Small businesses are a backbone of the U.S. economy. They are estimated to employ almost 50% of the country’s workforce and to create roughly 66% of all net new jobs, according to the U.S. Small Business Administration. In addition, small businesses account for 44% of the country’s economic activity.
In a February 2021 survey that probed how small business owners navigated the pandemic, small-business insurance provider Huckleberry found that while barriers varied from industry to industry, the most significant roadblock across the board was a lack of cash. Some 37% of small business proprietors cited insufficient cash flow as their No. 1 business challenge during the pandemic.
Another 29% cited lack of demand as one the 2020’s biggest challenges for their business. And 26% had a difficult time complying with pandemic safety rules, while 20% said hiring was a major business challenge and 17% said the same for marketing.
The pandemic’s most- and least-affected industries
Unsurprisingly, businesses that entail routine face-to-face interaction were the worst hit. According to Huckleberry data, active insurance policies for the daycare sector plummeted by 43%, while policies for retail and fitness businesses dropped by more than 20%. Both restaurants and barber shops showed a 10% decline in active insurance policies.
Industries that did the best were those relating to home improvement and maintenance. Plumbing and HVAC business reflected a 50% increase in active insurance policies. Landscaping services, carpentry firms and flooring providers were close behind, according to Huckleberry figures.
The strategies small businesses used to stay afloat amid the pandemic:
Business predicated on personal interaction moved online when feasible. For example, retailers switched to online sales, while gyms moved to remote exercise classes. Businesses that could stay open relied on safety protocols, but restaurants unable to offer in-person dining implemented curbside pickup.
Meanwhile, 70% of the survey respondents said they cut their budgets. Only 34% of small businesses said they were able to take advantage of government funds or loans. Among business that pared their spending, 61% accomplished this through cut to marketing and advertising. Some 41% trimmed their payroll, 30% trimmed rent or mortgage expenses, and 20% opted to go without business insurance coverage, Huckleberry stated.
How well did their stay-afloat tactics work?
About half of the survey respondents said they were still profitable at the close of 2020. Some 29% of respondents said they had broken even for the year. About 1 in 5 respondents operated their firms at a loss in 2020.
Small business owners view 2021 as a mixed bag
Half of the survey respondents said they were optimistic about their business’ outlook this year. Meanwhile, 29% said they were pessimistic, and 21% described their outlook as neutral. More than 75% reported that they do not have a contingency plan in the event of new COVID-19 restrictions.
Almost 1 in 3 small business proprietors said they would require staff to get the COVID-19 vaccine. Twenty percent said they were undecided. Over half indicated they would not require their employees to get the vaccine.