by Andi Gray, president of Strategy Leaders
The year 2020 can’t end quickly enough for most small business owners.
Across the country, the pandemic forced many of them to close their operations temporarily – or permanently – and the continued economic uncertainty threatens to kill the ambitions of entrepreneurs who planned to launch businesses but now must put their dreams on hold.
None of that bodes well for the overall American economy. Small businesses make up 50 percent of the gross-domestic product and also employ half the workforce. What happens to them determines what happens to the overall economy. We as a country cannot afford to fail them.
Look at the 2008-11 banking crisis, a disturbing example of how a national crisis can sabotage entrepreneurship. In 2008, for the first time, the number of business starts fell below the number of business closures. In other words, more businesses were killed off than were launched. And it wasn’t a one-time event. The problem continued on for years.
The ripple effects? By 2009 small business contributions to GDP fell rather than grew. By 2010 the economic contribution gap between large and small businesses widened four-fold as small businesses struggled to keep up with their large corporate competitors. People lost their jobs, exports dropped, taxes fell and economic opportunity disappeared as entrepreneurs fought to recover. It took over five years for the small business community to get back on track. But the damage was already done. By 2015, the U.S. was ranked 12th among developed nations in terms of startup activity.
I worry such lingering effects could happen again – and be significantly worse this time.
Today’s COVID crisis is far larger and deeper than the 2008 crisis. I would not be surprised if it takes far longer than five years for the small business community to get back to producing GDP and employment numbers we took for granted at the beginning of the year.
In the meantime, small business owners hit hard by this latest recession must find ways to weather the storm. Here are a few suggestions for how they can do that:
Stay energized and focused.
The single biggest determinant for survival of any small business is the commitment, ambition, and drive of the owner. If you are feeling worn out, take time off to recharge. Keep your eye focused down the road, on what’s way ahead, and don’t waste too much energy and sweat trying to control what’s happening right in front of you day-to-day.
Take care of the finances.
If money is in short supply, investigate sources of capital. Put together a bankable plan that justifies increased investment and provides guidance on how best to use funding to recover, expand and weather future challenges. Talk to your banker, the SBA, reputable SBA lending consultants, and private investors to find out what kinds of capital might be available.
Figure out how to play the hand they were dealt.
Small business owners need to get creative and innovative. Rebuild as you protect cash flow. Find suppliers to replace the ones struggling to perform. Rethink your business model and evaluate customer viability. In addition, look for new markets to add size and profits, implement processes to cut out waste, and transition more and more customers to internet communication and ecommerce buying solutions. Decide what size business will be right for you in the future and lay out a plan to get there.
Pay attention to employees.
As scared as small business owners may be about what the future holds, many of their employees are even more frightened. After all, you have the resources of your company to use to build solutions. Employees who live paycheck to paycheck may be running out of options and wondering how long they can hold on – or how long you’ll be able to let them hold onto their much-needed jobs.
The good news is that small business owners are known for being nimble, flexible, and resourceful. Many of them are finding new opportunities by solving problems that didn’t exist, or weren’t priorities, at the start of 2020.
Andi Gray is president of Strategy Leaders, a business consulting firm. Gray’s career started in sales, marketing and new business development at Xerox, American Express and Contel. Gray earned an Executive MBA from Columbia University while conducting research on success and failure drivers for entrepreneurial businesses. Gray is also the co-founder of the networking group BOHCA (Business Owners Hemp and Cannabis Association), where she helps industry specific owners grow their business through strategic planning.