Small business recovery still has long ways to go

Not only have small businesses been especially hard hit by the pandemic but there often is a ripple effect throughout the local community.

“Where we spend our money matters,” said Eric Groves, cofounder of Alignable, an online small-business referral network. “If we want our local economies to recover, we simply need to get everybody to shift their spending whenever possible from companies like Amazon to locally owned businesses.”

Why?

“Because when you spend locally, a lot more of what you spend stays within the community,” he said. “In contrast, when you spend on Amazon, you support sending really rich people into space for a four-minute joy ride. Up to you, but I’d rather support my local merchants.”

Alignable’s Recovery Report for October found several positive signs.

“After two months of rising concerns around the surge in Delta variant cases, this past month we saw some encouraging trends, with a slight increase in the percentage of businesses stating they’re feeling the impact — once again — is on the decline,” Groves said. “While the 34 percent of businesses that reported significant negative financial impact remained flat in the past month, it did stabilize the trend over the last two months, where it had jumped from 22 percent to 34 percent.“

Among other highlights of the report:

Openings are up. Seventy percent of businesses currently are fully open and providing the same level of products or services as they did before the pandemic. Heading into the critical fourth-quarter season, Groves hopes to see that number climb north of 80 percent before the end of the year.

Inflation is a concern. Inflation is the No. 1 concern on the minds of nearly half of all business owners. Thirty-eight percent of small-business owners cited inflation as their top concern last month, but that figure jumped 10 percentage points to 48 percent this month.

More customers are returning. This month saw a modest improvement in the number of customers returning to small businesses. The percentage of businesses reporting customer levels below 25 percent is declining, while those reporting more than 90 percent of pre-COVID customer counts increased from 31 percent to 34 percent: The current sentiment is toward continued improvement in customers returning, which is a positive step in the right direction.

Revenues are rebounding. Forty percent of small businesses still say they’re earning only 50 percent or less of their pre-COVID monthly revenues. Last month, that figure was 43 percent. Overall, 30 percent of businesses report they currently are at or above pre-COVID revenue levels.

Expenses are increasing. For two months in a row, 85 percent of business owners said the cost of their supplies and inventory has increased in comparison to pre-COVID levels. Hiring continues to be a challenge for many business owners. Forty-five percent of business owners are struggling to hire employees, and 42 percent are finding it significantly more difficult.

Mission not yet accomplished. Overall, 30 percent of businesses are at or above pre-COVID revenue levels. This is 2 percent better than it was last month but 5 percent less than it was in July

“In my mind, mission-accomplished status requires us to get to the point where at least 80 percent of businesses report being at or above pre-COVID revenues,” Groves said.  “Back in June, business owner sentiment had that happening sometime in the latter half of 2022. But now, business owners themselves are forecasting that won’t happen until some point in 2023.”

The pandemic has been like a 20-month hurricane for many business owners, he said.

“In many consumer businesses in particular, small-business recovery means getting back to a sustainable business model, one where the revenues coming in cover the costs of running the business,” Groves concluded. “This margin provides the extra cash flow to pay down debts, reinvest in the business and build up cash reserves for the next challenging time.”