Alignable: Road to Recovery Report (July 2020)

DATA INSIGHTS | COVID-19 IMPACT |

Reopening Fast Hasn’t Helped The Recovery 

Here’s what we learned from you this past month: Fast-to-Reopen communities put more people back to work. However, they saw fewer customers return, lower revenues, and some local governments even forced businesses to close again! 

Our July report has all the latest trends based on answers from you and over 460,000 other business owners.

Alignable’s State Of Small Business Report

The Road to Recovery

July 2020

In This Report

• Current Impact Levels & Impending Cash Crisis
• Reopening Status & Business Closures
• Recovery Concerns
• Customer Demand & Revenue Levels
• Hiring & Anticipated Employee Growth
• #MyMoneyStaysLocal Movement
• Alignable Research Center & Poll Demographics

JUNE CORONAVIRUS IMPACT LEVEL

• Overall impact improves by 6%, dropping to 68% 
• “Significant Impact” reported by 59% of business owners
• “Fast-to-Reopen States" (TX & FL) experience higher overall impact: 73%

Alignable has collected over 460,000 business owner responses, since mid-March, mapping the weekly spread of the Coronavirus Impact on Small Businesses Owners across the United States and Canada.  Unless otherwise noted, all polls in this report were conducted during the week of June 28, 2020.

In June, we saw a decline in the impact levels across North America. 

However, at the time of this poll, we were just starting to see COVID-19 case levels surge again across the “Fast-to-Reopen States."  

We believe it will be important to understand how the impact and recovery rates differ between states engaging in an aggressive approach to reopening and those adopting a more gradual strategy, reopening in phases. 

Accordingly, in this report, we’ll compare our May and June polling, as well as June results for all states versus those reported solely by small business owners Texas and Florida.  In future updates, we will further separate our findings. 

This past month, North American businesses reported a 6% decrease in the overall impact of Coronavirus on their businesses.  This brought the total impact level down from 74% in May to 68% in June.  We also saw a decrease (8%) in businesses reporting Significant Financial Impact, which is now down to 59%.   

We’re using data from Florida and Texas businesses as indicators for “Fast-to-Reopen States."  Businesses reported higher levels of impact in June with 73% Overall Impact and Significant Impact slightly higher than the national average at 60%. 

The prolonged impact of the Coronavirus has created a looming cash crisis for small business owners across North America. In our Mid-June poll of 7, 728 business owners, 47% said they had less than one month’s cash on hand. 

CARES Act Relief Helped — If You Could Get It

Only 4.8 million (16%) of the roughly 30 million businesses in the U.S. have been able to access CARES Act Relief (to date), which provided additional runway for those small business owners.  

It's a lifesaver. The ability to use it for rent and utilities is just the support I needed.

“The PPP is helping to keep the business going. We never laid anyone off, but our workload dropped by 50%. People are starting to contact us, allowing us to come back into their homes to start their remodels. I’m keeping my fingers crossed that we get back to some sort of normal soon.”

While many PPP recipients reported being in a somewhat better financial condition than other small businesses, the funding they received was only sufficient to keep their businesses afloat for 8 weeks. Unfortunately, that time has already passed for many of them.

In fact, 43% of those who received funding reported they too would be out of cash in July. 

“Our business is still drastically low and we need more cash to make it through until the economy picks up. We’re running on fumes.”

“I’m still in an economic struggle. Only 1/3 of my original business is back. My revenue is still very low.”

“We’re very worried that we can’t sustain our business moving forward, because we had three months where no shipments could go out. We are a manufacturer and had to sit on inventory. Now our suppliers are not happy, because cash will be too tight to make payments. And our bank line is up. We are terrified.”

I spent it all the way I thought I should—to keep my employees on payroll. The truth is that a second cash payment is sorely needed.

Dire Conditions For Those Who Had Applications Rejected

Many in Washington seemed perplexed as to why $130 billion of relief funding was unallocated on June 30th.  In fact, many used the available funding to pat themselves on the back for a job well done. 

Unfortunately, they failed to realize their actions precluded many businesses from receiving PPP relief, often those most in need.  We found minority-owned businesses saw application rejection rates almost 2x greater than other businesses (11.9% vs. 6.6%).  Of these businesses, 69% reported they will be out of financial resources in July. 

“I was turned down for a PPP by Citizens bank. They based their decision on my personal credit history. SBA approved me for an EIDL loan. I got a great rate. I'm discouraged when I read about the PPP, as that money would have been helpful to my women-owned small business.”

“For small businesses that are new and don’t take money out for payroll, it has been a huge disappointment that we don’t qualify for anything. Most of the business owners I know are sucking it up and riding it out for that reason.  As a woman and a business owner who has paid for everything out of pocket, this seems more than a little ridiculous. So tell me where is that support?”

Related: The government extended the PPP for 5 weeks: Here's what you need to know

Reopening & Customers Returning: The Only Viable Answer

With so many business owners on the brink, the only viable answer for recovery is to get these businesses open (safely) and encourage customers to return (by helping them to feel safe).

Once we, as customers, feel safe, we are all going to have to make a significant effort to change our behavior back to supporting the businesses in our communities, if we want local economies to recover.  We cover this further in the last section of this report, which introduces the #MyMoneyStaysLocal Movement. 

REOPENING STATUS & BUSINESS CLOSURES

• Closed business rate decreases significantly in June from 32% to 16%
• Reopened businesses more likely to operate at reduced levels: 33% in June vs. 28% in May  
• Majority of closed businesses (94%) still intend to reopen  

Our survey of 10,931 business owners showed continued progress towards reopening in June with 50% of businesses reporting “fully open” status compared to 40% in May. 

Businesses in “First-to-Reopen States" saw a slightly higher (54%) fully reopen status than the average (50%) across North America.   

As businesses reopen, many are adjusting their product mixes and their business models to provide a safe environment for their customers and staff. 

“We are thrilled that two remodeling projects have started up in the past week, with two kitchens waiting, and several projects after that! We are following every precaution, having our sub-contractors work one at a time, wearing masks, and sanitizing. With years of experience in making remodeling stress free and easy for our clients, working under COVID-19 rules is just one more way that we can accommodate.”

My personal experience is that folks are still afraid of eating or ordering food outside...looks like it will take quite a bit before customers get their confidence back. Moreover, the dine-in restrictions will be tough to follow 100%.

“My revenue will take a big hit this summer due to the fact that the property I work with will only open to 30% capacity in June and slowly increase during the summer. Many of the guests I booked long before COVID-19 have cancelled, but are planning to return in 2021. New guests are put off by the restrictions being placed on pools, restaurants, game rooms and some of the local activities their kids have grown to expect. Also, I am hearing many potential employees are happy not working and/or concerned about safety conditions. That puts more pressure on the companies wanting to rapidly get back to normal.”

GREATEST RECOVERY CONCERNS

• Depleting cash reserves — still No. 1 concern (26%)
• Re-closure worries jump 41% from 17% to 24%
• Customers being afraid to return remains key concern (23%)
• Looming cash crisis projected for July

We surveyed 10,291 business owners regarding their biggest reopening concerns. Having sufficient financial reserves to get through this crisis remained their greatest concern at 26%.

Last month, customers being afraid to return was a close second. In June, likely due to the significant uptick in cases seen across the U.S., the risk of re-closure jumped over 40%, becoming the second greatest recovery concern.    

While concerns over the re-closure risks were higher in the First-to-Reopen States than the North American average, business owners there remained more concerned about customers being too afraid to return to their businesses. 

“Introducing blanket forgiveness for loans would be great. I took a loan from the SBA to keep my business expenses paid during this pandemic. The money is almost gone, and I do not want to take out another loan, because I know I have to pay this money back. My business is down by 90%. I am praying September brings us closer to back to normal business.”

“The PPP loan calculations were based upon 2 and a half months of average payroll expenses. After 3 and a half months, we still have 2 phases to go before we can partially reopen in-house. Cutting expenses just can’t overcome the loss of revenue. We need a second round of PPP loans. I don’t think anyone understood how long small businesses would be closed."

CUSTOMER DEMAND

• Higher percentages of pre-COVID-19 customers return in June compared to May
• But First-to-Reopen States see fewer customers return

Some 6,955 business owners told us they've seen a significant increase in the percentage of pre-COVID-19 customers who returned in June. 

The number of small businesses reporting that 90% or more of their customers had returned increased over 50% month over month. While those in the worst shape in May (with less than 25% of their customers returning), saw a 47% improvement in June.     

Meanwhile, the First-to-Reopen States didn’t fare as well as the national averages — with a higher percentage of businesses reporting 50% or fewer customers returning. 

Looking ahead to the next 30 days, most business owners continue to remain optimistic as they forecast anticipated improvements in the number of customers returning in July.

However, business owners in the First-to-Reopen States were less optimistic than their counterparts across North America with higher percentages of them forecasting that 50% or fewer of their customers will return in July.  

REVENUE LEVELS

• Revenues for 49% of businesses are below 50% of pre-COVID-19 levels
• June: 7% improvement in businesses with less than 25% of their revenue returning

Operating Revenues as a percentage of Pre-COVID-19 levels improved during June, but almost 50% of business owners across North America remain at levels 50% or below where they were before the crisis. 

While it's encouraging to see the month over month improvement, it’s also clear we still have a long way to go to rebuild our local economies.    

Shifting demand back to small businesses is the only long-term path to recovery and survival for many businesses. Unfortunately, renewed concerns over spikes in Coronavirus rates may stall the slow improvements we’ve seen over the past month.    

“I am in the same situation as many others. We received the money in April and so we began to aggressively use it for payroll. By the time the Flexibility Act was passed, there was little left. We are now almost out of funds. We are now open for business, but at about 60% capacity.”

“From the beginning, we looked at the PPP as a survival mechanism. Businesses don't fail because they're not profitable, it's that they run out of cash. We never planned to go for forgiveness, we just needed cash. We still do. We have some PPP funds left, but they'll be gone by mid-July. At some point, we will have to pay it back. We still need funding, as revenues are about 60% of what they need to be.”

HIRING & ANTICIPATED EMPLOYEE GROWTH

• 23% of Pre-COVID employees are currently off the payroll
• Rehiring in June increased employment levels by 19%
• Businesses anticipate a 2% increase in July, and 90% re-employment by January 2021 

Data collected both in our May Hiring Poll (10,174 responses) and June Hiring Poll (6,003 responses) highlight a significant increase in re-hiring in June and an anticipated slowdown for July.  In May, businesses with employees reported 65% of employees back on the payroll.  This number increased to 77% in June.  Interestingly, when asked in May where they thought they would be in June the estimate was 70%. 

In both surveys, business owners anticipated returning to 90% of January 2020 levels a year later in January of 2021. 

Hiring levels for Fast-to-Reopen States were higher across the board.  With current levels of rehiring at 83%, little incremental hiring in July, and anticipated recovery to 96% by January 2021. 

MY MONEY STAYS LOCAL

As mentioned earlier, economic recovery can only happen with a massive change in human behavior. 

The Coronavirus Outbreak caused us all to shift into survival mode.  As local businesses were forced to close, we shifted the vast majority of our purchasing power to online businesses that delivered products directly to our door.  While great for companies like Amazon, the impact of this change in our behavior was devastating to local business owners. 

Changing our behavior for a day in November when we are all encouraged to Shop Small on Saturday isn’t going to solve this problem.  We need a long-term shift in consumer behavior in all of our communities. 

We believe the first step in moving in this direction is for all of us to simply do the math and understand as business owners and consumers how much of what we spend currently stays within our communities and how much goes elsewhere. 

I did the math both for Alignable (66%) and myself (44%) and I encourage everyone reading this report to do the same and share your numbers with others. 

By bringing awareness to these spending levels, we can create the movement necessary to spur the change needed for economic recovery across all communities.  

Learn more about the #MyMoneyStaysLocal Movement now.

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