Alignable: Road to Recovery Report (June 2021)

The Inequities of Recovery

Canada: Struggling to Get Vaccine

• Fewer Businesses are Fully Open (50%)
• Top Concern: Government Re-closures
• And Customer Spending Has Yet to Return

US: When Will Consumer Spending Shift?   

• More Businesses Are Open (71%)
• Inventory & Supply Costs are Rising
• Hiring Staff is a Struggle
• And Customer Spending Has Yet to Return

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Table of Contents:

• Coronavirus Financial Impact
• Reopening Status
• Triple Whammy: Inflation, Hiring, Customers  
• Editorial: #OneMainStreet
• Alignable Research Center and Poll Demographics

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Overview

It’s hard to believe we are now in our 14th month of reporting on the COVID Crisis and its impact on the small business economy!  This month’s report, unless otherwise noted, features May 2021 data collected among 3,789 business owners from 5/22/21 to 5/31/21, and historical data from over 630,000 poll responses collected since March 2020, as we’ve mapped the Coronavirus Impact and Recovery of the Small Businesses Economy across the United States and Canada, and tracked the impact of relief programs.

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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CORONAVIRUS FINANCIAL IMPACT LEVEL IMPROVES FOR SOME

• Trendline is Super Encouraging for US/Less So for Canada
• Overall Significant Impact Drops to 30%
• 62% Still Feeling Financial Impact of COVID-19

The significant financial impact of COVID-19 on the small business economy continues into its 15th month with 62% of small businesses still feeling the impact of this crisis on their business. 

Slight diversion: The great news; however, is we (as consumers) have it within our power to fix this problem simply by shifting where we spend our money.  I invite you to check out and join the #OneMainStreet movement by shifting your spending back to businesses owned within your community and encouraging everyone you know to join you.  Check out the link in the editorial section in this report for more information.  

Back to the report…

Here’s how the distribution of impact across the 3,789 small business owners in this most recent survey -- along with the 630,000 responses across past research – plays out:

Focusing on the figures from May below, you can see how over 30% of small business owners are still feeling significant financial burden from COVID. 

After last month’s report, I heard from a number of our Canadian members who felt the data (which includes a mix of US and Canadian businesses) was not accurately portraying the situation they were facing relative to businesses in the US. 

Why the difference?  In a word, vaccines. As of June 7th, Canada had roughly 7.5% of its population fully vaccinated in comparison to 45% in the US. The Canadian government was working to secure greater supply from the US with many communities still in lockdown. While the COVID case levels in the country have declined to very low levels, the risk of a resurgence has business owners concerned about re-closures and as shown in this breakout of the high level data you can see the significant differences in the current levels of financial impact between the two countries: 

One question we’re all asking ourselves is when will we see a significant lessening in the financial impact being felt by small business owners.  From the chart below, one can see most business owners anticipate a consistent yet slow return to levels of business last seen prior to the COVID outbreak. With 50% of businesses crossing back to pre-COVID levels by early fall, and 35% not anticipating arriving there until 2022 or beyond. 

While we try to convey COVID’s impact in the numbers, the true impact can be found in their words. Thousands of business owners have taken the time to share with us their stories over the past 14 months. Here are a few of them from this past month we thought would give you an even better perspective on what’s shaping up to be a rather uneven recovery, with some excelling, and others feeling like nothing’s improved in 14 months.

“Honestly, being a smaller business and being in Illinois, which legalized marijuana, we never closed. We were considered to be an essential business, because people have to be able to medicate and need something to smoke out of. My business actually flourished throughout the pandemic and I think it will continue to.”

“My business has been better than ever so far.”

“I’m looking forward to recovery, when Nova Scotia comes off of lockdown.”

“COVID affected my business at first, but then I switched to online meetings and I’m doing well. I plan on sticking with online meetings as those save time. And I no longer have the hassle of driving everywhere.”

“Sadly, I’ve had ZERO business.”

“We owe over $50,000 to our landlord on our already high rent, tuition credit, and PPP loans. Our enrollment’s down 60%, our income is down to less than 70%. We'll be lucky if we can last another year.”

“Live music is still prohibited in my state. Since I record live music, I still don’t know when I’ll be up and running again.”

“Canadian restrictions are still in place and my business isn’t close to recovering.”

“COVID restrictions are just half the battle. With the ever-changing restrictions on travel with the CDC, I do not see a full recovery until they can settle on one set of guidelines -- not guidelines for travel, hotels, restaurants all being different, yet restrictive.”

“My customers, usually booking in advance for services, seem to be wary still. Lots of inquiries and quotes sent, but I’m not getting many willing to retain. Too much uncertainty. Is the easing of restrictions going to backfire?”

“I need events to open up. Until we are fully open to ‘normal,’ I will have reservations about my recovery. But I’m eager to get going.”

“My business is gone. I’m hanging on through social security payments.”

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REOPENING STATUS & BUSINESS CLOSURES

• Rapidly Approaching 70% Fully Open
• Less Than 10% Remain Fully Closed

With vaccine levels rising and summer weather upon us, it’s truly invigorating to walk down Main Streets and see so many people walking around and getting reacquainted with their favorite local restaurants, salons, and retail businesses.  I must admit when I see a musician singing or playing an instrument along the way, it causes me to stop and take greater notice then I did in the past. I now have a better perspective for how artists of all kinds help us create a greater sense of community, and I encourage others to stop, listen, look, thank and support these folks, as well! 

Here’s the data from our question about reopenings. As you can see, we now have greater than 90% open and almost 70% fully reopen and operating at full capacity (waiting for us all to return). 

Here are some of their stories: 

“My business is already back in full swing.”

“My business actually did better during the pandemic. I may lose business as COVID restrictions relax!”

“The center of our town is open, and some stores are getting by with the small number of customers they have. But everyone needs more customers – customers who have money to spend.”

“I didn’t need a recovery. My investors don’t need a recovery. We’ve all been doing just fine. But some of my clients need a recovery, now that they’re open again.  And they’re worried about the effects of inflation on their sales and recovery.”

“COVID won’t be the problem going forward, the U.S. government’s tax and spend mentality will be the biggest hurdle for the new inflation/recovery.”

“As long as the government keeps handing out stimulus to people, their motivation to go back to work is zero. All around I see every business looking for employees and even offering bonuses of $200-$500 for hires and as much for employees who refer them. Small businesses all over my community only have 25% of the staffing they need – creating long waiting times for customers. The aid packages are more damaging to the economy than COVID ever was.”

“I am concerned that too few people are getting vaccinated and lifting mask mandates could cause new outbreaks.”

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TRIPLE WHAMMY HOLDING BACK THE RECOVERY

• Costs Are Going Up
• Employees Are Slow To Return
• Many Are Still Waiting For More Customers & Revenue

The period after every natural disaster represents a turning point for the communities impacted. How they rally as a community determines how fast and how far they recover. This situation is no different.

There are the givens and there are things we can and should affect. 

The Givens: It should come as no surprise, after more than a full year of a pandemic ravaging our economy, the supply chain is a mess, costs are rising, and supplies are tight. The laws of supply and demand will ultimately balance this equation, but it will take some time.  And, as you can see below, inflation is a real and growing concern. 

This first chart is from our series on the greatest concerns about the recovery facing you and your business. For the past year, the biggest concern bounced around between having the financial resources to get through the pandemic, governments reclosing businesses, and customers being afraid to return. Now, and for the past couple of months, concerns over supply costs have taken the top spot.

Who’s concerned about inflation and to what extent? More than 2 out of 3 small business owners (67%) have expressed concerns about inflation. And 35% say they’re “highly concerned” about how it will impact their ability to recover. That’s a significant statistic that we’ll need to watch closely in the coming weeks and months.

Who’s feeling the pinch? 55% of business owners are seeing costs increase by 11% or higher than they were prior to COVID.

And 25% are also finding it significantly more difficult to even get access to the supplies and inventory they need to generate business and revenue.

Several polltakers summed up their views on inflationary trends and how they’re affecting their businesses.

“Inflation is a great unknown. At the rate it is escalating, it could be the straw that breaks the back of our economy. But for now, we are coming back strong.”

“Inflation could halt construction all together. And that would affect many industries.”

“I am very thankful for the recovery, but the supply chain is distorted, so it will be a lot of work to restore my business.”

“The recovery is good, but inflation stinks. It’s already hurting us.”

“Higher inflation should actually increase my business, which helps other businesses figure out ways to counter inflation.”

“Inflation is a lagging indicator. The real issue will be tax increases.”

“I’m only worried about people not being able to afford my services, given inflation.”

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Employees Are Slow To Return

Many businesses need to scale up their employee ranks in order to be able to serve customers and make the revenue they need to recover – and in some cases, to even stay afloat.

Overall, 55% of business owners are finding it more difficult now than during pre-COVID times to find new employees or convince past employees to return – and that stat rose 5% over the past month. And, of this group, 34% are finding it “significantly more difficult” to source workers. 

Due to the shortage of available labor, the costs associated with each employee that businesses can find are increasing, too. Almost one-quarter of all small businesses (24%) report increases in compensation levels in excess of 10% from pre-COVID levels.  As you can imagine, that, too, is slowing the recovery for some small businesses.

These polltakers’ quotes convey the headaches many small business owners are having with ongoing labor challenges.

“The hardest thing is finding employees to work for you, because the government’s paying them. It’s like the government is my biggest competitor.”

“Hiring is a major issue right now. We have very few applicants and most are not a good fit for the positions I have posted.”

“I do not have the volume of business to need more employees at this time, but there is definitely a shortage in my industry. And I lost all of my subcontractors during COVID, so I feel like I am starting my business all over again.”

“I can’t really afford to hire right now, but I did just hire someone who’s fantastic, in case I have a surge of business. I want to have her on hand to help me make the most of it.”

“I’m suffering from a lack of employees due to free money giveaways. Enough, no more handouts! If people want something, they should get a job and work for it. And showing up to work is not the only reason for a raise.”

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Customers & Revenue

Reiterating this month’s theme: many, if not all, of the challenges outlined above could be overcome by a massive shift in consumer spending back to locally owned businesses. 

We’re not saying people need to stop buying from companies like Amazon, but rather they need to think about each dollar they spend from the context of the impact it makes on what they desire most. 

If they want to live in a thriving community with great local parks, bike paths, school systems, first responders, and the arts, then they need to make a commitment to shift 20%, 30% or even 50% of their spending back to businesses owned by people within their community.

That should not be very challenging, especially in the U.S., now that COVID cases have declined significantly in many areas, and many businesses have reopened.

We can use these few charts as our guide over the coming months.  These highlight the percentage of businesses reporting their customers and revenues returning to pre-COVID levels.

They tend to be mirror images of each other, but as you will see in the third chart, revenue recovery lags behind customer recovery. That’s because, as customers return, they tend to spend less than they did before the crisis. 

Here’s the customer level chart: 

What we’re looking to see is a shift in percentages from the left side (businesses with less than 25% of their customers returning) sliding over to the right. As you can see, the percentage of businesses reporting revenues at 90% or more of pre-COVID levels is roughly 27%. 

We also asked members to share where they think they will be in 30 days.  In this next chart, you can there is a slight degree of optimism with a 3% uptick in businesses anticipating being above the 90% level.  

Here’s the chart comparing customers to revenue as a percentage of pre-COVID levels.  What we’re looking to see is the delta between these two narrow, and ideally for the column sets on the right to grow, and revenue levels to surpass the customer levels on this side of the chart. This will indicate both a return of customers to small businesses along with a level of spending per customer on par or ideally ahead of where it was in early 2020. 

Here’s the chart showing the revenue levels throughout the pandemic.  The trend on the far left is concerning with the percentage of businesses reporting less than 25% of revenues on the rise.  One explanation for this might be businesses reopening and just starting to generate revenues again; however, we really need to see these trends shifting hard and fast to the right. 

As business owners’ costs are rising for both supplies and labor, many will see a reduction in their overall profit margins due to the inability or desire not to raise the prices they’re charging customers.  Whereas 55% of businesses saw more than a 10% increase in the cost of supplies, less than 20% felt comfortable increasing prices to compensate for the higher costs. 

This adds more risks to the recovery efforts. As we reported in our special edition on inflation earlier this month, 35% of businesses are at risk of failure in the next 3 months. These businesses indicated the level of revenues expected were less than those needed to stay in business:

For more details on this alarming finding – and what it means for Main Street this summer, please read this detailed report.

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EDITORIAL: #OneMainStreet 

To me, “Main Streets” are much more than roads running through the center of town. They’re the sense of community, often built on the past, creating real-life experiences for today, while also setting the stage for the future. It seems every Main Street I’ve experienced from around the globe has come with unique traditions, local personalities, entertainment, food, businesses, non-profit organizations, and parks and gathering places where locals congregate to support of each other.  I long to live in communities with high Main Street potential and when I travel actively search out destinations which possess it, too. 

The COVID Crisis put some real hurt on Main Streets across the Globe. The hurt happened innocently enough -- we all wanted to stay safe during the crisis, so we shifted where we spend our money from businesses in our communities to major online providers. That’s because they could deliver products to our doorsteps, enabling us to never have to leave our homes.  This was a boom for big brands from Amazon to Walmart, but devastated a critical component of our Main Street equation. 

The great news is we have the power to right the ship and redirect where our hard-earned money is spent.  Think about it this way… when you spend a $100 on Amazon what happens to that money?  It leaves your community.  It doesn’t employ people within your community (other than maybe the Amazon van driver). It doesn’t support local suppliers or provide tax revenue to pay for parks, recreation and first responders. It doesn’t fund school programs, either. It just leaves towns without contributing in any way to your Main Street or your treasured way of life.

OneMainStreet is a global movement encouraging people to support locally owned businesses, organizations, and the communities in which they live and visit.  We hope you’ll join us by sharing pictures of yourself attending community events or supporting local businesses.  Include #OneMainStreet in your posts and challenge others in your network to do the same. 

BTW here is one of my posts with my 87 year old mom out on the town in North Falmouth: 

My personal challenge to the readers of this report (and we have some notables who read this every month).  Use your voice and your significant positions within industry and government to raise awareness for this campaign and lend your support to it. We have never asked anything of you in return for our sharing all this fascinating data over the past 14 months... until now.  Please support this movement and together let's build back our local economies #OneMainStreet at a time starting with your own! 

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, including the methodology behind our polls, please contact Chuck Casto at chuck@alignable.com.