- The pandemic is still raging on in the U.S., yet 64% of small business owners on Main Street are confident that they can survive for more than a year under current conditions, the Q3 CNBC|SurveyMonkey Small Business Survey revealed.
- That is nearly double the 34% that held this optimistic view when polled in April.
- Government relief efforts including PPP, support from local communities, the adoption of technology and pivoting to new lines of business, are responsible for the turnaround in attitude among business owners.
The pandemic is still raging on in the U.S., yet 64% of small business owners on Main Street are confident that they can survive for more than a year under current conditions, the Q3 CNBC|SurveyMonkey Small Business Survey revealed on Monday. Surprisingly, that is nearly double the 34% that held this optimistic view when polled in April. And 46% of those surveyed say they expect their company's revenue to increase over the next 12 months.
The study polled 2,040 small businesses nationwide July 20-27 in a wide swath of industries from food services, retail and consulting to manufacturing and construction. Fifty-three percent of respondents were sole proprietorships or S Corporations and 80% had less than 20 employees.
According to small business experts, this turnaround in attitude may be due to many factors. One is that government programs, including the Paycheck Protection Program and Small Business Administration economic injury disaster loans (EIDL), have given some businesses a life preserver to ride out the economic uncertainty. And the loans have given owners time to pivot and reinvent their business models so they survive the new normal.
Gary Brand, a partner at Savannah, Georgia-based business consulting firm Brand Ferland Advisors, and a trustee of the National Small Business Association, said the end of lockdowns since last quarter, combined with the PPP loans and SBA EIDL loans, have "given lots of business owners some breathing room to reevaluate their business and how to tweak products and services."
Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, an advocacy and educational group, is witnessing the phenomenon nationwide. "Small business owners have quickly learned that they can operate by using various models to meet the needs of customers in the Covid-19 economy. Moreover, consumers are highly supportive of small businesses in their local communities, which is driving small business confidence."
Another trend is the adoption of technology to maintain operations. "Business owners have migrated in mass to technology tools and the cloud, which is allowing them to operate more effectively and efficiently," Kerrigan observed. "This is the silver lining of the pandemic. The acceleration in the use of technology is driving innovation and is providing a boost to their bottom lines — and the overall outlook of small business owners."
Greg Kowalczyk, partner in Fabio's Bistro in Fanwood, New Jersey has experienced this first hand. His upscale pizzeria in the center of town has pulled through the pandemic thanks to his takeout business and the support of his local patrons. "The residents have remained faithful and have done whatever they can to keep us going whether it has been ordering more food than normal, tipping our drivers and providing emotional support. They are the backbone of our business," Kowalczyk stressed.
"I have a positive outlook for the months ahead. I think we will make it and we won't have to close our doors," he added. "But there are challenges including the high cost of cleaning supplies, sanitation and PPE. It's been a huge hit costing us $400 to $500 monthly and that eats into our operating margins."
That is an issue many small businesses are now facing. According to the survey, 33% of small business owners say coronavirus safety measures are cutting into their profits.
Among hardest hit are restaurant owners. As revenues have plummeted, the cost of PPE for them is staggering. Rohit Arora, president of Biz2Credit, who just released a Small Business Financial Health study, says "they will shell out an average $52,106 on average for PPE this year that will reduce gross margins."
The bottom line is that Main Street has to leverage technology to reduce operating costs and expand into new avenues of growth, whether it be developing a bigger online presence, building a direct-to-consumer marketing strategy or simply creating a new product line.
That is already happening. According to the CNBC/SurveyMonkey Small Business Survey, 69% of respondents say it's likely the pandemic will have permanent effects on the way they run their business.
Dan Levin, CEO of Cain Millwork, based in Rochelle, near Chicago, exemplifies the trend. For over 30 years, his family has run the architectural millwork company that makes cabinets, molding, and trim made of wood, metal, and stone for hotels, casinos, stadiums and other high-profile venues, including those for the Chicago Bulls. Over the last few months, he has invested in upgrading his engineering and production software to improve operations and has developed a new line of business for clients: acrylic safety screens with millwork that compliment existing decorating aesthetics.
"We are looking at new opportunities," says Levin, who notes that the company's annual revenue is around $25 million. "Our clients want well-designed solutions that adhere to safety guidelines during this time, so it's a niche we are developing."
Rebecca Gardner, owner and creative director of Houses and Parties, which has offices in Georgia and New York, is also optimistic about the future of her business despite the fact that her entire event pipeline for 2020 was either postponed or cancelled by the end of March. She cited the CARES Act and PPP funds that enabled her to retain employees, absorb the initial shock of the shutdown and shift to a new business model she had been mulling from before the coronavirus — a focus on events designed for smaller groups in a private home setting to celebrate milestones.
She said interest in the past six weeks has proven what she suspected, that people would be staying close to home but continuing to want to mark occasions with celebrations. She also is setting up an e-commerce site to launch in October which will offer curated artistic pieces, from heirloom pieces to party masks, to go with in-home events.
"It sounds like a knee-jerk reaction to Covid, but it is only natural that people want to share with their family and friends. Even before Covid, the idea was entertaining at home and that means enjoying the effort of cooking and setting a table with family and friends, and whether it is a birthday or another occasion, to gather and make the effort so special and memorable," Gardner said. "I am very confident in 12 months, my event business will be even stronger than it was in February 2020, because I think that people will be ready to celebrate like never before."
Some companies were just lucky enough to be in unique lines of business that are thriving during the coronavirus crisis. For years, Terraboost Media was making advertising kiosks for customers that included stations with sanitary wipes. Business has exploded since the pandemic as more and more retailers, schools, airports and others look for wellness solutions for customers.
"Our business is up 600% since February and we have grown our workforce by 40%," says Brian Morrison, president of Terraboost Media in Chicago, noting customers include Rite-Aid, Walmart, CVS and Shop Rite. "Universities now are also coming to us as they try to develop plans to reopen their campuses and we are working with Boston University and the University of Miami."
"Over the next 12 months, the outlook for my business is positive and we will boost our manufacturing output of sanitary wipes," he said. Right now, the company's advertising kiosks are at 104,000 kiosk locations nationwide.
"Today it's all about running purpose-driven companies to serve the public," Morrison said. "Everyone is looking for ways to keep the economy running while keeping people safe."
Morrison's mindset is shared by many on Main Street. According to Andrew Sherman, a corporate attorney and partner at Seyfarth Shaw in Washington D.C. who works with small businesses, "Many business owners are hopeful that we are at halftime in the battle to overcome the business challenges caused by Covid-19. They are cautiously optimistic that with a little more help from the government, the markets and loyal consumers that they can make it across the finish line — alive but with battle scars."
The future role of government assistance for small business is uncertain, with the PPP expiring last Saturday for businesses who have not yet applied for a loan. Lawmakers in Washington, D.C., have yet to reach any agreement over a new aid package for Americans, including new loan programs and second-draw PPP loans for businesses in need. President Trump's executive orders signed over the weekend, which include unemployment assistance, a payroll tax hiatus, student loan relief and eviction protection, do not cover small business.
Amanda Ballantyne, executive director of the small business advocacy group Main Street Alliance, believes there will be winners and losers in the months ahead. "We are moving into a phase where we will see who is the most vulnerable, and who can weather it; and there are sharp contrasts. I do think there are plenty of business owners in certain sectors who will eke through, but there will be catastrophic losses…. It will be another quarter before we have clarity on what that looks like. It depends on how far public policy lets the damage go," Ballantyne said.
-- Additional reporting by Eric Rosenbaum
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