Small businesses are an extremely important contributor to the global economy. In fact, this sector accounts for 47.5% of the workforce in the U.S., employing roughly 59 million people. Small businesses generate 44% of our country’s GDP. With every state issuing stay-at-home orders and closing non-essential businesses, the small business sector appears to be the most endangered and vulnerable to the coronavirus impact, economically.
How are small businesses affected by the coronavirus pandemic?
The profits of small businesses depend on regular, short term demand. Once the demand is unexpectedly and rapidly reduced, companies start to face serious difficulties. Sadly, most small businesses do not have resources or a safety pillow for the state of emergency like the one happening now. The majority of companies can’t afford to close up for an uncertain amount of time without any budget cuts, layoffs, debts, and even complete shutdowns. The National Small Business Association conducted a recent study on how the coronavirus disruption affects small businesses in the U.S. Here are a few key takeaways to understand the impact of COVID-19:
- 49% report reduced customer demand
- 33% report delays or major closures in supply chains
- 20% suffer from employee absences
- 54% expect economic recession in the upcoming year
On the same token, there have been some positive statistics:
- 22% don’t report any major changes or disruptions
- 7% see an increase in their products or services during this time
The majority of business owners are worried about economic uncertainty and a reduction in customer demand and spending. Whatever happens, your business is not alone. There are solutions that can help eliminate the damage and avoid a severe crisis. Here are a few practices that small businesses can use to soften the consequences of an economic disruption.
How can small businesses survive the coronavirus pandemic?
Consider taking governmental loans and aid packages
In March, the Trump Administration issued a $7 billion disaster loan for small businesses with low interest and Congress is considering to greatly expand it (to as much as $300 billion). In addition to governmental loans, state officials are also taking initiatives and offering various aid packages. If your business is facing challenges, consider looking at the terms and conditions and apply for a loan. Additionally, there are a few private sector FinTech companies that have expressed their intention to lend to small businesses, like Kabbage and Fundbox. Among these aid programs, Facebook has launched grants for small businesses, totaling $100 billion in grants.
Reformat your services
This option is not available to all businesses, but if you can fully or even partially reshape your selling model to take out or delivery, it can make a difference. This is a solution for food industry businesses, but retailers and other companies can develop an online strategy to keep the sales flow going, too.
Renegotiate contract terms
In the current situation, you can rearrange your rent, debt and other obligatory payment terms. Many landlords and financial entities are allowing the postponement of payments for business owners, offering discounts, and allowing interest-free payments during this challenging time. Before cutting employees or executing other painful budget operations, explore the ways to maximize your spending. Above all, stay in touch with your customers. Your response to the crisis is forming you as a brand in the eyes of the consumer, so don’t forget about your audience and continue to gain their loyalty and support.