- and we’re already seeing clients planning for future projects. We do wear masks with clients even though we’re vaccinated.”

“We run a sports program and we are having the best business lift ever. Our signups for the fall league are very strong. Good luck to everyone!”

“Ours is considered an essential business (mechanical repair and service on vehicles), so we didn't have to close ever, and actually had some customers get repairs done because they had more time. We also do small engine repairs, lawnmowers, weed eaters, chainsaws, etc., so that business is always busy in the summer, no matter what.”

“Our business installing and repairing driveways is thriving! I think this is partly because people are spending more time at their homes and doing renovations and improvements that they may have otherwise put off. We have minimal contact with our customers and allow them the ability to have zero face to face if they desire that. While we are doing very well, we remain cautious, since we are a seasonal business and you never know what can happen.”

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REOPENING STATUS UPDATE 

• Delta Variant Sparks Fear of Reclosures
• 74% Of Business Now Say They’re Fully Open

We saw a slight 2% shift in the number of fully open businesses flipping over to partially open. 

However, the most disconcerting part of this report came from our greatest concerns question.

In April, concerns over government re-closures had hit an all-time low of 17%, which was encouraging at that point. But, since then, the percentage of businesses concerned over re-closures has been slowly climbing and last month was at 24%. 

This fear shot up significantly in July and now stands at 47% of businesses being most concerned about government re-closures. That’s the highest this concern has registered in the past 15 months!

In the past few reports, we had been focusing on how inflation had become the chief concern. And though worries about inflation are increasing, as you can see below, the recent surge in Delta variant cases has added a new, even more alarming challenge hindering recovery.

Here are some more quotes from our polltakers that reflect this change.

“We offer therapy and tutoring for children with disabilities. The Delta variant shut us down for sanitation. Three employees were quarantined. WE NEED TO BE OPEN!”

“Until COVID is totally over, my Tai Chi class size will be low. Many people still fear catching COVID. And many of my senior students refuse to use online training. The therapy aspect of my job halted in March 2020 and has not restarted yet.”

“Supplies are definitely more expensive and there continue to be shortages. I'm hearing quite a bit of concern about the delta variant, and it’s having an impact on my fitness training business already. I fear that will get worse. If we have to go back to masks indoors, even for the inoculated, I am concerned the fear factor will have a further impact.”

“We've done surprisingly well in the IT sector thanks to the SBA loans, as well as the increasing number of businesses that need remote IT support. However, this Delta wave is more difficult, due to the uncertainty of mask wearing.  We’re seeing more clients becoming argumentative over the mask-wearing issue. They’re ready to fight. I don't see people helping people like I did before. It's more like everyone is out for themselves.”

Customers & Revenue  

Customers

I almost hesitate to call out the slight but continued improvement in customers and revenues returning to small businesses. However, we have seen improvement in the businesses who were operating at 25% or less of pre-COVID levels. 

What we’re really looking for is significant movement from the left to right sides of this chart, so any month where we see the far left going down and right going up we will consider a win. 

Here’s the customer level chart: 

We ask business owners to project out 30 days, and interestingly, across the board, we can see how recent developments are causing them to be slightly more concerned about how the Delta variant will impact customers flowing back into their businesses. 

Revenue

Here’s the chart showing the revenue levels throughout the pandemic, and once again, this past month showed slight improvements, but a significant fall off from the previous month’s gains.

The next few months will be telling as to whether or not business owners are going to be able to continue down the path towards recovery or revert back to previous challenges. 

The next two charts highlight how business owners are internalizing the potential impact of the surge in COVID cases.

The first chart is from last month and shows how business owners were anticipating the slow march back toward full recovery.  Selecting a few data points to compare with this month’s survey results, if you look at when 60% and 75% of business owners anticipated being back at pre-COVID levels, you’ll see how these line up with the end of 2021 and the end of Q1 2022, respectively.  

Now jump to the second chart from the most current survey in July, and you’ll notice how in both cases they’ve shifted out by at least a quarter. 

Inflation Hampers Cash Generation  

We started diving deeper into the inflationary impacts on small business recovery back in January. That’s when we noticed the concern around it start to grow, and we’ve been breaking it down into three key areas in order to report on it and help people understand how these are all impacting the speed and scope of recovery. 

The three rather volatile areas we’re watching closely are:

• The cost of supplies and inventory
• The ability for businesses to pass along increased costs to customers
• The cost and availability of labor

Cost of Supplies & Inventory

When it comes to inventory and supplies, the primary question we look to answer is how do the costs businesses are facing compare to pre-COVID levels. 

This month’s survey is on par with what we saw last month, with over 80% experiencing higher costs and almost 30% seeing cost increases in excess of 25%. 

Passing Costs Along to Customers

The next question is whether or not business owners are finding it possible to pass along the increase in prices to their customers in order to maintain their profit margins and build back financial reserves. 

Unfortunately, for the majority of businesses this is not the case.  While over 80% are experiencing higher costs, we see that only 44% have been able to increase prices.

By looking at the distribution of this chart in comparison to the one above, it’s not hard to deduce that margins are still significantly below the levels these businesses experienced prior to COVID. 

Employee Costs

When it comes to hiring, this month’s survey found 59% of business owners were still having difficulty rehiring or finding new employees, which was a 9% jump over last month’s figures.

In fact, looking more deeply at the industries most affected by the labor shortages, you can see even more alarming statistics: 80% of restaurants now can’t find the help they need to handle their demand. That’s an increase of 6% over last month.

Car dealerships and auto repair shops also report significant struggles to find mechanics and salespeople – 74% say they’re experiencing a shortage, up 11% from last month. Manufacturing shows similar numbers, with 72% of business owners saying they can’t find help, up 10%.

Beauty salon and barber shop owners are in the same boat: 65% report hiring problems, up from 59% last month.

Nearly two out of three construction firms (65%) also say they can’t hire enough workers -- up 9% from last month. And half of all retailers say they’re struggling to find help -- up 3% from July.

Challenges with labor shortages and increased expenses came up over and over again in polltakers’ comments, as well.

“I am most concerned for restaurants, retail, and home building. The cost of supplies has increased. The cost of gasoline continues to rise. Employees are still collecting government checks and won’t go back to work. And the resulting labor shortages are driving up the costs of hiring and keeping employees.”

“We have been very busy. Our challenge is hiring. We need four full-time massage therapists for our very busy practice, Currently, we’re completely booked for August, and almost full for September, and October.”

“The requests for senior homecare have remained constant. Employing new staff is difficult as many were encouraged to stay home and get paid for not working with the COVID unemployment bonuses. We haven’t seen any improvement since.”

“My vineyard is doing great. But we’re looking for a few super employees and preparing for winter with a few more outdoor igloos for personalized tastings.”

Looking ahead, hiring is also an area where the surge in COVID cases could cause even greater challenges in the coming months. That’s because increases in Delta variant cases could further deter employees from returning to the workforce and make it more difficult to hold onto employees, as well.    

In order to understand how these concerns were playing out with small business owners, we added a few questions to this month’s survey on how the Delta variant was impacting the hiring process.  

The first question we asked tried to ascertain whether a business owner would like to be able to inquire about potential employees’ vaccine status prior to hiring them. Here we found over 70% would like to be able to ask.

Then we asked those who thought it would be beneficial to ask about a potential employee’s vaccination status how it might impact their hiring decisions. A strong majority (61%) stated they would be much more likely to hire someone knowing they had been fully vaccinated. 

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To see other polls we’ve conducted since March 2020, please go to the Alignable Research Center.

ABOUT THE ALIGNABLE RESEARCH CENTER

Alignable is the largest online referral network for small businesses with over 6.5 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, please contact Chuck Casto at chuck@alignable.com.