This week on the Wall Street newspaper reported that nearly 300 companies that had received loans under the paycheck protection program had filed for bankruptcy. The next day the Newspaper Highlighted Americans are using the Covid-19 pandemic to take their first steps in their entrepreneurial journey.
Existing small businesses continue to struggle. New entrepreneurs are looking for opportunities. This is what the data seems to indicate on the state of small businesses and entrepreneurship in the midst of the third wave of Covid-19.
Small businesses that suffer, see the tough roads ahead
In early November, Goldman Sachs probe nearly 900 small businesses. They found that four in ten had laid off employees or reduced their pay. If further relief from the government was not expected, 38% of them said they should do the same. Half of small business owners had stopped paying themselves. (Federal Reserve surveys at the end of 2019 found that in the event of a two-month revenue loss, 37% of small businesses would respond by cutting wages (for owners, too) and 33% would lay off employees. as they said.)
Over the summer, three-quarters of those polled by Goldman Sachs said they believed their business would survive. This slid lower in September and slipped again to 60% in November. Only small percentages believe their business will not survive. The biggest increase is in the category of uncertainties, with a third of them saying they don't know whether their business will survive or not.
The Census Bureau just released another week of The data of its Small Business Pulse Survey. Among the relevant results:
- As of mid-November, 74.1% of businesses report a significant or moderate negative effect from the pandemic. It's just a slight drop from mid-October, when the figure was 74.8%.
- 27% of small businesses say they have more than three months of cash flow. This number has been around the same level since the beginning of September.
- 29% say they have less than a month of cash, unchanged from mid-October.
- 47 percent say it will take more than six months to get back to "normal" operations. Every reading on this issue since August has been higher than during the April-June period.
In response to the WSJ story on PPP bankruptcies, some predicted a "strong acceleration" in the months to come. November data from the Census Bureau and Goldman Sachs seem to support this view. For many small business owners, the horizon of recovery and the return to normalcy keeps receding.
Business applications through the roof
Applications for Employer Identification Numbers (EINs) are breaking all kinds of records. (I go in more details hereSuffice it to say that in the 65 quarters of data available to the Census Bureau on these commercial applications, never been a quarter like the third quarter of this year.
Why? Part of those business applications could be pent-up entrepreneurial demand - that is, people who may have started their business in April but waited until August. Some of them could be "reboots" - those who are forced to shut down a business for good in the spring and make another attempt. And, some of them might try entrepreneurship because they lost their jobs. We have seen in previous recessions a positive correlation between rising unemployment and increasing entrepreneurial activity. (Some call it “entrepreneurship out of necessity”; I've never been a fan of the term.)
The peak of business applications could be a sign "Reallocation", which would correspond to the theoretical expectations of economists. We know from historical records that slowdowns present an opening for the creation of new businesses.
There is some evidence for this in the latest version of Yelp data analysis. Despite the earlier results of a huge wave of permanent business closures, the most recent figures show "promising signs of adaptability." Yelp found a "significant number of entrepreneurs" opening restaurants and food stores. The company is promoting “optimized restaurants in the event of a pandemic” with increases, for example, in food trucks and pop-up restaurants. The opening of businesses in this space is roughly in line with the pace observed in 2018 and 2019. BFS census data, with around 25,000 more business applications for “restaurants and drinking places” compared to 2019.
What does the data mean for public policy?
At the top level, there doesn't seem to be much contradiction in all of these data points. Covid-19 has disrupted everything. Existing businesses that have worked tirelessly to build customer and supplier networks have seen all of that hard work dissolve. Most small businesses are service-oriented and operate on low margins, so when consumer spending was halted by foreclosure restrictions, they didn't have much to do. While polls found a fairly healthy small business landscape just before the pandemic hit, significant weaknesses existed. Small businesses, start-ups and those owned by Blacks and Latinos were, at the end of 2019, more likely to be "at risk" or "struggling" in their financial health.
It's not necessarily surprising that existing small businesses have been hit hard by the pandemic and its public health response. The restrictions were designed, after all, to disrupt patterns of interaction and related consumption. We see this relationship in the Yelp data, with a correlation between the pace of reopens and fluctuations in new cases of Covid-19. Since Yelp's analysis is only for September, business reopenings can be expected to decline right now during the strong fall infection spree.
One of the questions these trends pose is what they mean for federal lawmakers working on yet another economic stimulus bill. Will some in Washington look at the census business app data and say, "There's no need for more stimulus, entrepreneurship is booming!" It's a one-handed situation. Millions of small businesses continue to struggle; tens of thousands of entrepreneurs view a new business as their salvage vehicle. Can the same support mechanisms help them both?
The biggest problem founders and small business owners have is that they’re experts in their field and novices in what it really takes to effectively run a business. That’s what usually trips them up, sooner or later.
Don’t let that happen to you. Admit that you don’t know what you don’t know about business, starting with these 15 tips guaranteed to help keep you and your company out of hot water. Some are straightforward, others are counterintuitive, but they’re all true. And some day they’ll save your butt.
Always make sure there is and will be enough cash in the bank. Period. The most common business-failure mode, hands down, is running out of cash. If you know you’ve got a cash flow or liquidity problem coming up, fix it now. You can’t fire bad employees fast enough. You just can’t. Just make sure you know they’re the problem, not you ( see next tip ).
The problem is probably you. When I was a young directeur, my company sent us all to a week of quality training where the most important concept we learned was that percent of all problems are management problems. When things aren’t going well, the first place to look for answers is in the mirror.
Take care of your stars. This goes for every company, big and small. The cost of losing a star employee is enormous, yet leaders rarely take the time to ensure their top performers are properly motivated, challenged, and compensated. Your people are not your kids, your personal assistants, or your shrink. If you use and abuse them that way, you will come to regret it. Capiche ?
Learn to say ' yes ' and ' no ' a lot. The two most important words owners and founders have at their disposal are “yes” and “no. ” Learn to say them a lot. And that means being decisive. The most important reason to focus – to be clear on what your company does – is to be clear on all the things it doesn’t do.
It boggles my mind how little most entrepreneurs value their customers when, not only are their feedback and input among the most critical information they will ever learn, but their repeat business is the easiest business to get. Learn two words : meritocracy and nepotism. The first is how you run an organization – by recognizing, rewarding, and compensating based solely on ability and achievement. The deuxième is how you don’t run an organization – by playing favorites and being biased.
Know when and when not to be translucide. Transparency is as detrimental at some times as it is beneficial at others. There are times to share openly and times to zip it. You need to know when and with whom to do one versus the other. It comes with experience.
Trust your gut. This phrase is often repeated but rarely understood. It means that your own instincts are an extremely valuable decision-making tool. Too often we end up saying in retrospect and with regret, “Damn, I knew that was a bad idea. ” But the key is to know how to access your instincts. Just sit, be quiet, and listen to yourself.
Protect and defend your intellectual property. Most of you don’t know the difference between a copyright, trademark, trade secret, and patent. That’s not acceptable. If you don’t protect and defend your IP, you will lose your only competitive advantage.
Learn to read and write effective agreements. You know the expression “good fences make good neighbors ? ” It’s the same in business. The more effective your agreements are, the better your relationships will be.
Far too many entrepreneurs run their business like an extension of their personal finances. Bad idea. Very bad idea. Construct the right business entity and keep it separate from your personal life. Know your finances inside and out. If you don’t know your revenues, expenses, capital requirements, profits ( gross and net ), debt, cash flow, and effective tax rate – among other things – you’re asking for trouble. Big trouble.
You don’t know what you don’t know. Humility is a powerful trait for leaders, and that goes for new owners, veteran CEOs of Fortune 500 companies, and everyone in between. More times than not, you will come to regret thinking you knew all the answers. Behind every failed company are dysfunctional, delusional, or incompetent business précurseurs. The irony is, none of them had the slightest idea that was true at the time. Even sadder, most of them still don’t. Don’t end up like one of them.
For every success you have in growing your market share, another or other businesses will inevitably lose ground. Here are 11 quick and easy business tips to gain a competitive advantage over your rivals and insulate yourself from the threat of new entrants in the market.
Of course, we all want to spark business growth and increase revenue. But the way you do this in a sustainable way is to focus instead on the building of a loyal database of avid fans. Content marketing, paired with optimized website forms and intelligent mail automation follow-up is critical to business success. This approach builds trust by giving away free value before asking for someone’s hard-earned money. Not an professionnel in creating optimized lead generation pages on a website ? No worries, use a trusted tool like Leadpages to make it happen.
Like it or not, folks out there aren’t searching for your brand, they’re just looking to solve a problem or find a particular type of product ( unless you run Starbucks or Adidas ! ) Don’t list all the benefits your product brings. Focus on the solutions. Explain to the customer in simple, straightforward terms how or why your product can help them or assist in the attainment of their goals. Consider FedEx’s iconic slogan : When it absolutely, positively has to be there overnight. This was a clear example of addressing widely-spread anxiety about the reliability of delivery services. Run through some market research to profile your target customer. How does your product or service – and your delivery and and price point – solve other people’s problems and make their lives easier or more pleasurable ?
Dropping prices doesn’t necessarily raise sales, for instance ( though it will definitely squeeze margins ). If you place yourself as a premium brand, then your customers aren’t necessarily value-driven in the first place, and cutting prices could even tarnish your brand. Consider this case study from Robert Cialdini’s seminal book ‘Influence : The Psychology of Persuasion’ : a jeweller sold out of turquoise jewelry after accidentally doubling, instead of halving, the price. The inflated price tag lent the product an unwarranted cachet ! If you are a premium brand, there are ways to optimize your pricing without lowering prices. For example, offer the quality-conscious customer an ‘exclusive’ benefit that your rivals do not or cannot provide. If you are at the value-driven end of the market, on the other hand, don’t assume slashing prices means incurring a loss. Low pricing can help you rapidly onboard a heap of new customers who may also buy other items in your shop and return again. Context also counts for a lot with pricing. The best way to sell a $5, 000 watch, for instance, could be by putting it next to a $10, 000 watch. Think strategically when it comes to deciding any price point.
Yes, it sounds obvious, but it’s so very important ! Whether consciously or not, people are more likely to buy a product if they like the sales assistant who’s attending to them. While the employee’s personality obviously has no bearing on the price or your product’s ability to serve their needs is irrelevant. Friendly customer-facing staff will always attract more sales. Be rigorous in hiring people who are genuinely cheerful, friendly and outgoing. Make sure your training program teaches them to adopt a consistently friendly approach that puts customers at ease and feel like a priority.
Say you’re a bricks-and-mortar store and you’re getting a rush of customers as closing time approaches… why not close up an hour later ? While this may cause disgruntlement among équipe, solve this issue by getting creative with rosters. Monitor customer footfall throughout the day and week to identify your busiest periods, and équipe people accordingly. You can also reduce headcount during quieter periods to offset the higher costs and longer sérieux hours created by your extended opening hours. It’s a win-win !
Even in the digital age, some customers will always prefer to contact you by phone rather than mail or Facebook. While many online companies with tight margins eschew manned phone lines altogether, it’s worth giving customers the option of having a voice-to-voice conversation with your brand. By all means, slash the time and cost spent responding to queries by funnelling customers to standardized, pre-existing responses on your webpage ( i. e., FAQs ). But if their query isn’t listed in the drop-down menu of FAQs, then don’t make them click more than once more to find your phone number. Put it front and center on your web page, particularly if you’re a retail offering. ‘Live chat’ bots are an inexpensive way of offering real-time communication, too.
Why not give your happy customers a voucher with their purchase to redeem on your products and services ? If they love what you do already, they’re only going to love you more for this. It’s good for you because : It guarantees they will return to your store again. People hate to waste freebies ! When they return to your store to redeem their voucher, they may buy other items, too. If your operates online, then the freebie could be strategically timed to coincide with a special sale. Oh, and guess what ? Chances are customers who have received vouchers or freebies won’t stay quiet about it either, so you could enjoy some positive buzz on social media.
Local businesses can arguably connect with their unique communities with much greater authority than any global chain. A local retailer, hair salon or gardening company can sponsor a kid’s sports team and offer deep discounts for OAPs at the same time. Some cinemas feature special ‘sensory’ screenings where parents can bring kids with autism ( who would normally be overwhelmed by busy, noisy environments ) to enjoy a movie in a relaxed, stress-free atmosphere. This reflects well on them and also guarantees them a loyal customer niche. Whatever you choose to do to support your community, make sure it authentically fits with your brand offering and journey to date.
Social media is a great medium through which to build a solid relationship with customers – just don’t forget what ‘social’ actually means ! Soul-less corporate shop-talk won’t work on Twitter. Try to give your brand some ‘personality’ when you write updates or posts. This can bring its own risks, of course. But if you get it right, the benefits can be immense. Develop a tone of voice that aligns well with your brand identity. Seek to inform, help, entertain or amuse. And most importantly – given the dire PR consequences – don’t patronize, try too to be funny, or tweet after a few alcoholic drinks !
Sometimes it’s better to be a master of one discipline than a jack of all trades. Admittedly, multiple revenue streams do spread your risk : if one falters, others can take up the slack. Nevertheless, consumers often associate ‘specialists’ with higher quality products or services than generalists. And with good reason, too : specialists typically invest all their resources into perfecting a single product or service. So what should you specialize in ? to state the obvious, it should be something in which you excel. You could also pick something with rising or recession-proof demand which is resilient to technological change in which you possess a competitive advantage over your rivals or where there’s an obvious gap in your local market. Own it, whatever you do.
Don’t ever get too satisfied with your . You can always improve – and improve you must ! Don’t get me wrong : without the odd moment of smug satisfaction, what’s the point ? Do relish in the successful launch of a game-changing product or take pleasure in positive customer feedback. But don’t let your customers hear you banging on about it time after time ! Be alert to the common element that has led to the downfall of countless hitherto thriving brands : complacency. Imaginative, nimble and innovative start-ups often do better than big market leaders that just got lazy. You may be the disruptive innovator today, but tomorrow you could be the complacent market leader with a tired model. So try to be humble and always strive to improve. Seek inspiration from other fondateurs, from books and from seminars. The moment you think ‘mission accomplished’ is the same moment you become vulnerable to being usurped.
There are lots of ways in which you can improve your business, and not all of them are complicated ! Try out the above business tips or integrate them with your existing strategies, and let me know how you go in the comments below. Guest Author : Faye Ferris is responsible for the day-to-day management of the Dynamis APAC Pty Ltd offices in Sydney. She develops the DYNAMIS stable of brands and their expansion into the Asia Pacific region as well as BusinessesForSale. com, FranchiseSales. com and PropertySales. com. If you have an interest in partnering up with Faye or advertising on any of these websites in the APAC territories, please do not hesitate to contact her on faye@businessesforsale. com.