10 min read
May 05, 2020
Trends

How Small Businesses Are Navigating the COVID-19 Crisis

Half of small businesses don’t expect to last six months under current conditions. Here’s how they’re trying to beat the odds.

Z.C.
Zach CapersSenior Content Analyst

Small businesses across the U.S. are being battered by COVID-19’s financial impact and sweeping societal changes. Forecasts of economic devastation emanate from news outlets and social media, while record numbers of Americans file for unemployment. Suddenly, survival is all that matters.

The majority of our small business clients are hurting in many ways. Many of our clients are under immense revenue pressure as demand for products and services has collapsed. They struggle to pay fixed costs that can’t easily be reduced like rent and insurance.

Brandon Wenzel, CPA and Tax Manager at Wenzel & Associates

GetApp research reflects this sentiment. We asked more than 500 small business leaders how long they expect their company to survive under the conditions created by COVID-19. More than half (52%) said they expect to be out of business within six months.

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Small businesses need financial help now—but many go it alone

On March 27, President Donald Trump signed into law the Coronavirus, Aid, Relief, and Economic Security (CARES) Act. The law includes the Paycheck Protection Program (PPP) intended to fund payroll and other critical costs for small businesses. But most small businesses are having trouble securing the emergency funding that could keep them afloat.

It sounds great in theory, but the rollout has been a mess, and the banks have not been able to cope with the insatiable demand from small businesses.

Brandon Wenzel, CPA and Tax Manager at Wenzel & Associates

The PPP ran out of its initial $350 billion within two weeks of launch, leaving untold thousands of small businesses without funding. Similarly, a $20 million loan pool intended to help small businesses in New York City was flooded with 15,000 applicants, only a few hundred of which are expected to receive funding.

While most small businesses have no choice but to apply for emergency loans that they may or may not receive, it’s clear that the vast majority will also need to find other ways to improve cash flow. That starts with cutting costs wherever possible.

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Companies cutting costs across the board—except for software spend

Small businesses are making hard choices to lower costs. We asked small business leaders about cost-cutting measures they’ve implemented in response to the economic downturn. Here’s what we heard:

Small businesses are freezing hiring and cutting hours. Marketing spend is down, travel and events eliminated, and vendor contracts renegotiated or canceled. With margins stretched thin, small businesses are also reprioritizing resources to focus on mission-critical tasks. Our research found that nearly a third (31%) of small businesses have reassigned employees to different roles in response to the COVID-19 crisis.

Interestingly, one area where many small businesses are actually increasing spend is software. Our survey found that 59% of small businesses need new software in response to the current business climate. Digital business transformation is no longer just a business strategy—it’s a crisis plan. 

The crisis is also causing small businesses to accelerate digital transformation. According to our survey, 36% of small businesses have sped up their software-buying timeline while about half (49%) plan to increase software spending in response to COVID-19.

To find out more, we asked potential software buyers which tools have been most critical in contending with the impacts of COVID-19.

By far, the most critical tool companies are turning to is web conferencing software, followed by instant messaging and chat software and project management tools. It’s no coincidence that these are the most essential tools for online collaboration and remote work programs.

Social distancing measures required to tackle COVID-19 have firmly established remote work as the new normal, and small businesses across the country have adapted quickly to move operations online. Meanwhile, the same dynamics that are accelerating digital business transformation and causing employees to work from home are upending the business models of several industries—many of them permanently.

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Business models are changing along with customer expectations

Business constraints, such as limitations on face-to-face interactions, have caused companies to reconfigure delivery channels and rethink product offerings. In response to the COVID-19 crisis, our survey found that small businesses have changed their business models by offering curbside pickup (50%), delivery (53%), and moving products, services, or events online (54%).

These statistics represent many of the small businesses that are widely known to have been most affected by social distancing measures, such as restaurants and retail shops. But other less obvious establishments (such as medical practices) have also been forced to change how they do business.

Everyone thinks doctors would be doing well now. Elective surgeries and other non-emergency checkups have been canceled. Because of that, there have been massive layoffs and hour reduction in this industry for anything that is non-emergency related.

Brandon Wenzel, CPA and Tax Manager at Wenzel & Associates

Medical practices around the country are facing severe challenges, with one model predicting the closure of nearly 40,000 family medicine offices and the loss of half a million industry jobs by the end of May. These numbers explain the rapid rise of telemedicine whereby patients are examined virtually rather than in the office.

Much like remote work, telemedicine will emerge from the COVID-19 crisis as a new normal. Prior to the arrival of the novel coronavirus in the U.S., GetApp research found that 84% of patients would select a provider that offers telemedicine over one that doesn’t. Now, with fear of contracting COVID-19, telemedicine is an even more attractive option for patients—and often the only option for physicians.

Just as patients are quickly becoming accustomed to telemedicine, so too are students getting used to online learning, shoppers discovering the convenience of curbside pickup, and cinephiles acclimating to seeing new movie releases online instead of in a theater. 

These fundamental transitions are changing customer expectations in ways that might never be reversed. For many businesses, this means reexamining their value proposition. When this crisis is over, it will take more incentive to lure people back to movie theaters or to convince them to attend an in-person conference instead of joining it virtually.

Moreover, companies that once relied on their online experience to provide value are now faced with a glut of new competitors. In a post-COVID-19 world, businesses will need to meet customers where they are and find new ways to set themselves apart from the competition.

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1 in 5 small businesses neglecting employee communication about COVID-19 impact

Clearly, small businesses are under enormous pressure—but so are employees. Productivity is difficult to maintain while dealing with the challenges of sheltering in place, particularly when caring for children while doing so. Onsite employees and essential workers (such as field service technicians or warehouse staff) without the luxury/ability to work from home must cope with the fear of contracting a rapidly spreading virus during a nationwide shortage of personal protective equipment.

Adding to stress, economic turbulence stirs anxieties about job security and the loss of healthcare coverage. Employees left in the dark about their company’s outlook and mitigation plans will assume the worst. Small business leaders must communicate clearly and openly regarding COVID-19 impacts to their business, the steps the company is taking to address them, and the support available to employees. This can be accomplished by creating a central online COVID-19 resource hub.

But GetApp’s research found that only 35% of small businesses have created a COVID-19 resource hub for employees. More alarmingly, 21% admit they haven’t provided any ongoing COVID-19-related communication to employees.

At a time when the credibility of news sources and accuracy of information has never been more difficult to determine—and misinformation about the coronavirus is running rampant—a COVID-19 resource hub should include official guidance from entities such as the CDC, the Department of Labor, and relevant local municipalities. 

Other useful information that could be added to a COVID-19 resource hub includes:

  • Remote work resources

  • Health and wellbeing tips

  • Healthcare and benefits guidance

  • Relevant policies and best practices

  • Responses to commonly asked questions

Small businesses lacking the engineering resources to create an employee-facing website should consider website builder software, which makes it quick and easy for anyone to design a website with no coding required. At the very least, small businesses should provide ongoing updates about COVID-19 impacts via web conferences or email.

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Moving forward into an uncertain future

Small business leaders must ensure their companies not only survive the pandemic, but thrive in the new business environment that will emerge when it’s over. And while it’s hard to envision what the world will look like next week much less next year, many experts agree that we’re looking at an ongoing crisis that could come in waves over the next eighteen months.

For now, small business leaders must focus on turning short-term solutions into long-term strategies while ensuring employees have the tools and support they need to be successful.

We don't know how long this will last, and it won't recover overnight. But there will be a lot of pent-up demand when everyone gets back online. The struggle is surviving until then.”

Brandon Wenzel, CPA and Tax Manager at Wenzel & Associates

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Want more strategies and insights to help lead your company through disruption?

Methodology and Disclaimer

The digital transformation survey referenced in this article was conducted by GetApp in April 2020 among 503 respondents who reported executive leadership roles at small businesses with 250 or fewer employees.

The software buyer survey referenced in this article was conducted by GetApp from March 25 to April 5, 2020 and included more than 5,500 respondents. The respondents were website visitors on getapp.com, and the number of respondents varied by question.

The patient experience survey referenced in this article was conducted by GetApp in February 2020 among 1,000 respondents. Screening questions were used in this survey to narrow the number of respondents down to those with relevant histories and experiences.

This document, while intended to inform our clients about the impact of the novel coronavirus on small businesses, is in no way intended to provide legal advice or to endorse a specific course of action.

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