Alignable: Road to Recovery Report (May 2021)

"If My Phone Doesn't Ring, I'm Not Going To Make It!"

• COVID Concerns Lessen, But Aren’t Over
• Businesses Anxiously Await Consumer Behavioral Shift as Already-Lackluster Revenue Levels Dip
• Hiring Increases in Anticipation of Customers Returning, But Finding Workers Is Hard
• Meanwhile, SMBs Struggle to Access Inventory & Supplies, Watching Costs Rise (Often Dramatically)

TABLE OF CONTENTS:

• COVID-19 IMPACT LEVEL IMPROVES
• HOW WILL INFLATION IMPACT RECOVERY?  
• REOPENING STATUS AND BUSINESS CLOSURES
• GREATEST RECOVERY CONCERNS
• CUSTOMER DEMAND - STILL WAITING
• REVENUE LEVELS REMAIN UNCHANGED
• HIRING: FIRST SIGNS OF IMPROVEMENT
• CONTACT ALIGNABLE RESEARCH CENTER

About the Road to Recovery Report

Since March 2020, we’ve collected data from our members to help them navigate the COVID Crisis.

At the same time, we’ve provided our insights to legislators, so that they can enact helpful policy, while also encouraging the media to spread the word about what’s really happening among the most important segment of the world economy: small business. 

Unless otherwise noted, the current month data in this report was collected among 7,757 business owners from 4/24/21 to 5/9/21. The historical data represents over 625,000 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.

LEVEL OF CORONAVIRUS IMPACT ON BUSINESS IMPROVES

• Stabilization of Impact Encouraging
• Significant Impact Stays Below 40%
• “Impact Over” Rating Remains Flat

How has coronavirus affected small businesses this month? While it’s still too soon to declare victory, if we’re able to continue on this current trajectory of declining impacts of COVID-19 on business, we’re hopeful we’ll see a genuine start to the recovery in the coming months.

It’s important to note, the silver lining above comes within the context that 70% of all businesses are still operating under financial situations worse than what they experienced prior to the COVID outbreak. 

Here’s how the coronavirus financial impact numbers break down from our most recent survey, which just concluded: 

Last month, we wondered if the massive positive shift in optimism with regard to the COVID crisis was real. This month, we received some encouraging news: the impact results across the board indicate that a significant percentage of impacted businesses are starting to feel the negative impact decline. 

This point in time reminds me of the period during a massive hurricane when the eye of the storm has passed over head.  You feel you are on the back side of the storm, but you also realize the back side can be deadly. And then once the storm has fully passed over, you acknowledge that there’s going to be a lot of rebuilding required before things can return to some semblance of normalcy. 

Whether or not you believe the storm is over, the turbulence of the current situation facing small businesses is well-reflected in a variety of polltakers’ comments, which illustrate a great disparity between those who are succeeding, and others now confronted with additional inflationary problems.

Let’s start with some good news:

“When I finished my 2020 tax returns, I discovered that my llama trek business had a 2020 income 5 times that of the past. It seems that llama treks, birthday parties, scout hikes with llamas, and other llama events for kids are very popular now. Out of doors, socially distant, etc. It's very healthy exercise.”

“In our case, we had enough clients and income to overcome most of these difficult times. We were more fortunate than many. We have seen an uptick in new business lately and expect this to continue throughout 2021. Several clients want help from us restructuring their business to comply with the ‘new’ economic conditions left behind by the pandemic. Interesting times ahead.”

“We’re gradually recovering. We are an event venue, a Steamboat museum, and people are booking, which is reassuring. But they're requesting event dates later in the year or in 2022.”

“Our residential appraisal service is very busy, and I am afraid for the Real Estate market when the foreclosures start, as so many of our citizens are behind and the banks are waiting for the Feds to open the gates. I hope that it doesn't happen, but I think that is wishful thinking.”

“It’s been getting a lot worse at our car repair shop -- where my lead time on products is getting to where it is months now versus maybe a couple weeks. My suppliers are saying they cannot get products from manufacturers due to having no material to make it. This is especially true with any metal products.”

“It appears that we’re heading for disaster.”

HOW WILL INFLATION IMPACT RECOVERY?

This first caught our attention last month, when we reported a significant uptick in concern over the rising cost of supplies and inventory. Throughout last year, business owner concerns were focused primarily on having financial resources to survive, government closures, and customers being afraid to return.  Concerns over the cost of supplies increasing were minimal.  Fast forward to our latest poll, and we have found that 67% of business owners are concerned about inflation making their recovery more difficult.

And in this chart below, you can see that concerns over supply costs increasing continue to climb.

Inflation can hit business owners in a number of ways: supplies, employee costs, rent, etc. So, we asked our members a series of questions to see if we could gain a better understanding of how each of these cost drivers are factoring into the equation.

80% are Paying More for supplies / inventory compared to Pre-COVID pricing:

59% are having Greater Difficulty acquiring supplies / inventory

52% have kept prices they charge flat or lower

51% have increased what they pay employees

50% are finding it More Difficult to Hire

34% are Operating with A Month or Less in Cash (up 4% from last month)

Here are some comments from our polltakers verbalizing the true concerns fueling these statistics. As you’ll see, it’s not so much that they’re worried about inflation descending upon them. Many say it’s already here, especially those in construction, manufacturing, car sales and repair, restaurants, and retail.

Adding the scarcity of people seeking employment and elevated hiring costs to this equation, it’s not difficult to see that inflationary pressures are confronting many small business owners everywhere they turn.

“There's something really wrong with the wood industry. Prices have gone up by as much as 400% for certain items. You would think that the trees caught COVID. The issue for us is that we can't start charging 400% more for furniture as we would lose all our clients to Chinese products. So, margins have never been slimmer. Someone in the supply chain is price gouging. We've seen this with toilet paper, and plexiglass, and now it’s happening with wood and steel. The government should do some type of investigation to figure this out. Maybe raising interest rates would slow down home purchases a little to help stabilize this inflation as it is artificial and hopefully short-lived.”

“Our waiting time used to be 5-10 days – now it’s a minimum of 30. We have needed semiconductors that will not be available until the end of the year. Resins are hard to come by -- this affects everything related to processed wood, such as building supplies (houses, cabinets, finishes, lamination, etc.) and plastics, such as those used in vehicles and semiconductors. These shortages have been created by reduced manufacturing during COVID shutdowns and the rising cost of energy. Our freight charges have increased and will continue to increase as energy costs rise. As others have mentioned, political situations have a definite effect on inflation, shortages, and a sense of uneasiness among all of us running a small business. We (small businesses) continue to meet these challenges; however, it does take its toll - financially and on our morale.”

“We use independent contractors to fill all of our private duty cases. Most of the companies in this industry (home health) are having problems getting care givers to take a case that’s 3 days per week, 4 hours each day. Some families don’t need more than that. We end up having to charge more to get the caregiver to take a case, which hurts the families we serve. I truly believe a big problem is that these workers are getting unemployment, and on their weekly forms, when asked if they were offered work, they say, ‘No.’ There is no proof to the contrary. They always have the choice to turn down a case. It has gotten 100% harder to fill cases than it was before COVID. We always get it done, but it is much more challenging than it used to be. The stimulus money also kept a lot of workers at home. The intention was good, but if they get $2,800 or more, and don’t have to go to work, they aren’t going to.”

“We need to redirect manufacturing back to our own country. Encourage our government to invest in Canadian manufacturing instead of the situation we are rapidly facing -- being handcuffed by foreign exports owning the barges that are moving our supplies! Hence, we become solely dependent on imports for survival of all of our industries. We are facing extreme supply shortages due to our import dependence on everything! Help reroute our goods back to Canadian soil, so we have more control over our supplies that we obviously NEED!”

“When politicians flood the economy with ‘stimulus’ money, you have more dollars chasing less product. This eventually will collapse the dollar.”

“Prices are climbing on equipment, parts and supplies faster than ever before. We had 2 different equipment suppliers inform us of a 7 percent increase effective May 1, 2021. They claim the reasoning is due to COVID limiting factory workers. I feel bad for our customers as they need air conditioning and are going to feel brunt of this.”

“Transportation costs continue to go up. Paper increased 2-5% in the last two months, and we have received notification of other types of supplies increasing 1-8%, and no price increase notification from others. Nitrile/latex gloves have increased 200%+ over the year. Manufacturers have, in some cases, focused on their high demand products, and let other options fall to the wayside. Availability of raw materials is impacting manufacturing. It turns out, there were many products in high demand this last year that require the same raw materials. Lack of raw materials, and the increased usage and demand of some products has impacted the ability to catch up and we have been told, in some instances, it will likely be another 12-18 months.”

“It’s hard to find inventory right now in the real estate business. It’s fun, however, to find creative ways to uncover what my clients are looking for. But the cost of building supplies is concerning.”

To learn more about the industries that are suffering the most right now from inflationary trends, read this companion article to our report.

REOPENING STATUS AND BUSINESS CLOSURES

• Rate of Fully Reopened SMBs Remains Above 60%
• Majority See Normalcy As Still A Ways Off

Status quo in terms of businesses reopening this past month.  We saw a slight improvement in the percentage of fully reopened small businesses.  So, we are still running a little above 60% with fewer than 10% reporting their businesses are closed, either temporarily or for good.   

Looking ahead towards the summer, we see some optimism around August, but the vast majority of small business owners still anticipate that the new normal will arrive after summer for many SMBs. 

Here are some of the comments from our polltakers regarding their own reopenings.

“We’re slowly trying to bounce back in the travel industry. And I’m happy to say I’ve already received requests for travel arrangements this summer, especially to ITALY.”

“Luckily, our business will reopen this summer! Although we won’t have as much revenue as in the past. We’ve had to reduce our prices quite a bit and we have maybe 1/2 the clients we normally have for summer. We’re happy to get back to performing our shows after over a year of not working (March 2020 was our last live performance). It’s been very hard financially and emotionally.”

“We sell antiques. We are moving to a mostly online presence and only opening shops in small environments like antique and craft malls. With the economy and people belt tightening, sales of antiques and other non-essentials have declined. Hopefully, this will rebound at some point, and we’ll respond when it does.”

“Last year, all booked live shows except for one were canceled. Our governor’s restrictions on live music has killed 85-95% of my business income. The future isn’t looking much better as people who used to hire quality entertainment are now using smaller and ‘cheaper’ musical groups.”

“From what I’m seeing, things still haven't loosened up enough for many people to travel with confidence. The other issue is the lack of extra money to travel.”

GREATEST RECOVERY CONCERNS

• Price Inflation Shoots Into The Top Spot
• Worry Increases Over Customers Being Afraid To Return
• Declining Concerns: Reclosures & Cash Resources Running Out

As referenced above, the increased cost of supplies has jumped into the top spot as small business owners’ leading concern.  Also on the rise: SMB fears that customers are afraid to return to their businesses. 

However, as COVID case levels continue to decline and overall vaccination levels increase, we see concerns of reclosures and cash reserves running out subside.  

Many financial institutions will be closing down their PPP funding portals this month, if they haven’t already. So, it will be interesting to conduct a comprehensive survey on the overall impact the PPP had on business survival in the coming weeks. 

Here are a few comments from our polltakers, demonstrating the extent of their concerns now and looking ahead.

“Once all the stimulus check money and extra money coming in is gone and life returns to what will soon become normal, gymnastics for kids is one of the first things many parents cut out of their budget. As the job market declines and the cost of living increases, unfortunately, gymnastics enrollment drops.”

“Although I am grateful for the government PPP program, I am also quite concerned as to what will happen regarding inflation, as well as new taxes, due to all the debt the U.S. is loading onto its citizens. Additionally, I do not believe that any of these stimulus packages were carefully devised or fairly distributed. I know for my company, the amount of funding and the time in which to spend it was not enough. None of us anticipated a year-long shut down, as well as a lengthy recovery period. These are challenging times, presenting an entirely new paradigm to live by.”

“We import stainless steel work tables, compartment sinks, and faucets from China for the commercial restaurant industry. It has been a logistical nightmare, even with our own team of ten employees in China. Shipping containers are very scarce, and we are currently waiting four to six weeks for a container to load finished goods. Then, once the container arrives at the port in NY, we have to pay a ‘congestion fee’ to prioritize our container to get it trucked out of the port and to our warehouse.”

“It is very disconcerting that the people we all elect have no idea what they have done to businesses across the U.S. Most have never run any type of company and really are not educated in the economics of business. And the overall majority of them did not feel the pain that we as business owners felt. And yet they think they know what is needed. We are in a bad situation. They can't balance the federal, state, and local budgets, yet they are telling us how we should run ours. Mandates in New York destroyed businesses here not to mention people’s lives.”

CUSTOMER DEMAND -- STILL WAITING

• Still Waiting For Consumer Behavior To Shift
• 49% Operate with Less than 50% of Pre-COVID Customers

You’re not having a déjà vu. We will purposely continue to repeat the opening line of this section until we see a meaningful shift in consumer behavior, back to small, Main Street businesses and away from national, online behemoths.

“Recovery happens when customers return.  Simply put, it’s all that really matters.”

As you can tell from my tone, the majority of small business customers still seem to be missing.

Changing our buying behavior back to local businesses and encouraging others to join with you is the only answer to help ensure local recovery.  I’m not saying you can’t buy anything from Amazon (heck I do to), but do you think you can shift 25% of what you typically spend at major online retailers back to locally owned businesses?  I think you can do it and I hope you do – sooner vs. later.   

For more information on what we can all do to make this happen, visit this page on our website: www.mymoneystayslocal.org.

Not a lot of change anticipated over the next 30 days: 

Several polltakers weighed in on issues around customers returning to their businesses.

“We have the same band members and gigs for our musical group are starting to pick up! Finally!”

“We are actually very busy with work right now. New customers and old customers are requesting signage. Currently, we’re bidding a lot of projects for general contractors.”

“Our salon is seeing a big increase of former clients returning, also a big increase of new clients from the Internet. Women are ready for makeovers, updates, and new changes to their hair.”

“Receiving goods from Europe and Peru have been challenging. The consumer in my store, likes a destination store. I provide gift wrapping, shipping and extraordinary customer service. Being loyal to your customer and trying to get to know them and their families is rewarding. The majority of my customers are just thrilled to find a store filled with beautiful clothing, the fabrics, colors and mixed styles. Unfortunately, retail is changing rapidly. Online goods allow the consumer easy ordering and less human interaction. I'm hopeful that the goods I order for the store’s upcoming season will arrive on time. These are uncharted retail times, like every other part of life. We are prepared to buckle up for the ride.”

“The cost of everything has gone up, so customers cannot afford to pay more for home services. It’s a catch-22 situation.”

If my phone doesn’t ring, I’m not going to make it.

REVENUE LEVELS REMAIN UNCHANGED

• Lower Revenue from Fewer Customers
• Returning Customers are Spending Less

The ultimate indicator or recovery will be revenue levels returning to pre-COVID levels.  Unfortunately, this month, we have seen that number swing in the wrong direction:  presently 58% of businesses are generating 50% or less of their monthly pre-COVID revenue numbers.  In addition, revenue per customer is lower across all groups reporting less than 125% of pre-COVID levels (so pretty much everyone). 

When comparing revenue levels, we see a disturbing trend with growth in businesses reporting less than 50% revenue generation on a pretty consistent basis. 

Here’s what small business owners had to say about their ability to generate revenues this past month and in the near future. Some are hopeful, others are more concerned than ever.  

I feel very optimistic about the 3rd quarter of 2021.

“We have seen an increase in sales. Homeowners are spending more to fix up their homes, since they are not taking many vacations. With low interest rates and home values increased, they are replacing windows and doors.”

“I’ve been busy steadily, as I have a cleaning service and we’ve done well. But now we have an employment problem. No one wants to work. This holds true for many businesses other than mine. I've been offered more commercial jobs, that I've had to turn down because I don’t have enough employees. That means lost revenue for my business.”

“We have been at our location for over 50 years and run an operation supplying auto and truck parts. It is virtually impossible to be able to survive the current situation. Insurance companies control what we pay for our inventory, which is bad enough. But that, on top of the huge influx of aftermarket parts (even though they are vastly inferior in quality), have made our industry almost non-competitive!”

“I sell furniture, accent furniture, and accessories to independent furniture stores, and with the possibility of the lock down being extended here in Ontario, I can see the possibility of many more smaller stores here closing down. On the other side, I can also see stores doing some heavy business once this lock down is over. Unfortunately, for me, many of the furniture lines that I sell are not your everyday style of furniture, so there will not be a high demand for some of these items. And, a couple of the lines I usually sell are back ordered for another two to four months. Moving forward will be very challenging, especially if there’s another lock down.”

“My business is in the home construction trades. Because the cost of building material has gone through the roof, it has put thousands of people out of the housing market. Since I deal with this first, my business will see the downfall first. And I'd like to know -- who is pocketing the 700% increase we are seeing on the cost of building materials?”

“I’m a doctor and, it’s sad to say, but COVID stimulus went to big, rich companies and we got the crumbs.”

“I mostly sell my art - paintings - at art shows. I just participated in my first show in over a year in April. I will also have a show in June. Other summer shows have been postponed until October. Many shows over the past year went virtual, and this year they are only accepting last year's artists. I participated in three virtual shows last year with zero sales. My income from my art in 2020 was 40 percent of what it was in 2019. This was made possible by online sales, sales from shops, and commissions.”

“Entrepreneurs are creative and survivors by nature. There are so many factors at play (pricing, staffing, age, and health) that it is difficult to anticipate the future and know the outcome. Only time will let us know the true impact of the pandemic on the world.”

“Both during the 2008 drop in the economy and the COVID time period, we have noticed little change in the pace of sealcoating pavement. Paint and sealer costs have been the same with no noticeable increases. the pavement repair / sealcoating/ pavement markings business in Florida is continuing to flourish.”

HIRING: FIRST SIGNS OF IMPROVEMENT

• 88% Of Pre-COVID Employees Are On The Payroll!
• Optimism Builds Toward A Late-Summer Recovery Surge

This past month, we saw our first significant increase in employees back on payroll since Q4 2020.  Employment levels jumped to 88% which is an all-time high since the start of the COVID Crisis.   

When looking forward, business owners’ perspectives on where they will be by the end of the summer were relatively unchanged (97% this month vs. 98% last).  However, at that time they didn’t anticipate getting to 88% until some point after May. 

Hiring is sure a hot button for this report and we’ve included a few quotes that mention it in the context of inflation and other issues.

However, we wanted to share a few more perspectives here, including a quote or two from people who are patiently waiting for the right hires to appear, before making a move.

Others, of course, don’t have that luxury and need to take the best candidates they can possibly find in a very competitive market. 

Here’s more of what we’re hearing:

“We’ve grown considerably over the last year and have increased our employee account by over 25%. We have not raised our pricing and have, instead, added more platforms to help our merchants grow their revenue and reduce their costs.”

“Working on creating the 'A-Team' right now. We are not seasonal, but we have grown exponentially in the past 6 months.”

“Labor is extremely difficult to find and getting more expensive.”

“Unfortunately, so far, we’re seeing a lack of qualified workers for our industry.”

“We’re in a small town with limited talent.”

“The lack of interested (never mind qualified!) job seekers is scary, even in the floral industry. Never have I seen so many opportunities posted, and even while offering $2 to $3 above minimum wage for entry level jobs, no one applies.”

"I run a convenience store and I am concerned about not being able to find additional new hires. With summer and tourist season coming, I’m worried that my current staff is going to be burned out and exhausted if we don't find help. It will then be hard work for me to keep morale up, but we will do it. It is definitely an odd time when people would rather be on unemployment than work. There has to be an end to the easy money sooner or later.”

“Thankfully our toy store seems to be a fun place to work, because we’ve never struggled to find employees. We’ve also almost never needed to advertise that we’re hiring, because we have so many apply on a regular basis. However, our supply costs took a significant jump recently.”

“I could be doing more business at my auto parts store, if I could just get some employees. People are not even bothering to show up for their scheduled interviews.”

Thanks for reading.  And please, the next time you are about to buy something from a major online provider, ask yourself if it’s something you might find by taking a trip downtown to a locally owned business!  Recovery will be at the grassroots level and we all can make a difference.  #MyMoneyStaysLocal. 

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.