The Impact of COVID-19 on Small Business Outcomes and Expectations

 


The coronavirus has affected all facets of our lives, from the way we socialise to the way we work, to the way we consume and beyond. Economies around the globe have been profoundly affected, with many going into recession, millions unemployed and many businesses threatened with temporary or permanent closure. As the world tentatively peeks out from under the blanket of lockdown, we are facing a ‘new normal’, and the landscape of business will have been changed, possibly forever. Millions of people are now working remotely, and changes that were on the distant horizon have been suddenly forced into implementation. Small businesses face a real time of uncertainty, and a set of specific challenges, and must change their expectations to survive in what looks like a bleak foreseeable future. 

The way we work

There has long been a consensus that technology will drive changes in the way we work, but rather than a distant possibility, technology has come to the fore in determining how and where we work. With social distancing measures in place, millions are now working remotely, using advanced video conferencing solutions and home offices to keep businesses afloat during the pandemic. In a way, the crisis has forced the hand of change, and we are learning that it is possible to continue trading with a fully remote workforce. This has led to a reexamination of the concept of work as a place, and the socio-economic value of that concept. While many employers have seen that remote work is helpful, and potentially money saving (less overheads, more flexible working policies etc) and many employees have found an increase in productivity and wellbeing attributable to the lack of a draining commute, many will still see the benefit of a communal workspace. More tricky is customer interaction, face to face in person creates a more intimate bond than video conferencing. 

Expectations

Small businesses are especially vulnerable to the effects of the pandemic. In an American survey, it was estimated that 43% of small businesses had temporarily closed, and employment reduced by 39%. The dramatic economic downturn around the globe has led to a widespread tightening of belts, profit margins are down and workforces are being diminished. Having to deal with working with smaller margins is further exacerbated by the effect COVID19 has had on postal services, couriers and freight handlers - a reduced capacity means that small companies which supply products with sensitive lead times will have to accept that they will lose business. Companies that supply products that people touch, such as printed marketing materials may see a drop in business, but will be hoping to bounce back once things start to ease up.

Financial fragility

Many smaller businesses are also facing big setbacks because of their inherent financial fragility. Most companies with $10,000 expenses reported that they have on average two months worth, with their cash flow heavily dependent on keeping their day to day business going. Compared with larger companies, who often have huge financial reserves and back up plans, the vulnerability is highlighted. The length of the crisis is going to be critical to smaller businesses, some forecasters project 35 million job losses if it continues for another six months. But while some areas are particularly fragile, such as retail, arts and entertainment, hospitality and personal services, other areas such as finance, professional services and real estate are more robust. This is because they are less client facing, and therefore less restricted. But of course, with a general economic downturn, no industry can escape the negative repercussions of the pandemic. 

Bailouts

Across the globe governments have been rushing through legislation to provide support for industry. In some cases, loans will be ‘forgiven’, effectively turning it into a grant rather than a debt. While this is obviously an important lifeline, for many small businesses the bureaucracy involved in securing a loan could mean that the money is received too late to stall a closing or job losses. The sheer number of small businesses applying means a lot of red tape for governments as they check each company’s eligibility. 

All areas of business and industry have been turned on their heads by the coronavirus pandemic. And while the immediate future looks bleak and uncertain, the economy will adapt and survive, and the way we work will have changed profoundly.


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