COVID-19 pandemic has hit us all very hard since it broke out two years ago. It has caused ripples all over the globe, affecting nearly 500 million people worldwide (as of writing this piece) with a death toll of over 6 million.
While the coronavirus outbreak affects everyone in some way or the other, it has a particularly drastic effect on the fortunes of small businesses and even threatens their continued existence.
It has caused significant disruption in our public and professional lives. Still, due to the imposition of lockdowns to contain the spread of the virus, the epidemic has led to the widespread closing of mom-and-pop stores and family-owned businesses across the United States.
The subsequent lockdowns and curtailment of economic activity have forced small companies to rethink how they conduct their businesses because of the inherent uncertainty that the coronavirus brought. This article covers the impact of COVID-19 on small business outcomes and how they can overcome the unique challenges in the survival period.
Business Closures
Lockdowns meant that many businesses could not physically operate at their locations. For retail businesses like shops and dine-in restaurants, temporarily or permanently shut down operations. Some companies that survived the lockdown phase have either shifted to a shorter work schedule by reducing the number of working days or working hours in a day.
Financial Vulnerability
Many businesses ran out of cash because their sales experienced a significant decline. Small businesses, especially in developing countries, experienced a severe dip in their revenues. While restrictions are gradually being lifted in different places, business is not the same as it was before the pandemic hit for many small companies.
Reduced cash flows resulting from a slump in revenues put existing small businesses on the verge of bankruptcy.
Laying Offs and Unemployment
Increased downtime due to COVId-19 lockdowns has forced many companies to lay off employees as a cost-cutting measure. In addition, the financial pressure caused by low sales and the potential of COVID-19 infections driving up employee healthcare expenses reduced small business profits.
Therefore, keeping a small number of workers on the payroll and letting go of the majority of the staff became necessary for survival.
However, in a survey undertaken in partnership with Alignable, the employment levels in North America fell by as much as 40% because of this continued trend in downsizing.
Some businesses did not have a choice, though, as vaccine mandates edged out the individuals who did not comply. Still, many small businesses had to restructure their employee tenures by reducing the ratio of permanent employees to temporary workers to help cut down employee benefits.
Work from Home
Working from home is perhaps one of the most debated topics during the COVID-19 pandemic. This was a boon for those who already worked remotely from home – such as digital marketers, web designers, and software developers. But for many who were accustomed to the office environment, it was a less than desirable situation.
For better or worse, many small businesses opted to keep their business model running on a remote working basis. In a surprising twist of events, some small businesses even gained by the shift to working from home in the form of reduced office overheads, satisfied and productive employees, and safe working conditions with reduced risk of COVID-19 transmission in the human resources.
Digitization
With remote work and lockdowns in full swing, dealing with paper documents and cash was naturally difficult. As a result, small businesses and startups had to rely on digital tools to coordinate with teams and customers through the internet.
A call on Zoom or a digital payment through a mobile application is now second nature for small businesses and startup entrepreneurs. Companies are now increasingly turning to ERP solutions and cloud-based services to manage their operations.
This need for digital management tools has also created new opportunities for freelancers and workers who want to enter the Software-as-a-Service (SaaS) market to help small companies digitally transform their businesses. This also means more room for cutting costs for small companies by hiring freelancers for routine or special projects.
Online business is now an essential avenue for business growth for more consumer-oriented businesses. Consumers are more than happy to order things online, such as groceries, eats, or even durable luxury items. Even coronavirus test kits can be ordered and delivered online at people’s doorsteps.
Cyber Threats
As more companies start entering the cyber world to conduct business, more information is stored on online servers that may be vulnerable to cyberattacks. Hackers can destroy data, take data hostage through ransomware attacks, or leak sensitive information that can make small businesses liable to pay legal damages if the customers’ data is compromised.
Cybersecurity considerations are another layer of expenses to manage the risk that comes with running an online business.
Reliance on Government Support
As several small businesses were at risk of closing down in the first and second waves of the epidemic outbreak, petitions were made filed for government intervention to support them financially. In the USA, for example, small businesses could take advantage of PPP loans issued as part of the CARES Act. Governments of other countries have also taken measures to offer benefits to small firms by providing tax breaks and other forms of financial relief.
States have also leveraged their ability to bail out small businesses in exchange for compliance with financial and auditing regulations and COVID-19 recommendations. In a sense, this effect of collaborative governance between government institutions and small businesses has been a positive development for both sides.
Supply Chain Disruption
COVID-19 has resulted in significant supply chain disruptions because of increased border controls and tighter customs regulations. The result is an unprecedented surge in shipment waiting times and higher costs for warehousing and order fulfillment.
A business that requires raw materials or is dependent on logistical operations to deliver products faces an enormous challenge. To make matters worse, shipping costs from China – an important raw material and manufacturing hub – have increased dramatically during the pandemic.
Small enterprises are increasingly looking towards outsourcing to 3PL logistics providers that can provide advanced inventory management and real-time tracking services to offset this negative impact on business. In addition, reduced dependence on single manufacturing centers like China is also a serious consideration for small businesses.
A Focus on Risk Management
The coronavirus outbreak has exposed virtually all businesses to extreme uncertainty amidst global health and financial crisis. Small businesses typically operate in small-scale regions, and this uncertainty has only forced them to be better prepared for future challenges and risks.
More and more small-scale companies are learning to utilize resources more efficiently and adapt to more flexible business models during a tough time. For instance, we can already observe several small businesses taking steps to ensure COVID-19 SOPs are still being followed. The same rule applies to remote working.
Therefore, small businesses are increasingly becoming aware of the importance of contingency planning and responding proactively to new risks and uncertainties in the business environment. As a result, they can formulate their operational, financial, and HR policies accordingly.
What’s Ahead?
Small businesses have learned several lessons from the outbreak of COVID-19. Both positive and negative effects of the epidemic have been observed on business and the economy, and companies are still struggling to survive and cope with the new challenges.
However, if a business has managed to survive, there’s a good chance it can overcome greater odds in the future. Do you think we missed any other impact of COVID-19 on small businesses? Let us know your thoughts.
Most of these topics are discussed in my two books:
Being A Visionary: Going After Your Vision
Being A Visionary: Going After Your Vision Workbook
JOIN MY EMAIL LIST
Sign Up & Receive Monthly Business News Regarding Strategies For Your
Business, Be The 1st To Know About Our Seminars & Receive Updates
On Free Offers We Often Extend To Our Subscribers…
Don’t Miss Out! Enter Your Email Below & Subscribe Today
