Have you been to your city’s or town’s local main street since the COVID-19 outbreak? Even as states begin to open up, what were once busy streets packed with small shops and customers are now eerily vacant.
Many local shops and restaurants are feeling the pain from this pandemic. Many locals are doing their best to help support their favorite local shops, but it’s still not enough. The worse part is many will continue to feel the financial strain to where they end up hanging a business closed sign.
There are, however, far more factors causing small businesses to struggle. To fully understand the effects of COVID-19 on small businesses, one must understand how different parts of a business.
Are you wondering why some of your favorite cafes and stores are closing their doors? Here’s a closer look at how COVID-19 has affected and will continue to affect small businesses.
How COVID-19 Affected Small Businesses
Let’s rewind back to mid-March. COVID-19 began sweeping through the United States causing serious illness and death to many Americans. In response, states decided to close all non-essential businesses and enact “Stay-At-Home” orders to keep their citizens safe.
Despite the uncertainties and possible financial downfall, non-essential businesses closed their doors. During that time, many drafted and enacted plans to safely continue business with carry-out and online ordering. Many businesses hoped new procedures would be enough.
Unfortunately for many businesses, staying open became more expensive than closing. Fewer people came out and what little money businesses could make wasn’t enough to cover the costs of staying open. To save money, many small businesses began hanging the business closed sign not knowing when they could open again.
The Costs of Owning a Small Business
Owning a small business is not a cheap endeavor for most business owners. It requires financial planning, saving, loans, and patience. Here’s a look at some of the costs of owning a small business.
Small businesses may purchase or rent a space that, oftentimes, requires a monthly payment. For most businesses, rent continued no matter the financial hardships they faced due to the pandemic.
Employees are an essential part of every small business. Without them, many businesses wouldn’t be able to function. For businesses that chose to stay open, they continued to pay their employees for their time, even if they didn’t make enough to cover business costs.
Most small businesses need electricity and water to function. Utilities did not stop during the pandemic.
Other costs include paying any loans and business insurance. The business owner also needs to receive a payment to continue paying for their business as well as their personal bills.
Regardless of the pandemic, business bills continued. While some states are offering financial relief, many small businesses continue to face financial hardship.
Small Business Financial Relief
Are small businesses simply left to fend for themselves during the COVID-19 outbreak? The answer is a bit muddy but there have been some financial relief options for businesses of all sizes.
The CARES Act
At the end of April, Congress passed the CARES Act or Coronavirus Aid, Relief, and Economic Security Act. This Act provided financial help to millions of Americans, small businesses, and local governments.
This Act offered a paycheck protection program that granted small businesses up to 8 weeks worth of payroll costs. This also included insurance benefits. Small businesses could also use the funds to help with other bills like rent, utilities, and more.
The CARES Act helped many small businesses alleviate some of their financial hardship. However, there were others who couldn’t get the support they needed because they didn’t meet CARES’ program standards or couldn’t afford to close for longer than 8 weeks.
Small Business Loans
If you’ve been on social media recently, it’s likely you’ve seen the ads for available small business loans to help those impacted by the Coronavirus. The SBA (Small Business Administration) offers financial relief options for small businesses impacted by the Coronavirus. This is in addition to the Paycheck Protection Program.
Besides offering loans, the SBA also offers other financial resources for businesses to receive a loan or debt forgiveness. Small businesses that meet SBA’s standards will have 6 months of principal, interest, and other fees covered. This doesn’t cover Economic Injury Disaster or Paycheck Protection loans.
Local governments and states are also scraping together funds to help their local businesses. Wisconsin’s SBDC (Small Business Development Center), for example, is offering additional loans. They’re also helping with Economic Injury Disaster Loans and more financial resources.
While there isn’t a solution to the economic hardships small businesses are facing, there are many resources available. Many business owners are spending more time looking for ways to recoup financially from the pandemic.
How to Avoid Hanging the Businesses Closed Sign
Small business owners aren’t relying solely on relief funds and loans to keep their doors open. Many are looking at how they can move forward and keep their doors open after the pandemic.
As states start to reopen, small businesses are also making plans to open their doors again. Service businesses found their call volume has been affected by COVID-19 as their loyal clients are looking to enjoy services once again. Other small businesses in the food industry are trying to plan how to safely bring customers back.
Here is what many small businesses are doing today to prevent hanging a permanent business closed sign.
Reforming Business Plans
The first step small businesses are taking before reopening is reviewing the financial damage of the pandemic. This includes how COVID-19 affected their marketing, employees, and other business areas.
From there, small business owners are looking back at their business plans and making adjustments. Businesses will have to make adjustments to their business models to become successful after COVID-19.
Brick and mortar businesses may start shifting to eCommerce and selling goods online. Businesses in the food industry may consider focusing on To-Go orders and outdoor seating to follow social distancing.
Small business owners don’t need to feel lost as they go through this. The SBA offers many resources and mentoring services to help owners reform their business plans for success in this new age.
Determine Funding for Recovery
There are a few small businesses learning they might not need additional funding moving forward. Many others aren’t as fortunate and need assistance to jump-start their business.
Besides the federal options, there are other places offering funding. These include traditional SBA loans, business lines of credit, and financing. The interest or cost of these options may not be as economic as the federal ones but they are viable options to help.
Recreating a Budget
Small businesses are also revamping their budgets. This new budget will need to account for additional spending due to COVID-19.
Businesses may need to spend more on:
- Hiring and rehiring employees
- Purchasing fresh inventory
- Advertising for reopening
- PPE (personal protective equipment) for employees
- Costs of working remotely
- Costs to maintain social distancing of customers in the business
Not all businesses are experiencing these costs as they vary by industry. Business owners are planning their new budget to include necessities and cut whatever is not essential.
For some business owners, this means taking a salary cut or skip paying themselves altogether.
Planning a Timeline to Rebuild
There will be a period of time where both business owners and customers will need to be patient as a business rebuild. The process of rebuilding is long and messy. To speed up this process, small businesses are creating a timeline to plan what needs attention first.
The timeline helps businesses prioritize what items and actions are the most important. Some businesses may start with securing extra funding followed by rehiring employees and restocking inventory.
As a business accomplishes the tasks on their timeline, they should track this progress to see what’s helping the business and what isn’t. This way business owners can save valuable funds for actions that will offer a greater return on investment.
Planning for the Future
Finally, businesses are planning for the future and doing their best to avoid the business closed sign. COVID-19 severely impacted economies and businesses around the globe. Changes are taking place in most businesses to promote the health and safety of employees, owners, and customers.
Other business changes include making contingency plans for the possibility of another crisis. This may lead some businesses to cut nonessential spending or narrow their products and services. Some are setting money aside for savings accounts and paying off debt.
What’s Next for Small Businesses?
As states start reopening their economies, small businesses are focusing on how they can adapt to avoid hanging a permanent business closed sign. Many are opening in phases as they complete their business models and plans. Both businesses and customers need to work together and have patience as they traverse a post-COVID-19 economy.
Learn more about small businesses and company tips by checking out our latest articles.
