When it rains, it pours. And it has stormed in 2020. Especially for small businesses.
SMBs have been hit harder by the economic impact of the pandemic than mid-sized and enterprise companies. And the data seems to be changing on the daily. In such a tumultuous business climate, it's hard to get reliable, accurate statistics about the impact of the COVID-19 on small businesses.
We've pulled together some data from some of the leading authorities for small businesses to help you understand how to pandemic is truly affecting small businesses, and how they can weather the storm.
The Real Impact of the Storm
Let's cut to the chase. Revenue is down and many small businesses are closing.
According to Main Street America and 30,000 small business owners, the aftermath is intense.
- 94% of small businesses report revenue losses due to the pandemic.
- 57% report revenue decrease of 75% or more
- 15% between 50-75%
- 12% between 25-50%
- 5% have maintained revenue.
- 1% show an increase in revenue.
- 62% report business closures (both temporary and permanent, voluntary and mandated).
- 78% have suspended storefront operations at some point during the crisis.
- 45% have changed their business hours
- 45% laid off employees
- 36% have added expenses to support health and safety protocols
Unfortunately, small businesses typically aren't prepared to deal with crises of this megnitude. They don't have the cash reserves or investment resources that their larger business counterparts have spent decades building.
Business Insider reports that 82% of businesses fail due to cash flow issues. Most businesses have a short cash runway.
- Only half of small businesses have enough cash to cover expenses for 27 days.
- The other half couldn’t last that long.
7.5 million small business owners have either already closed or are at risk of closing.
- 3.3 million small business owners closed their businesses between February and April 2020. That’s 22% of all small businesses.
The Hardest Hits
Some industries have been hit harder than others.
- Transportation & travel
- Amusement parks, entertainment centers & casinos
- Retail clothing stores
- Personal services
- Dentist offices
- Video & sound recording
- Restaurants & bars
- Retail furniture stores
- Hotels & hospitality
Restaurants & Bars
Restaurant owners across the country have been reeling since March. They've been overwhelmed with state restrictions, financial pressures, new health and safety protocol and patron concerns.
The bottom line revenue impact that the pandemic has had on the food service industry is disheartening when you look at it.
- The restaurant industry lost over $25B in March 2020.
- The number of seated diners is down by 22% worldwide.
- 110,000 US restaurants are expected to close.
- All types of restaurants are feeling the impact:
- Fine dining sales are down 90%.
- Casual dining sales are down 75%.
- Fast casual revenue is 65% lower.
- And quick service restaurants are down 60%.
- 22% of local Restaurants & Bars have closed.
Hotels, Hospitality & Leisure
Given that the world pretty much stopped traveling this spring and summer, it makes sense that a lot of hotel beds are going empty.
- 35% of small Hospitality & Entertainment businesses won’t be reopening.
- 4.6 million hotel room bookings will be lost in 2020.
Unfortunately, this doesn't seem to be a short-term trend. While travel will pick back up a little, it may be years before it returns to 'normal.'
In fact, the number of lost hotel bookings as a result of the pandemic is projected to reach 8.1 million by 2024.
Consumers are simply spending less. And many of their purchases have shifted online.
This isn't as big of a deal for major chains, or even ecommerce sites, but for small brick and mortar retailers and local shopping plazas, it's a different story.
- Forrester projects that global retail sales will be down $2.1 trillion in 2020.
- US retail sales is expected to be down 10.5% in 2020.
- 10% of small retail shops have already closed their doors for good.
Preparing to Weather the Storm
Although the eye of the storm may have passed, the skies ahead are still unclear. Smart business owners are getting proactive and looking for ways to weather the storm.
There are three ways your business can secure a longer financial runway.
- Seek financial support
- Reduce budgets
- Create a savings strategy
If you're trying to figure out how to save your business, this eBook contains some super smart tips and ways for SMBs to save money. It will help you build a savings strategy, make savings part of your business culture and identify some quick wins to help your company preserve the cash you have on hand.
Seek Financial Support
When faced with disasters beyond our control, government and public service organizations often rise to the occasion to support those most affected.
If your business has been affected by the pandemic, it's ok to ask for help.
- 70% of small business have taken or are considering taking financial aid
- The CARES Act provides $400 million in relief for small businesses
- Economic Injury Disaster Loans can provide up to $2 million in relief.
Companies often make budget cuts in order to make cash flow last longer. Spendesk gives a great breakdown of the places financial leaders look to first to reduce expenses during a crisis.
- 65% pull back on hiring
- This can be smart, unless those new roles are critical to your growth.
- 63% cut marketing & advertising budgets
- Some say that the brands that double down on marketing right now are the ones that will come out ahead.
- 25% of companies know this and are increasing their 2020 marketing budgets.
- 50% eliminate some team perks
- Be careful about the effect this can have on morale. Involving the team in the decisions can help get them on board.
Create a Savings Strategy
A savings strategy is different from cutting costs. Cost-cutting often involves trimming back on things that add value to the business. A savings strategy is all about looking at the ways your business might be wasting money and not even realize it.
There are six main areas you want to evaluate when building your savings strategy.
- Every dollar invested in employee wellness programs saves up to $6 in employer healthcare costs.
- Marketing & Sales
- Switching from paper to electronic communications can save your business an average of $725 per employee every year.
- The average SMB spends $10-50K on technology each year. 22% think they’re spending too much, but 52% think it’s not enough.
- Now is the time to negotiate discounts with your vendors. We’ve seen vendors giving as much as 50% off to new customers.
- Infrastructure & Operations
- Businesses can save over $10,000 each year for every employee they let work from home part time.
- US small businesses spend $60 billion annually in energy costs. This is one of the first areas businesses can look to save.
Go Green for a Brighter Tomorrow
Green energy solutions are the key to reducing this $60 billion expense. Plus sustainable energy options are healthier for employees, customers and the environment.
- Solar panels can reduce your company’s energy costs by 75%.
- Sustainable, low-emission appliances can save as much as 25-30% in energy costs.
- Hand dryers that use forced air instead of heated air can use up to 80% less energy.
- Energy-efficient computers use 25-40% less power than their counterparts. Laptops use 80% less energy than desktops.
- Smart thermostats can save 10-15% on heating and cooling costs.
- LED lighting can reduce your energy usage by 60%.
A Closer Look at LED
- Energy.gov reports that LED lights use up to 80% less energy than traditional incandescent lights.
- LED lights have a proven positive impact on employee health and focus. One study found as much as an 8% increase in cognitive performance.
- IHS Market released a study showing that LEDs eliminate close to 600 million tons of carbon emissions each year.
- That’s like planting 75,000 acres of forest or removing 50,000 cars from the roads.
- LEDs are projected to reduce US annual energy costs by $30 billion by 2030. An individual business owner can save 1000’s of dollars each year.
- 61% of businesses have already switched to LED lighting. Have you?
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Savings for Business Owners and the Planet
Future Energy Solutions is on a mission to make it easy for businesses to make smart energy choices. We’ve partnered with thousands of business owners to:
- Generate $200 million in in savings
- Install 500,000+ energy-efficient lights
- Eliminate 68 million lbs. of CO2 emissions yearly
If you need a smart saving solution that's better for your business and the environment, FES can help. Learn how you can switch to LED for zero upfront cost and get 15 years of free maintenance.
Here’s to a brighter, greener future for small business owners and our planet.