Alignable: Road to Recovery Report (November 2020)

DATA INSIGHTS | COVID-19 IMPACT/MONTHLY REPORT |

Alignable’s State of Small Business Report: 

The Road To Recovery, November 2020

By Eric Groves – Alignable, Inc. 

Business Confidence Hits The Skids

Washington Seemingly Oblivious To The Problem

15-Second November Summary

• Fears Over Reclosures Reach All-Time High
• Ongoing Improvement In Financial Impact Stalls
• 43% Still Feel Significant Negative Impact
• Fully Reopened Business Rate Takes A Step Backwards
• Significant Reduction In Returning Customers

In This Month’s Report:

• Current Financial Impact Levels
• Reopening Status & Business Closures
• Recovery Concerns
• Customer Demand & Revenue Levels
• Hiring & Anticipated Employee Growth
• Alignable Research Center & Poll Demographics

Overview

Alignable has collected over 540,000 business owner responses, since mid-March, 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 8,092 business owners during the week of October 24, 2020. 

This month’s report was written during the first week of November and also features insights from a recent report created by Gusto on the financial impact winter weather may have on the retail and restaurant industries and how it translates into millions of predicted job losses in these sectors. 

OCTOBER CORONAVIRUS IMPACT LEVEL

• 67% Of SMBs Experiencing Negative Impact
• “Significant Impact” Grows To 43%
• Coronavirus Lift Experienced by 15%

Overall, small businesses experiencing negative impact from COVID-19 remained flat at 67%. Business owners experiencing “significant impact” increased 1% to 43%. Businesses reporting positive impact was up slightly to 15% of respondents. 

When we look at the past six months, we’ve seen a steady decrease in businesses reporting significant negative impact. That is, until the end of October. As highlighted by the red circle on the chart, that welcome trend changed trajectory and increased for the first time in half a year.

In Their Own Words

Here are several direct quotes from small business owners we polled that show great diversity in their experiences. In some cases, they point to COVID problems compounded by other forces, adding to their sense of feeling a significant, negative impact.  In other cases, they’re thriving.

“Arts and crafts shows are still not safe to hold due to COVID. I do not expect this to change this year, or early next year, so money is very tight. People are getting better at indoor mask use, but many still don’t comprehend that if their nose is not covered, germs are being spread and inhaled. Also, there seems to be a general mindset in our tiny town that the person you’ve been friends with for years is safe to sit down with over coffee without masks. Most people take masks off outdoors, no matter how many others are in the vicinity. We need to correct both behaviors for counts to decrease. Mask up and stay safe. Peace.”

“With all that’s said about this Pandemic, there’s another  problem facing small businesses in the Racine area. I question the logic and intelligence that has shut down virtually every major throughfare in this city. Businesses are hard-pressed to put together enough business with this Pandemic, and then the city decides every road construction project has to be done -- at the same time. Customers have told me that they’re not about to attempt to navigate the idiotic maze of closed streets, intersections and traffic. Now, guess what that leads them to? It sure isn't buying locally. This city has placed a rope around the neck of small business and is strangling it to death.”

“Event centers have been devastated by COVID. Politicizing it has only made things worse! We are all learning together because no one really knows the best course of action to take.”

“I just keep dipping into my retirement. I am 12 months away from break even on current monthly expenses, but 3 years away from recovering my pandemic losses.”

“Buyers in my line of work have been shopping less and I even had a woman demand that I provide services for free. I’m working on rebranding my business and offering more on my website. I was sick with COVID this summer and I’m still facing the numerous side effects, as I’m a long hauler. I hope to work on my website and Etsy soon to drive more digital sales.”

“Fortunately, people are still buying and selling homes and the real estate business has been pretty good with low interest rates helping. However, I’m concerned that those who are out of work and can't pay their mortgage or rent are going to really suffer.”

“Working from home has become an opportunity that many parents and older couples have wanted. I have found as a disabled RN an opportunity to continue my mission of helping others without leaving home. While this pandemic has been devastating for so many, it has also opened many doors.”

“Our business is health-related, small, and community-based. During the lock down, we were essential. We adapted to curbside delivery and it was a place where our customers could get out and not have to cook a meal. Our business thrived and is still thriving today.”

REOPENING STATUS & BUSINESS CLOSURES

• The Number Of Fully Reopened Businesses Declines
• Business Status Shifts From Fully To Partially Reopened
• Majority of Closed Businesses (89%) Intend To Reopen

A change in trajectory was noted with regard to the number of fully reopened businesses, as well. 

After five months of positive reopening trends, the percentage of fully reopened businesses suffered its first setback dropping from 65% to 62% in October. 

This decline (highlighted in red) was offset by an increase in partially open businesses, signaling a shift in business. This was caused either by seasonal changes to businesses and/or further restrictions based on increased COVID case numbers.    

In Their Own Words

Looking at comments from polltakers, there’s a great deal of concern over the winter months – and some businesses already feel the negative, seasonal shift.

“I fear an explosion of cases after Thanksgiving and Christmas. I’m closing for 2 months right before Thanksgiving.”

“I’m worried about Coronavirus infections rapidly increasing. It’s terrible. I cannot put staff in danger as I have to live with myself if someone dies or get really sick.”

“A lack of customers has flatlined my businesses, but expenses go on. As long as we are in a pandemic, it will be a very uncertain future for all my businesses.”

“I can no longer meet clients outdoors and that will affect my business greatly.”

GREATEST RECOVERY CONCERNS

• Fears Over Reclosures Hit An All-Time High
• Cash Reserves & Customer Confidence Round Out Top 3 Concerns
• Decline In Business Owners Feeling Good About The Recovery

In our latest poll, we saw a significant increase in concerns over new government-imposed business reclosures due to the rise in COVID cases. So much so, that this month’s level of concern exceeded the level at the outset of the crisis. 

With the case levels continuing to rise across North America, it’s clear business owners are anticipating that new restrictions will be put in place, dampening any progress towards recovery.  

In Their Own Words

Here’s what small business owners said about their current state of affairs and reclosures:

“I had to shut down my business again for this 2nd wave, as I am a medical aesthetician.”

“Another shutdown, if it comes, would have a severe impact on many of our customers, so we're naturally concerned. While most of our customers will continue to feed their animals, they may not be able to spend as much on more expensive, healthier foods.”

“Our retail customers are not buying at all. Our school sports business isn’t doing well. Our recreation business is zero. We have no business right now.”

“My husband died in April. This has made it difficult to be financially stable. My studio is in my home and I’m afraid I’ll have to sell it. Gigs, my Choral Group, and school music programs are closed, too.”

CUSTOMER DEMAND

• Critical Time For Customers To Return
• Customer Demand Declines Across the Board
• Twice As Many SMBs Report < 25% Of Customers Have Returned
• Majority Anticipate No Improvement In Next 30 Days

Recovery depends on customers returning to businesses. And, unfortunately, we lost some ground here again in October.

The percentage of businesses reporting that they had less than 50% of their pre-COVID customers return increased 8% from 35% to 43%. The loss of customers was felt across the board from businesses previously reporting a wide range of customer activity, even those who said 90% or more of their customers were back. This the first time that group has seen a decline since May.  

When looking at the outlook for November, leading into the busiest time of year for many local business owners, there is not much optimism across the 5,932 business owners surveyed.  Across the board, business owners seem to be holding their collective breath and hoping things don’t continue to get worse. 

In Their Own Words

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

“We don’t have many customers now and our reserves are dwindling.”

“My clients are small businesses and they’re not buying my services, because they’re negatively impacted.”

“Certainly, this is a time for all business owners to brainstorm ways to draw back customers. However, there isn't much more they can do as we are being controlled by the government and the ridiculous restrictions placed on businesses. Until the American people learn that life still needs to go on and a vaccination is on its way, things will remain in a recession.”

“As a full-time artist, I know that everyone in the visual arts is now focused on selling online. Despite this solution, I've seen two new problems emerge: 1. There’s even more competition for online sales, as those who never had a website get online. 2. Customers who’ve signed up for mailing lists are now bombarded with emails -- promoting sales, virtual art shows, etc. Discussing this with other artists, we've all noticed a significant jump in "unsubscribes." My last mailing had a 9% unsubscribe rate vs. the usual 2% rate. This is the opposite of what we want. But until there’s a vaccine, we can't go back to doing live art shows.”

REVENUE LEVELS

• Revenues For Businesses Experiencing Less Impact Improve
• No Meaningful Improvement For Others
• 42% Say Their Revenues Are < 50% Of Pre-COVID Levels

The most important component of economic recovery is revenue returning to pre-COVID levels.  This will require both a return of customers along with the purchasing behavior they had prior to the crisis. 

In the chart below, you can see how revenue growth is slower than customer growth in most cases.

October saw slight improvements in the sectors at each end of the spectrum with businesses with < 25% of revenue declining 2% and those with >90% of revenue improving by 3%. Across the rest of the population, revenue growth remained relatively unchanged.  

The majority of small business owners polled commented about ongoing revenues issues, despite pivots they’ve made. However, on the high end of the spectrum, several business owners said they’re faring very well, making more money than they did before COVID struck.

Others are showing great resourcefulness by driving revenue through second jobs or by opening new businesses.

In Their Own Words

“We are caterers for very large events, and since there are no large events, there are no major catering opportunities. We have started doing caterings for as few as 4 people, and even those catering jobs are still far and few between. Most of our clientele is retired, so they’re being safe and not going out. Sadly, we have seen our sales drop 85%.

“Because I live in Alameda county in California, I’m still sheltering in place and I’m considered a nonessential contractor, so I’m not allowed to provide my music therapy services for palliative and hospice care patients in hospitals and nursing homes. And all of the weddings that I had scheduled over the spring, summer and fall have been canceled.  Therefore, the only thing keeping me alive is the discovery of virtual performances via FaceTime, Zoom, & webinars!”

“If there are no events -- concerts, trade shows, or conventions -- I have no work. We need a CURE! We need to congregate again in numbers that produce profits. Without that, the entertainment industry will collapse. It really has me worried now. Where do I go. My industry is closed. Retooling at my age really isn’t an option. And retirement is still a long way off.”

“My business is presenting concerts. The need to 'shelter in place' has reduced us to once-a-month live casts of our artists, and to twice-weekly broadcasts of our concert videos. These are all free, though we request that our audience donate what they can. The general economy has reduced the ability of many to donate.”

“Due to my current business slowing down, I’m currently working on opening two new businesses.”

“I am working two other part-time jobs to put money back in the business to keep us afloat.”

“Gratefully, my skills as a therapist have been in high demand. What has changed is that I am reaching out with more online seminars than ever. My history is helping individuals, families and business when they are stuck.”

“I'm 65 years old and went through the depression that Jimmy Carter and George Bush Sr. brought upon us. Also, I was building houses from 2002 to 2005 and you could see the market was over-saturated. The same is happening now. If you don't know your history, you'll repeat the mistakes. Learn from history, figure out how to save and invest. Then you can ride it out and make money off of a depression or slow down.”

“We work more vigorously than ever and focus on our business, clients and their needs totally. We are in the mode that “ nothing has changed.“ No question everything is more difficult, but we focus on moving forward. Also, we’re supporting local businesses as much as possible.”

HIRING & ANTICIPATED EMPLOYEE GROWTH

• Hiring Stabilized, But January Outlook Declines
• Anticipating Further Reductions In Employees On Payroll
• Winter Weather’s Impact on Jobs Reported by Gusto

October continued the trend from September where we saw little to no growth – during the month or in the projections for the next 30 days.

In our most recent poll, we saw both the outlook for the next 30 days and the outlook for January 2021 decrease from the previous month, which could mean some small business owners will be forced to cut back on hiring or even consider layoffs, especially if reclosures occur.   

While hiring seems flat and projections for the future are down, several comments came from members who are bucking the trends and they’re in a growth mode. Yet, they say it’s been hard to find people to hire to help them keep up momentum.

In Their Own Words

“I just purchased a third business during COVID! We have been moving homeowners and commercial business in South Carolina for 2 months. We have added employees to handle the increased demand, but we may need more.”

“There are more problems that impact us than just monetary ones! We are doing very well financially, but we cannot find workers. We’re exhausted.”

“Some people are struggling and can’t afford to hire anyone. Many seem paralyzed and information remains mixed about what’s next. We need to talk about something more positive and give people permission to hope for a better outlook even if concerns remain right now. We need HOPE.”

Winter Weather’s Impact on Job Losses

This month, we’re highlighting a report by Economist Luke Pardue at Gusto, which is entitled: Analyzing the Potential Effects of Cold Weather in the Quarantine Economy.  With winter weather fast-approaching in many parts of the country, Gusto analyzed the geographic areas and sectors which would be hardest hit.  Here’s their summary of the key results:  

• Job recovery nationwide has slowed down significantly since August ‘20. The cold weather expected to hit starting in November poses a significant threat to an already fragile economy, and may potentially erase the past two months of job gains, an estimated $190 billion in economic activity.
• Many businesses across two highly affected industries—Retail Trade and Leisure & Hospitality— made adjustments to the way they operated during summer months in order to open back up (e.g. outdoor dining). However, these adjustments will be significantly less feasible during winter.
• Using a conversative estimate, the 1.4 million jobs that have been recovered since April could be lost from the impact of winter weather.
• Job losses could number 2.8 million under a more severe scenario, in which half of the gains made across all private industries are lost due to cold-weather induced spike in coronavirus cases, for instance.
• These losses are most acute in America’s mid-size and smaller cities: 14 of the 20 cities facing the largest projected losses have populations below 200,000 people.
• Black and Latinx workers bore a disproportionate share of job losses at the onset of COVID. In cold weather cities, Black workers are projected to lose 140% of recovered jobs across Retail Trade and Leisure & Hospitality. Latinx workers are projected to lose 51% of recovered jobs in these industries, and women are projected to lose 76%.
• In cold-weather cities, small businesses account for 54% of employment within these two industries. If small business failure rates approach those seen in the spring, an additional 20,000 firms could be forced to shutter.

About Gusto:  Launched in 2012 as ZenPayroll, Gusto serves more than 100,000 businesses nationwide. Each year we process tens of billions of dollars of payroll and provide employee benefits—like health insurance and 401(k) accounts—while helping companies create incredible work places.

ABOUT THE ALIGNABLE RESEARCH CENTER

Alignable is the largest online referral network for small businesses with over 5.5 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 press@alignable.com.

FOR ADDITIONAL COVID-RELATED POLLS & INSIGHTS FROM ALIGNABLE: 

Visit Alignable's Research Center Home Page

Visit Alignable's COVID Resource Center