Alignable: Road to Recovery Report (January 2021)

DATA INSIGHTS | COVID IMPACT/MONTHLY REPORT |

15-Second Summary

• 80% Of SMBs Seek Financial Relief 
• Timely Vaccine Distribution Seen As More Important Than PPP 
• Recovery Not Anticipated Until After May 2021 by Most
• Intense Cash Crunch For 34% Of SMBs

Table of Contents:

• Coronavirus Impact Level
• Recovery Impact: PPP Relief vs. COVID Vaccine
• Reopening Status & Business Closures
• Recovery Concerns
• Customer Demand & Revenue Levels
• Hiring & Anticipated Employee Growth
• Alignable Research Center & Poll Demographics

Introduction

Alignable has collected over 575,000 business owner responses since March 2020, mapping the Coronavirus Impact and Recovery of the Small Businesses Economy across the United States and Canada. Unless otherwise noted, polls in this report were conducted among 10,325 business owners from 1/9/21 to 1/12/21.

This report was written during the second week of January and features insights on business sentiment as the latest round of PPP relief funding is finally becoming available, political unrest is causing further injury to the small business economy, and the vaccine distribution process across the U.S. seems a complete mess.

On that somber note, let’s examine the latest reports of COVID’s impact on small businesses…

CORONAVIRUS IMPACT LEVEL

• 66% Of SMBs Still Experiencing Negative Impact
• “Significant Impact” Felt By 46%
• Businesses Hibernate Until Recovery is Possible
• PPP Round 3 Mitigates Some Financial Concerns
• Vaccine Distribution Key to Recovery

Overall, small businesses experiencing a negative impact from COVID-19 declined slightly by 2% to 66%, with the percentage of business owners experiencing “significant impact” decreasing 4% to 46%. Businesses reporting positive impact was flat at 15% of respondents.

Looking at the impact over time, this month we noticed a decline in the percentage of businesses stating the impact was significant and a slight lift in the businesses reporting they felt the impact was on the decline.  While we didn’t see improvements in the customer levels or revenues, the improved outlook could be attributed to the passing of the third round of CARES Act Stimulus coupled with multiple approvals of COVID vaccines.   

Here are a few quotes from our polltakers that illustrate the range of impact small business owners are experiencing now. Some could effectively pivot and are faring quite well. However, many others desperately need more funds for a short-term fix, and a change in consumer mindsets, which likely will require widespread vaccine distribution ASAP.

“I run a sewing school. 2020 started really well. Then the shutdown was devastating. But selling masks kept my business alive. Once we reopened, things got a little better. I had to change the way I ran my business by doing virtual classes. That was a huge help. Now in 2021, I’m doing well, better than I expected. My numbers are not like they were, but I can see the business growing in the future.”

“2021 marks my 28th year in the tradeshow and special events industry. March 2020 was the last time we participated in a show, due to the national shutdown of large gatherings. I would like to urge state and federal legislators to offer specific protocols and guidelines for show management groups to follow, so our industry can begin our recovery. We are all at a standstill with no end in sight and very limited means to generate revenue. The PPP and EIDL funding has been helpful, but not enough nor sustainable for the long term.”

“I had already begun to close my video production business at the beginning of 2020 and moved into starting my RV mentoring and RV inspection business (a side gig). Well, now business is booming. And I got a full-time IT job in May 2020 with a WFA (work from anywhere) kind of place. It’s a remote IT job, so I can go RVing/do inspections on the road, and still do my FT gig. Life is good in my world, as people are buying RVs like nuts.”

“It isn't so much impacting the business as much anymore, it’s more that we are working out of a hole we were put in because of the pandemic. The moving industry received very little by way of stimulus or assistance. I have never been on unemployment or any other assistance program, but I can't help but think we wouldn't be in this position if the leaders of this county, state and country were a little more attentive to small business.”

“The future remains uncertain, but I will continue to practice psychotherapy and be available to see clients. There’s been a significant increase in the demand for help. People are struggling. I’m finding that people who did not have a significant history of anxiety and depression do now.”

Importance of CARES Act Round 3

With over 80% of businesses indicating access to financial relief is important to help them stay in business through June, it will be interesting to see how long the available relief funds in this latest round hold out. 

Fortunately, the government has carved out funding for specifically hard-hit industries and communities across the U.S.  However, at this point in time, the distribution process is still at a standstill. 

A summary of the various programs provided under the CARES Act Round 3, and specific actions business owners can take in preparation of relief availability can be found in our Coronavirus Resource Center. 

RECOVERY IMPACT: PPP RELIEF VS. COVID VACCINE

• PPP Relief: A Much Needed Band-Aid
• But Substantial Recovery Can’t Start Until The Vaccine Gets Out
• New Approach To Distribution Crisis Needed

Importance of Vaccine Distribution

The only way to get to the next stage in economic recovery is for consumers to feel safe returning to businesses and no amount of money from Congress will make that happen.  It can only happen when the COVID vaccine is readily available to all citizens.

So, it’s not a shock to see that 84% of small business owners listed vaccine distribution as important, if not critical (34%), to helping them stay in business through June. 

You may note, this is actually higher than those emphasizing the importance of new relief funding. 

In fact, when we asked business owners which would have a greater impact on their business, as well as the recovery of their local business economy, the majority of businesses selected rapid distribution of the vaccine ahead of PPP relief funding.

Many of the polltakers highlighted the importance of receiving the vaccines as quickly as possible. Here are just a few quotes reflecting their sense of urgency:

“If the vaccines are not quickly distributed, and the recovery doesn't start until June or July, many businesses WILL fail permanently. Mine included.”

“I can't reopen until I'm sure that my office won't be a vector for the virus. Until we're all vaccinated, it's not safe for me or my clients.”

“My business involves renting office space to therapists. Until everyone is vaccinated, my therapist tenants will not be able to return to their offices and see patients in person. This has been the case since March 2020.”

“I'm not comfortable doing open houses or going to the office. There have been four COVID cases in the office. We need vaccines ASAP.”

“Very difficult to practice dentistry in this COVID environment, it makes everything highly stressful. We need vaccines now.”

Humor me with a slight digression….

This situation reminds me of a story told to me many years ago.  The story was about a teacher who asked her students to figure out the fastest way to change a tire, and then report back on what they determined.

The students broke into groups, analyzed the situation, and came back to the teacher with a definitive “10 minutes” as the fastest this task could humanly be accomplished.  To which the teacher asked them why then, at the Indy 500, can they do it in less than 10 seconds? 

With the vaccine on hand -- and a nation of experts in logistics and distribution – surely, we can do better than aiming for the May/June timeframe for vaccine distribution to all citizens.

We just need to assemble the right people who actually know how to accomplish such a task. 

We need to recruit more people with the drive of Indy 500 pit crew members and rely less on people whose idea of ingenuity is driving on the rims. 

The sooner we can distribute the vaccines across the U.S. and Canada, the more lives we can save – and the faster our small businesses can expedite the coast-to-coast recovery process.

Thanks for your indulgence.

REOPENING STATUS & BUSINESS CLOSURES

• The New Normal Starts Sometime After May 2021
• Many Businesses Will Hibernate To Survive Until Then
• 34% Have One Month Or Less Of Cash-On-Hand

Economic Recovery won’t start in earnest until we as a country get the COVID outbreak under control.  Where other parts of the world have found ways to minimize the spread, our only hope at this point seems to be rapid deployment of approved vaccines. Here's the current case levels from across the globe from the WHO: 

We surveyed business owners asking when they believe their businesses will be reopen -- with the same level of products and services they offered prior to COVID. And 45% of our respondents predicted sometime after May 2021.  

We also noticed the continuation of a disturbing trend first identified in October, where businesses started shifting from fully to partially reopened, and most recently, towards being closed until a future date. Personally, I’ve noticed an uptick in Boston-area restaurants going into hibernation until the point in time when they can safely reopen. 

Compounding this issue, small business owners are also suffering from a profound cash crunch -- 34% of 7,133 businesses polled have only one month or less of cash reserves available. 

With an increase in businesses temporarily closing or “hibernating,” the ability for companies to stay afloat in this atmosphere remains a challenge. As small business owners are waiting to get access to the new round of PPP, many hang by a thread.

“Our guests need months to plan events, especially events that make us enough income to make a difference. It’s been so long since we’ve had a big event, our reserves are nearly depleted. We need the PPP funds now.”

“My money is running low. My inventory is higher than ever. And my credit is impacted, too.”

“Many customers are delaying their purchases, which affects my cash flow…a lot!”

“My finances are depleted.”

GREATEST RECOVERY CONCERNS

• Largest Concern Remains Government-Enforced Closures
• PPP Round 3 Approval Seems To Have Lessened Cash Concerns
• Largest Increase: Customers Being Afraid To Return

Once again, fear of government-enforced business reclosures due to elevated COVID case levels is small business owners’ greatest concern.   

With the case levels continuing to rise across North America, it’s clear business owners are anticipating further government restrictions along with a slow rollout of vaccines. As you might expect, in December, we also saw a significant uptick in concern over customers being afraid to return. 

Polls over the past few months have shown that increasing numbers of consumers are afraid of shopping on Main St. Unfortunately, they’re opting to buy their goods online from major retailers, diverting that money away from struggling local retailers – and their own communities.

Here’s what small business owners said about their current state of affairs -- their latest concerns, hopes, challenges, and even a few triumphs against all odds.

“I’m a wedding and portrait photographer, with a brick-and-mortar studio in Florida. The wedding industry crashed and burned at the first lockdown, but we rode it out. We’ve now experienced the worst December in our long history. Only ‘Elopement- style’ weddings are popular, and our Family Portrait Sessions over this past holiday season were dismal, at best. Chatter of another possible lockdown has caused many to cancel their scheduled sessions. Our business model has allowed us to survive, thus far, but cannot go much longer without financial aid, or a wide-scale change of mindsets.

“We are undergoing a downtown revitalization in Denison, TX. We recently facilitated the sale of the Historic Katy Depot, at the East end of Main Street and we are having success leasing space, including bringing a Community Dinner Theater to a previously vacant restaurant, leasing office space to the City, assisting in fundraising for the Red River Railroad Museum. Activity breeds activity, so the more we do in our central business district, the better our chances will be to help all businesses.”

“North Carolina has been booming with people from northern cities migrating to an area where at least they can get out and get fresh air. We real estate agents have been busy enough that our inventory is now extremely low, and listings are not on the market that long. A lot of the agents have done virtual tours and wrote contracts with the buyers making offers from the virtual tours, so they don't lose out on the opportunity to get a home here. The demand has also driven our pricing up.”

“We are a golf course and have doubled down on Golf! We have changed our winter mode from large events to indoor golf. We have increased the golf memberships along with a focus on creating relationships with our customers instead of being transactional. We provide a safe place to play indoor golf this winter with an easy menu and keep the number of customers low, so they all feel safe! We are excited to have the snow melt and continue our success with a safe haven to get away from the daily grind.”

“We have closed the store, as people are afraid to come in and we just can’t make ends meet.”

CUSTOMER DEMAND

• Stagnant Customer Demand
• Significant Drop In Customer Traffic In Q4
• Little To No Improvement Anticipated In January

As highlighted above, one of the top three concerns is customers being afraid to return to local businesses due to COVID.  Q4 is often regarded as the banner time of year for locally owned businesses, but as anticipated by these business owners back in September, it turned out to be a disaster for many.   

The percentage of businesses reporting that they had less than 50% of their pre-COVID customers return remained unchanged at 46%.

And as these business owners begin 2021, they’re not anticipating much improvement, with the exception of cautious optimism for businesses with less than 25% of their pre-COVID customers. Otherwise, expectations are relatively flat across the board. 

Seems like many small business owners are expressing a bit of a wait-and-see attitude with the upcoming inauguration, PPP relief scheduled to launch, and much of Washington in a state of disarray. 

Our polltakers had a lot to say about customer numbers declining and hurdles they’ve encountered while trying to bring them back.

“I’m a party entertainer at small and large events. I lost all of my corporate events and most of my private parties. I have a few customers, but most aren’t entertaining, even in their homes. I could do more with Zoom, but it’s just not the same.”

“Really challenging times for everyone. My restaurant did well previously with the first wave of the pandemic. With this second wave, and infections rising, it is becoming more and more difficult to stay positive, given seating limitations. People are afraid to eat a nice dinner in a nice place.”

“Money is short and one-on-one teaching is very difficult.”

“My customers are out of work and I don’t have as much inventory to sell.”

“Online technology is still a barrier to bringing in more customers.”

REVENUE LEVELS

• 72% Of Businesses Experienced A YOY Q4 Decline
• 47% Report Revenues Below 50% Of Pre-COVID Levels
• 27% Book 25% Or Less Of Their Revenue Compared To 2019

There’s clearly a close correlation between customer levels and revenue generation, and we see that play out in the responses to revenue generation both in December and across the 4th quarter as a whole.  Over 72% of businesses reported experiencing revenues in Q4 lower than 2019 with 47% collecting 50% or less of what they earned just a year prior. 

Each month, we also compare revenues collected to customers returned to get a feeling for the spending levels of customers who have returned. 

This chart continues to indicate spending per customer trails pre-COVID levels. 

We first noticed a jump in the level of businesses reporting less than 25% of revenue in November. This trend continued into December and based on the customer expectations seems to indicate there will be little to no improvement seen in January. 

As you would expect, there’s no shortage of small business owners who are quite verbal about their disappointing revenue losses from 2020.  However, some managed to turn “going digital” into a substantial money-making venture. Here’s a look at what a few members told us, in their own words.

“Customers can’t continue to afford to buy products due to massive job losses. That has me worried.”

“Most of our sales are to restaurants, so much of our business depends on their reopening! We are concerned that it will take months before they reopen, and that some may never reopen. To survive in the interim, we may be required to reinvest in a different marketing strategy to attract more ‘private’ clients.”

“We serve the performing arts community who have been very hard hit. Our projects are capital projects, so many continued out of momentum, and the most optimistic of clients are planning for their post-COVID future.”

“Because we organize cultural exchange projects with South Africa, as well as youth arts programs here in the U.S. and in South Africa, we have not been able to function for all of 2020. Trying to ride out the storm is very difficult during these uncertain times.”

“Still waiting on people to travel, as I’m a pet sitter.”

“Clients’ budgets are lower or nonexistent.”

“I operate a sole proprietorship business. I provide various music/entertainment services such as ‘Live’ Performances, ‘Live’ Audio for events, and Music Lessons. However, I am pretty much a ‘one-man operation’ without a store front. Luckily, I don't have to pay employees or rent store space or pay off business loans. So, my business is basically on hold until my audience is allowed to assemble again. I pray we can get back to ‘normal’ soon.”

“Sales are off on towing by at least 40%. And to make matters worse, I got COVID and have been off work since Thanksgiving. I am in recovery now and hopefully will be back to work by month’s end.”

“I’m a touring musician. No chance of that being viable until the pandemic is over, if venues, festivals, and house concerts survive. I’m hoping for 2022, perhaps.”

“Customers are more frugal with their funds due to the uncertainty of the COVID virus, creating a drop in revenue for us.”

“Business is brisk, the only downside is getting inventory.”

“We’re a print shop that has been in business for 60 years. We've seen the good and bad. Last year was bad, but not all bad. Some of our customers were also considered essential and still working as we did. Just recently, we've seen a resurgence from our customers, and we are grateful! Keep smiling, we'll all get back to work soon.”

“Fortunately, we are blessed to be a mortgage company that is an essential business. With the refinance boom, we have been busy.”

HIRING & ANTICIPATED EMPLOYEE GROWTH

• 80% Of Pre-COVID Employees On Payroll
• Slow Improvements Anticipated
• 10% Increase Estimated By Beginning Of Q2

Employees on payroll remained at roughly 80% of Pre-COVID levels. Contrary to last month’s report where further declines were anticipated, business owners now believe there will be a continued slow climb towards full re-employment. 

Based on their anticipated return to full levels of service sometime after May, it seems likely 2021 will be a slow climb back to some level of normalcy, provided we can get the COVID case levels under control.     

While many small business owners are not hiring now, and trying to keep the staff they have occupied, others are expanding different aspects of their business. Those owners are hiring to support that expansion with varying results. Here are a few stories reflecting these trends:

“I’ve never made so much money, business has gone up 321%. Time to get more employees.”

“I just want employees that want to pull for the business. We’re all in this together, but they don’t always think that way.”

“I’m worried about hiring enough skilled workers to satisfy client demand. Finding just the right people is tough.’

“Our customers have been great. Due to our mall location, we have seen a dramatic decrease in foot traffic. With that said, the in-store customers are spending more per order and our online and business-to-business sales have increased considerably, as well. We made a lot of changes and took some big risks to stay afloat, but they have paid off. We received 2 small grants and we put those to good use. Adding employees, replacing our inventory that had reached its shelf life while we were closed for 4 months, then increasing our marketing and working our website. We also offered free local delivery through our website since our location didn't work well for a curbside pick-up option. We have been very fortunate and have had to make some ‘Go Big Or Go Home’ kind of decisions. We are grateful that those risks worked for us.”

So, we’re ending this report on a cautiously hopeful note, knowing that much more needs to be accomplished – and quickly – before the majority of small businesses will feel like they are fully back in the game.

But expediting vaccine distribution would be a major step in the right direction.

Thanks for reading. 

To see more 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 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 latest polls, please contact Chuck Casto at chuck@alignable.com.