2020: Small Business Disaster

Small Businesses In Trouble

NFIB survey is way too optimistic of a depiction of how small businesses are actually doing. The strength of small businesses is strongly dependent on the industry and state/city the business is in. Let’s look at more Paychex data from November. In Texas and Florida, the indexes are at 96.73 and 96.72. On the weak side, the worst 2 states are New York and Washington which are at 92.35 and 91.59. 

If you are a restaurant in Seattle, you’re barely surviving, while if you are a construction company in Denver, you are doing very well. Denver’s index is at 97.31 and it’s at 97.58 in construction. On the negative side, in Seattle, it’s at 91.29 and it’s at 88.14 for leisure and hospitality.

Bank of America’s survey of small businesses is quite negative. In the survey of 1,000 entrepreneurs from July to September, 39% said their local economy would improve in the next year which is down from 51% before the pandemic. Hiring plans and sales expectations were the lowest since 2012 and 2013. That’s not as bearish as the Paychex data.

7 in 10 small firms plan to keep staffing the same in 2021. Arguably, that’s bad news because we want them to rehire the people they fired in the spring. The top 3 concerns small businesses had were healthcare costs, COVID-19, and politics. The good news is 2 of those 3 will be gone in 2021. The bad news is healthcare costs will probably be an issue for years to come. Over 80% of small businesses stayed open during the pandemic because they were essential or complied with social distancing rules.

This makes the temporary liability shield that McConnell supports important because it limits the lawsuits on small firms who complied with government regulations. It’s uncertain how successful this will be. We can be quite confident there will be a lot of lawsuits once the dust settles on this pandemic. 

COVID-19 caused 24% of small firms to retool operations and 61% to develop new products and services. There were a ton of added costs this year with fewer sales as a reward. Think of all the costs restaurants had to deal with to make it comfortable to eat outside just to get fewer customers as a reward.

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