The coronavirus pandemic continues to devastate the global economy. Its impact on large companies is damaging enough. How much more so on smaller businesses struggling to cope with the effects of COVID-19? Too many neighborhoods have seen local businesses close. Too many people have been left unemployed. COVID-19 has caused small business to rethink everything from how they operate to how they protect both their people and their profits. Many are now looking to cost saving measures – with insurance coverages high on the hit list for economies. That makes it a great time to explore self-funded group health plans.
Small Business COVID-19
A recent survey released by SCORE1, a network of expert and volunteer business mentors supporting small businesses, says that the small business owner has no clear vision of how to make do post COVID-19. More businesses than ever are fighting store closures, with Black and Hispanic-owned businesses being hit especially hard1. The results show only 34% of small business owners were able to say they maintained profitability – down from 55% a year earlier1.
Too many of these businesses, particularly restaurants forced to close due to COVID-19, may never reopen – driving up unemployment figures2. There’s also the ripple effect to consumers, not only because of the loss of local establishments but also because of the resulting financial and psychological impact of such losses.
The coronavirus pandemic has all but crushed in-person interaction. Online shopping has seen a boom, but it comes at a cost to shopping malls and commercial districts once flush with consumers. There’s not even the certainty of a return to such profitability for physical shops, as online consumerism is expected to maintain momentum long after COVID-19 is behind us3. Add to this a change in attitude towards income: more people are saving, and spending habits are changing. These trends may reverse once we return to a normal that is closer to how things were before the pandemic, but they don’t help small businesses in need of revenue today.
Small Business Losses for Minority-Owned Businesses
The COVID impact on minority-owned enterprises is hard. Only a little over a quarter of black business owners could say they saw profits in 20204. That's a drop of nearly 15% from the year before4. Thirty percent of Hispanic business owners attested to profitability compared to 51.2% in 20194. The relief these businesses received also lagged behind the market as white owned businesses were three times more likely to receive small business support from the Paycheck Protection Program (PPP) or Economic Injury Disaster Loans (EIDL) offerings4.
Small Business Loans for Covid-19 PPP - Paycheck Protection Program
Another report, this one from Goldman Sachs, shows the failings in the SBA's attempt to help businesses keep their staff on payroll during the coronavirus5. The program ran its course, and owners were stuck with no additional COVID-19 relief as the pandemic continued its onslaught. An additional round of loans for the PPP were introduced in January 2021, but at nearly 9 months since the first round went live many small businesses were simply left out in the cold5.
The PPP small business forgiveness act, along with the Economic Injury Disaster Loan (EIDL) initiative, should've been a good thing. This was a direct incentive to keep staff on payroll with the benefit of loan forgiveness if the small business owner was able to do so2. If COVID put a spotlight on the importance of small business’ effect on the economy from small towns to metropolises, the small business PPP loan forgiveness program highlighted the precariousness of their reality.
Across industries, somewhere in the vicinity of 31 million small businesses were responsible for 50% of the private workforce and had created 1.6 million new jobs in 20192. As unemployment rose due to COVID-19, though, close to 50% of small businesses found they had only two weeks' worth of liquidity in their coffers2. They were desperate for COVID-19 stimulus for small business long before any governing body came to their aid.
The Post-Coronavirus Future for Small Businesses
All hope is not lost though. Companies are adapting business models to the climate, including rethinking revenue sources. Richard Bliss of Babson College says, "Approximately two-thirds of respondents [in the Goldman Sachs survey] have pivoted to new revenue sources or adapted their business model in response to the current crisis.”5 This could be the silver lining to the cloud of the coronavirus pandemic: an opportunity to adapt, survive and ultimately, thrive.
One way small businesses can adapt is by re-evaluating their health care plan. In the past they may have relied on traditional small business health insurance offerings, but in a post coronavirus environment smart businesses are looking for ways to maximize every dollar spent. This is more important than ever as health benefits for your employees are going to be top of mind for both your current team members and anyone you wish to hire in the future. If you’re interested in providing group health benefits that can protect your people at a cost that can also protect your profits, get a free small business group health benefits quote today.
While the fact remains that 32% of small business PPP loan forgiveness recipients still had to cut wages and lay off employees,5 Babson's claim of entrepreneurial leadership is alive and promising. Business owners are working jointly to enhance safety measures, including promoting social distancing, wearing of masks and other PPE, incentivizing team members to get vaccinated, taking a closer look at their employee benefit plans, and developing entirely new business models as a way to get through this challenging period and set themselves up for success.