Small Businesses and the Pandemic
I’ve built my career around helping small businesses start and thrive. I’ve worked on solutions that address financing, opening new sales channels, managing inventory, leasing and more… but I’ve never looked at solutions for managing a business through a pandemic. Eager to turn anxiety into action, I decided to dig into the impact of the current global pandemic on small businesses and potential solutions. My goal for this post is to offer a framework for thinking about how small businesses will be impacted and to start categorizing the key solution areas. This is only a start and I know there’s much more that I can and want to do. I chose to share my research and ideas here so that they have the potential to inspire more conversation, ideas, and action.
A Framework for Evaluating Impact
Not all small businesses will feel the pain of the pandemic in the same way. I would argue that the impact on a business will hinge mainly on the following:
- Product — Is the product the business offers in high demand during the pandemic? Can customers still access that product? If customers do not demand and/or can not access the product, can the business adapt their offering to meet their needs? Most small businesses are now dealing with customers not demanding their products and/or not being unable to access them. Over the last few days, I’ve seen so many great examples of businesses that are creatively improving access to their product and even adjusting their offering all together to meet demand. For example, fitness studios that are moving to online streaming and restaurants that are adjusting their menu for delivery.
- Fixed Costs — This is largely composed of full time labor, rent for those with physical locations, and a smaller category that I’ll just call “other contracts,” which includes any fixed purchasing contracts like a monthly insurance bill or scheduled waste management services. Labor is the largest cost for most businesses and presents the biggest challenge. Businesses that can afford to do so are choosing to continue paying employees for their scheduled shifts to support their team members in this challenging time and so that they don’t lose those individuals (finding new employees is expensive and time consuming). Owners will do everything possible to cut other costs before turning to the option of reducing wages, furloughing wages, or laying off employees. For those with a storefront, asking their landlord to reduce rent is an option.
- Resources — This refers to your savings, but also your good will with the community and your plans for future growth. Of course, the most secure way to weather any storm is to have savings on hand. If you have clear plans for growth (new product launches or store openings in the wings for example), you may have more confidence in future sales and your ability to repay debt you take on during this period. The least obvious resource is goodwill — the more goodwill you have built with your community, the more likely they are to answer your calls for support. For example, I’ve seen fitness studios leveraging their goodwill by asking members to consider keeping their membership and bakeries asking patrons to consider buying gift cards.
Solution Areas
If you are an individual, the answer is fairly straightforward; you can support your local small businesses by continuing to patronize them. Order delivery directly from your favorite restaurant if they are open, try a virtual class or event (even if it’s a clunky experiment from your favorite yoga instructor to teach a class over Zoom or a comedy club streaming a performance to an empty room!), and consider purchasing gift cards. If the small business has an email list, make sure that you are on it to get updates about new offerings and ideas for offering support.
Many larger, or simply more well-resourced, businesses are well positioned to support the small businesses in their community as well. It would be impossible to create an exhaustive list of ideas because the right strategy for each business needs to authentically match with its unique expertise, resources, and values. Instead, here are two examples:
Technology companies that help small businesses deliver their products and services online: Companies that facilitate deliveries, e-commerce and email marketing providers, and streaming services are all in the position to be heros. Consider providing pro-bono consulting and technical support, sharing how-to guides, or easing the set-up process for new users.
Landlords with small business tenants: Landlords can consider offering temporary rent abatements to tenants who have been ordered to close due to the pandemic. For those tenants who chose to stay open, I’d suggest that landlords give tenants the option of paying rent as a percentage of in-store sales rather than a fixed fee for the remainder of the pandemic. It’s in the best interest of the landlord for their tenants to succeed over the long run, even if that means less rental income in the short term.
This doesn’t even touch on what the government can do to support small businesses. The government’s solutions will largely center around creating more resources (grants, loans, tax abatements, etc.) and while some programs have already been announced, I expect that list will continue to grow.
