Alignable: Road to Recovery Report (March 2021)
DATA INSIGHTS | COVID IMPACT/MONTHLY REPORT |
Solos: New Hope After Being Shut Out Of PPP?
- Is there TIME for Solos to Get Relief?
- Vaccine Rollout: Will More Rounds of PPP be Needed?
- Who's Getting Forgiven? Search for Clarity
- Negative COVID Impact Increases, As Cash Reserves Decline
Table of Contents:
- Current Financial Impact Levels
- Recovery Impact: Cash Crisis and PPP Availability
- Reopening Status and Business Closures
- Customer Demand and Revenue Levels
- Hiring and Anticipated Employee Growth
- Alignable Research Center and Poll Demographics
Overview
This month marks the one-year anniversary of when we first started collecting impact data from business owners on Alignable. To date, we’ve collected over 600,000 responses, mapped the Coronavirus Impact and Recovery of the Small Businesses Economy across the United States and Canada, and tracked the impact of relief programs.
Unless otherwise noted, polls in this report were conducted among 8,206 business owners from 2/27/21 to 3/2/21. For more details about any of these findings, including the methodology behind our latest polls, please contact Chuck Casto at chuck@alignable.com.
CORONAVIRUS IMPACT LEVEL WORSENS
- 78% Of SMBs Still Experiencing Negative Impact (Up 10%)
- “Significant Impact” Felt By 58% (Up 12%)
- Coronavirus Lift Drops To 8% (Down 7%)
This past month, the number of small businesses experiencing a negative impact from COVID-19 jumped 10%, with the percentage of business owners experiencing “significant impact” jumping 12% to 58%, a level last seen in June 2020.
Businesses reporting a positive impact was cut almost in half dropping from 15% last month to 8% now.
Looking at the data we’ve collected over time, the past month’s significant shift in negative impact becomes even more pronounced.
Here are a few quotes from our polltakers that illustrate the range of impact small business owners are experiencing now. While some small business owners say their businesses are thriving, most say their suffering is on the rise.
“My business is shut down!”
“The Coronavirus has greatly impacted my Massage/Lymphatic Drainage business. It is rather difficult to bring previous customers in to receive services due to the fear of being too close. I get it.”
“As a landscaping company, we’ve had to cut back 70%, because working in close proximity is a necessity. So, we’ve cut back on the number of people on a job to enforce social distancing guidelines.”
“At first, I had a lot of short-term and longer-term projects in response to social distancing and separating workers. Now, nothing is going on. It appears the next round of projects will be around reconfiguring offices.”
“I’m a professional DJ. I haven’t performed any events since March 2020. I had upwards to 25 events postponed and/or canceled due to the restrictions on venue limitations. This created no income.”
“I'm a recruiter. It seems a lot of people want to work remotely. Some of our clients want people in the office. Lots of these people who want to work remotely are parents. Schools have been closed. Therefore, many people can't go to the office.”
“If we would fully open North Carolina, we’d be better off. We don’t need the PPP money. I didn’t take it. Not allowing businesses to open affects my business. It affects everyone.”
“The impact was devastating last year, but we learned to survive. It’s still impacting us, but we think we will survive. We lost our physical location, but the alternative has been positive. Working virtually and from home most of the time has helped us to recover somewhat. When things are better, we are hoping to return to the same neighborhood where we were before.”
“I own a fishing lure company. During the lockdown, people were going fishing and doing things in a single person manner, keeping some of my business going.”
“I'm a medical practitioner and I never closed our office. I was able to fill the gap left by those who did, and now things are very much on an upward trend.”
“As a dog breeder, there has been a tremendous increase of people wanting pups, so my business is great.”
“I’m a bookkeeper who has helped keep three restaurants in business by getting them approved for the PPP twice.”
“The home improvement market is increasing, because more people are staying home. That’s been good for my business.”
RECOVERY IMPACT: CASH CRISIS & PPP
This month, we also saw a dramatic worsening in the overall cash situation facing business owners. Just last month, our survey indicated 32% of business owners had a month or less of cash on hand. This month, it jumped to 41%.
This situation is most dire for businesses who’ve been shut out of relief programs and in industries where human-to-human interaction is required for the business to operate.
We were highly encouraged to see the Biden administration taking actions to get relief to those in greatest need and to speed up the process of getting vaccines delivered quickly. Here’s why:
- Solopreneurs and Independent Contractors account for 81% of small business entities. While the PPP program was and is available to this segment, the formula used in the calculation for how much money was available greatly restricted access for roughly 50% of these individuals (12.8 million according to IRS records) making between $10,000 and $500,000 per year.
- With regard to vaccine distribution, many of the hardest hit sectors of the economy depend heavily on summer revenue generation. The ability to shift vaccine availability for all to Memorial Day from the 4th of July represents a significant opportunity for these businesses to start to recover.
The Biden proposal changes the calculation for solo businesses from a multiple of net profit to a multiple of gross revenue. I went looking for some data from the IRS which would help me understand the challenge. Based on my interpretation of the proposed changes, it seems like this would amount to a real increase in relief funding for this segment of business owners.
That was the good news. Now comes the challenging part – in fact, several obstacles have emerged:
- The PPP has less than a month before it expires
- Banks have to update their internal processes reflecting the new formula (many of whom are talking about having to process these new applications manually, because there simply isn’t enough time to update and test all their platforms)
- Banks will likely close down their portals in mid-March to provide enough time to submit the applications they receive before the end of the month
- There’s confusion over how to handle businesses that already received funding using the old calculation and those that have loans currently being processed
- And extending the program requires Congressional approval and it was not included in the current $1.9 Trillion plan.
How will this all play out? It’s too soon to tell, but we’ll be sure to cover that in next month’s report.
Now let’s talk about vaccine distribution. We asked business owners when a vaccine for the masses would have to be widely available, so that they could start down a path toward real recovery during 2021.
As you can see below, shifting this date from July to the end of May results in roughly 28% more businesses recovering. We need to make this a “Memorial Day Mandate.”
That’s because the cash situation is getting worse. And if we don’t get it done by the end of May, we’re going to need yet another round of PPP funding to bridge the gap.
Cash On Hand
It was very disconcerting to see the percentage of businesses with less than a month of cash reserves jump to 41%. That could easily lead to another round of permanent business closures.
Here’s how the levels look for some of the different sectors or groups fueling the small business economy. Unfortunately, these cash on hand figures are even more discouraging.
Minority-Owned Businesses: While this remains a focus area for the administration, it’s clear minority-owned business continue to struggle at a disproportionate level.
And the cash situation is even more dire for these businesses with 56% having only one month or less of cash on hand.
Women-owned businesses are also at a disadvantage with 51% running with a month or less of cash on hand, which is up 12% from last month.
When looking at the industry data, it’s no surprise that retailers and other consumer-focused businesses are struggling the most. The Beauty sector is suffering more than others with 63% of salons and barber shops reporting they have one month or less of cash reserves.
To provide more perspective on the cash crunch, here are several quotes from small business owners in the middle of this unfortunate mess:
“I am counting the days before I am out of money.”
“I am currently homeless, living at my business, due to debt caused by COVID. I need emergency help ASAP.”
“All of last year, I had no income and had a $15,000 loss, yet was not eligible for the PPP since I had only started my business in January 2020. That was bad, since we, too, had expenses like the older businesses.”
“Zero revenue since March of 2020.”
REOPENING STATUS AND BUSINESS CLOSURES
- “The New Normal” Shifts Out Past June
Economic recovery won’t start in earnest until we get the COVID outbreak under control. It will be interesting to see this data next month as business owners process the shift in outlook based on the President moving the date for ubiquitous vaccine distribution to the end of May from the end of July.
As stated earlier, many of the hardest hit businesses depend on the summer for a disproportionate share of their revenues. Therefore, focusing on a Memorial Day Mandate for vaccinating all adults is critical.
The percentage of fully reopened businesses continues to decline – a disturbing trend first identified in October. Highlighted below, you can see the shift of businesses from a fully-open state to partially open, as well as those temporarily closed. We are now almost back to where we were last May.
Here are some sobering thoughts from polltakers about their struggles to stay open during the pandemic, or to even help their businesses survive – in some way -- during enforced shutdowns.
“I shoot weddings and events. Nothing is happening for photographers who rely on events. No contracts in 2020!”
“This past year made me have to reinvent my business and business model.”
“As a realtor in a new town and unable to get out and socialize and meet people, I have had zero business, so I am living in poverty and only Social Security.”
“Our sales are down 40% in February.”
“People are not going out as much, so they don’t visit my gallery. But, because they don’t get out as much, they have a bit more money to spend on art. They’re home more, so they’re on the computer more ordering on line. Of course, being an art instructor, I've lost my earnings from classes. It's difficult teaching art through Zoom as most students are seniors and aren’t very good with technology. So I’ve had less money from art instruction, but improved revenue from commissions and painting sales.”
“I’m a nurse and this past year has been hell. Then when I got hazard pay and it got taxed to nothing -- very unfair.”
GREATEST RECOVERY CONCERNS
- Top Concern (Yet Again): Financial Reserves Running Out
- Consumer Confidence Will Be Key To Recovery
With the growing cash on hand crisis, it’s not surprising to see concerns over financial resources top the list of troubles cited by small business owners. Fears about customers returning continue to increase, as well, while fewer polltakers are worried about government reclosures.
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.
“The fitness industry has been decimated. I haven’t been able to recruit a personal training customer in 12 months.”
“The place where I used to meet for workshops is been closed for over a year now. I’m doing virtual work, but my target dementia individual does not respond as well via Zoom.”
“I'm a mental health professional and my business has grown dramatically.”
“I’m busy. People have gone home improvement crazy.”
“All the Northerners are leaving the poorly run states to move to Florida. I am in real estate and business is great!”
CUSTOMER DEMAND
- Customer Demand Declines
- Yet Some Business Owners Remain Optimistic For Recovery
Recovery happens when customers return. Simply put, it’s all that really matters.
This month, we saw a step backwards in a trend that remained pretty flat for the past 4 months. For the first time, we saw an across-the-board increase on the left side of this chart and a decrease on the right. This signals a further shift in consumer-buying behavior that’s beyond disturbing and could have long-term effects if nothing is done to counteract it.
This month, the majority of small businesses (56%) report having 50% or fewer customers than they had before COVID.
Even after life stabilizes following massive vaccine distribution, we’ll need to work hard to shift consumers’ collective purchasing behavior back in favor of local businesses.
For more information on what we can do to make this happen, visit this page on our website: www.mymoneystayslocal.org.
In order to gauge business owners’ outlook, we asked what they’re anticipating with regard to customers returning a month down the road.
Here, we see further optimism perhaps driven by the declining number of COVID cases and an increase in vaccine distribution levels.
Several polltakers weighed in on issues around customers returning to their businesses.
“Customers are out of work and can’t afford my product.”
“I work in people's homes and it has been difficult to find new clients.”
“My customers have been shut down.”
“The fact we are not able to do face-to-face meetings particularly with clientele that are not computer savvy is a problem. This has impacted our business in the life and health insurance industry. Not sure how to get around this with elderly clients.”
“I lost several accounts due to COVID -- from restaurants to night clubs -- I lost revenue. Will need to try to find other customers when places reopen.”
“As a physician, I practiced telemedicine for about a month. I soon found that wasn't perfect with certain diagnoses such as abdominal pain, so I was willing to see patients if I felt the physical exam was important. I still rarely do telemedicine, but most of the time, I’m seeing patients in person with appropriate precautions. I also got vaccinated against COVID as soon as I could. I found that more patients are willing to come in now.”
“I can now see some clients in person, so things are looking up.”
“People are willing to do more things at home, I have more piano students than ever.”
“People are moving here, as it is so horrible in other states. Lots of home inspections are needed as part of house sales, so I’m seeing an increase in customers.”
REVENUE LEVELS
- Revenue Historically Trails Behind Customer Levels
- 58% Are Collecting Less Than Half Of Their Pre-COVID Revenues
- These Are The Businesses That Should Really Get PPP Relief -- SOON
Roughly 50% of businesses have operated with less than 50% of the revenues they were generating prior to the COVID crisis for almost a year.
Unfortunately, in February, this number rose to its highest level since we started asking this question in May. These are the businesses Biden’s administration should focus on for their relief efforts.
Businesses with 90% or more of their Pre-COVID revenues took a massive drop this past month, and from the distribution, it seems as though these businesses lost a significant share of revenue (offsetting increases seen in the 26% to 50% level).
In this chart, you can see the lagging relationship between customers returning and revenue levels improving.
Here are direct quotes from polltakers, describing their current ups and downs with customers and revenue.
“Being at 25% and 50% capacity for indoor dining has handicapped my ability to even get close to a break even mark. Dine in, Catering and our ‘Grab ‘n Go’ refrigerated case are down in sales in excess of 40-50%. We have made up some ground with delivery and curbside pickup. However, that’s not enough to cover the huge deficit created by the other large components of revenue that have and remain down.”
“We’re down 70% in daycare. It’ll stay that way until folks get back to work.”
“Retail has been severely impacted; my retail sales are down about 50%.”
“In late 2020, business was good. But now everything has slowed down.”
“While my revenue increased in 2020, my clients in 2021 are taking longer to pay and require lower retainer payments due to the interruption of mail, the courts, and general business/economic hardship.”
“We are a travel agency. COVID has devastated our business. Loans do not help. We need grants!”
“Seeing secure funding through the PPP program has been positive.”
HIRING & ANTICIPATED EMPLOYEE GROWTH
- 82% Of Pre-COVID Employees On Payroll
- 8% Increase Anticipated By Mid-Summer
While the country as a whole reported significant job growth in February, it seems as though the majority of those jobs were created at larger firms.
Our members reported flat employee levels for the past four months with a slight increase anticipated over the next two months. However, by the end of July, small businesses expect to achieve 94% of Pre-COVID employment levels.
Summer hiring will likely be highly correlated with the restaurant and retail sectors being able to operate at full occupancy levels leading into the summer.
Here’s a quick look at what small businesses are experiencing when it comes to hiring right now.
“We are still recovering from the shut down, but because interest rates are so low there is an unprecedented amount of work available. On the flip side, though, it is harder than ever to find employees, because they are being paid to stay home still, so nobody is hungry for a job.”
“More people are getting pets, and we were busier in 2020 than 2019. However, staffing is more difficult due to quarantine requirements and sick family members.”
“So many people around us are home and they need warm houses. We are working endlessly to make sure they have heat, but we are swamped! We do all of our firewood by hand. And we can’t afford a processor, so people are waiting a long time for firewood! We need to hire a few more people.”
Summary
We continue to be cautiously optimistic as we look toward the summer of 2021. As we highlighted in last month’s report, massive and expedited vaccine distribution remains the key to recovery.
We in the U.S. are starting to feel a bit more optimistic about how we are progressing. However, many of our members are located in Canada where they are struggling to gain access to vaccine supplies.
We’re hopeful they too can find ways to secure what they need, so we can all make a dent in this pandemic and start down the path to local business recovery.
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.