Main Street Business
A Selection Of Featured Articles About The Many Issues and Challenges Surrounding Small Businesses in Today's Rapidly Changing Market Landscape
America’s Small Businesses Are Running Out Of Workers
BY MARTHA C. WHITE
August 19, 2022
The pandemic forced Freed Bodyworks, a wellness center offering massage therapy, yoga, acupuncture, mental health counseling and other services, to shut down for four months. But while clients returned when it reopened in the summer of 2020, workers did not.
Almost two years later, owners Frances Reed and Jessica Von Dyke were forced to shut the business’ doors.
“I couldn’t hire anyone,” said Reed. “We never had trouble with our demand for services. It was 100% a supply issue for us.”
Before the pandemic, Freed Bodyworks had 20 practitioners booking up to 550 clients a month. It reopened with a skeleton crew of eight — too few, Reed said, to bring in enough revenue to sustain the business.
Two former staffers had departed for graduate school, three had moved to areas with a lower cost of living and several had to take on caregiving roles in their families. Moreover, the shutdown of in-person instruction at massage schools dried up what had once been a dependable pipeline of emerging talent.
“In the entire time period from when we reopened until closing, I managed to hire three people, and that was with full-time recruiting,” they said.
Reed is far from alone. Small business owners across the United States today face an acute labor shortage, which experts warn has hit a crisis level.
A recent survey from the National Federation of Independent Business found that about half of small-business owners said in July they still can’t fill open jobs, a near-record high in the survey’s roughly five-decade history.
“Hiring has never been harder for small-business owners,” said Bill Dunkelberg, chief economist for the NFIB.
While the current labor market poses a challenge for employers of all sizes, small businesses have less ammunition in the battle for talent, lacking access to the kind of cash flow, credit and economies of scale that larger corporations enjoy. That makes it harder for them to offer things like competitive wages or sign-on bonuses.
“It’s likely true that the big box stores are paying more,” said Harry Holzer, a professor of public policy at Georgetown University.
That puts mom-and-pop businesses at a serious disadvantage. “If they’re operating on tight margins, maybe they can’t afford to raise wages to lure more workers,” Holzer said.
Inflation is a small-biz “double whammy”
Susan Sarich founded SusieCakes in 2006 and has grown it into a 26-bakery chain, the vast majority of which are in California. But her head count has plunged from nearly 500 before the pandemic to just over 200 now — and rebuilding those ranks has become more and more difficult.
With gas prices in California still at around $5.30 per gallon, many prospective employees say they can no longer afford to commute an hour or more, Sarich said.
“We increased hourly pay close to 20% [but] the cost of living is off the charts,” she said. “Some are commuting upwards of an hour and a half each way and you add on gas prices and it’s like, how does the math work?” she said.
To cope, her bakeries remain closed two days a week and are open shorter hours. She has cut her product offerings, including dropping customer favorites like iced sugar cookies based on a beloved family recipe.
“The demand was there, but we didn’t have the people, so we had to pivot pretty quickly to a reduced labor model. For us, that meant fewer days, fewer hours a day and fewer products,” she said, adding that she is still down from her pre-pandemic revenue by about 15%.
Eric Groves, CEO of Alignable, an online platform for small businesses, said owners are taking it on the chin, with higher inflation both raising their costs and crimping their sales as consumers become more cautious.
“We’re seeing this double whammy,” he said. “It’s harder to find people, and the costs are going up.”
A recent Alignable survey found that only about a third of small businesses are making 90% or more of their pre-pandemic revenue, Groves said. That’s worse than the results of a similar survey conducted last year, when 42% said they had recovered 90% or more of their pre-pandemic business.
“They do have to sometimes dial back the hours that they’re open,” Groves said. “It’s this constant pressure of lower revenue, higher costs and challenges of just trying to get to the other side of this.”
Workers still in the driver’s seat — for now
There’s a combination of factors working against small business owners as they try to add head count.
The July jobs report showed that the unemployment rate ticked down to 3.5%, matching the half-century low it reached in February 2020. The report also showed that the labor force participation fell slightly, to 62.1%.
“Able-bodied people of the right age are just not out there looking for jobs,” said David Dollar, a senior fellow at the Brookings Institution.
A number of factors are behind this, economists say: An ongoing shortage of care workers, lower immigration rates and a pervasive fear of the pandemic.
“A lot depends on, do people feel confident that we’ve got Covid under control?” Dollar said.
Edward Fox owns two franchises of Tradebank, a business barter service with locations in Wichita, Kansas, and Nashville. When his sole Nashville-based employee departed at the end of 2020, he spent six months searching in vain before giving up and shuttering the office. He estimates that he sacrificed $200,000 to $300,000 in lost business as a result.
“We were hoping that the job market would bounce back, that we’d have a bunch of people applying… but, man, it has been a struggle,” he said.
Fox said he was constrained in his ability to raise pay because Covid quashed many of the barter deals his business brokered, knocking out around 75% of his business. Without someone on the ground in Nashville, it made it tough to recapture that revenue. “I just think that everybody is looking for the same labor pool, and it’s tough,” he said.
“I think employees these days want more flexibility. I think managers don’t want to let go of the control they have over the employee,” he said. “I think we’ve got a new reality we’ve got to face there, too.”
Big hit from small-business loss
The loss of any single small business might be a drop in the ocean for the US economy, but if enough small businesses like Reed’s ultimately fail due to the labor shortage, that situation could turn into an economic tsunami, experts warn. Small businesses account for nearly half of private sector employment and contribute more than 40% to the US gross domestic product.
“It would be a shame to see them go out of business. You don’t want the retail sector getting more and more concentrated,” Holzer said.
When vacant storefronts become a fixture on Main Streets across the nation, consumers wind up with fewer choices about where they spend their money, and workers are left with fewer places to seek employment.
“Anytime you lose jobs, it reduces the overall health of the local labor market,” Holzer said. “It’s good for workers to have choice as well as consumers.”
Small Business Trends You Need to Know About
By Kalin Kassabov, Founder and CEO of ProTexting.com, a fast-growing enterprise-level text message suite of services
From Forbes on Small Business Trends You Need to Know About in 2021.
Many small businesses closed in 2020, and 2021 looks like it’s going to be a challenging year, as well. Aside from lockdowns and restrictions due to Covid-19, rapidly changing technology is putting pressure on businesses to adapt and meet consumer demands. Let’s look at some top small business trends that can help you respond to these challenges and find success in the coming years.
The Expansion Of E-Commerce
Unlike many other industries, e-commerce actually grew in 2020. Small businesses of all kinds need to expand their mindsets and seek ways to cash in on this massive trend. Even if you don’t typically sell physical products, think of what you can sell online to supplement or even replace your in-store offerings.
Sell products related to your industry that your customers will appreciate. You can also sell helpful information in the form of e-books, white papers and reports. If you don’t want to create or stock physical products, consider affiliate marketing opportunities, where you earn a percentage of sales on other people’s products.
Having a strong online presence helps shield you from not only lockdowns but also ups and downs in the local economy because you have access to a much larger customer base.
Aside from e-commerce, where everything is online, we’re seeing more and more hybrid shopping models. A typical example is a customer placing an order online at a store such as Walmart or Target and then picking it up curbside at the store. There’s no reason smaller businesses can’t take advantage of this model.
Restaurants were forced to switch over to deliveries and pickups when in-house dining was banned in many places. Online apps such as Grubhub or ChowNow make this easier. Other types of businesses can get creative and offer similar options. Even when regular shopping is permitted, many customers find it more convenient to order online or by phone and have their items ready for pickup.
Very small businesses can handle such hybrid orders manually. When a customer orders online or by phone, you arrange a convenient pickup time. If you want to scale this practice, however, it’s best to automate the process as much as possible. Train employees on how to serve customers who pick up curbside. Make sure it’s a visible option on your checkout page. Advertise this service on your website, social media pages and inside your brick-and-mortar business.
Businesses Will Expand Into New Markets
In a challenging environment, one way to increase sales and attract more customers is to expand your offerings. E-commerce, which we already discussed, is one way to do this. You can also think about reaching out to new markets at your brick-and-mortar location. It’s not usually too complicated to start expanding your products or services.
For example, a coffee shop can introduce more food items, such as baked goods, sandwiches and wraps. Contractors and home service providers can upsell customers on additional services. Landscapers can offer more specialized services, such as pest control, mulching or landscape lighting. If you have a spa or salon, think of additional treatments your customers would appreciate.
More Focus on Retaining Customers
Another essential factor in an uncertain economy is retaining customers. One way to do this is to sign customers up for ongoing products and services. Some ways to do this are:
• Rewards and loyalty programs
• Membership sites that deliver services and digital products
• Subscriptions for products. Many companies now offer subscriptions for everything from wine to razor blades.
• Ongoing personal and home services. Landscaping and snow removal are examples of businesses that commonly do this. Personal coaches can sign customers up for ongoing sessions.
Flexible Employee Policies
In 2020, employees and business owners were hit hard by shutdowns and reduced hours of operation. These events combined with longer-standing trends, such as more businesses offering flextime and hiring independent contractors and part-time rather than full-time help. It isn’t always easy maintaining strong relationships with employees in such uncertain times. Here are some points to keep in mind.
• Allow employees to work remotely as much as possible.
• Assess and rethink the benefits you offer. Benefits such as paid time off are more important than ever.
• Offer employees flexible hours. More than ever, people are juggling multiple jobs and responsibilities.
• Communicate clearly and give employees as much notice as possible about changing conditions such as hours.
Businesses Will Seek More Creative Financing Options
You need to be more creative than ever to find funding for your business. Here are some creative options.
• Emergency funding. You may be eligible for a loan from the Paycheck Protection Program. The Small Business Administration has information on this program and other loans for small businesses.
• Invoice and accounts receivable funding. This is worth considering for any business that has existing customers who pay invoices. This can help your cash flow as you collect payments on invoices right away rather than having to wait for customers to pay.
• Crowdfunding. Though no longer new, crowdfunding on sites such as Kickstarter and GoFundMe is growing in popularity, especially if you have new and innovative products or services.
• Microloans. A microloan is a type of loan that can help businesses that may not qualify for traditional bank loans. They are small loans, usually for $50,000 or less, that can be used for any business purpose.
Prepare For The Unexpected
No one knows exactly how the current year will turn out. Based on recent experience, however, it’s best to be prepared for anything. The best approach is to be flexible and agile, ready to pivot in new directions at any moment. When you can’t predict the future, you need to rethink your assumptions and be open to new possibilities.
How Small World Seafood Went Digital to Thrive During the Pandemic
Venture Forward June 2021
Last March, when restaurants were ordered to shut their physical doors due to the COVID-19 pandemic, Robert Amar, owner of Small World Seafood, a fish wholesaler in Philadelphia, suddenly had a truck full of seafood on his hands. He reached out to friends and neighbors asking if anyone wanted to buy some scallops, mussels and salmon. Ten people were interested, and Robert arranged to have them pick it up on his street corner.
One of the buyers was his friend Andy Farrell, who happened to be walking by with his dog and bought a bag of mussels on the spot. He was convinced Robert was onto something. Surely there were lots of other people interested in buying fresh seafood directly from a supplier — especially now that they couldn’t go out to restaurants to eat anymore. Having recently lost his job as operations director for a restaurant chain, Andy had time on his hands and wanted to see if he could help Robert get more customers.
Drumming up interest proved easy.
They floated the new business idea past friends and word of mouth quickly spread. In April, Robert started his digital marketing strategy by creating an email newsletter to announce what seafood would be available that week, and people would mark their choices in a basic online form.
The effort gains momentum
Even as many businesses shut down because of the pandemic, the number of online micro-businesses like Robert’s grew, according to data from Venture Forward. So did traffic and the number of orders placed on websites, with 60% saying their digital presence helped to get going or expand their operations. And communities with more micro-businesses per 100 people recover more strongly from economic recessions, Venture Forward found.
Indeed, each new everyday entrepreneur like Robert adds two new jobs in a community on top of their own, the data shows, as they do things like rent trucks and build websites.
For Robert, business kept growing. Ten orders turned into 30 the following week, then to 80, and pretty soon, hundreds.
By June, they upgraded to a larger truck, added multiple new stops to their route, and rented a sorting facility to help better manage the growing volume of orders.
“It was happening very quickly,” says Robert. “We really were just trying to help neighbors and friends temporarily.”
Today Small World Seafood sells to between 800 and 1,000 customers a week across Philadelphia who pick up their orders at one of six locations.
The newsletter now goes out to a list of 5,000 subscribers with weekly updates on what’s available, along with recipes and a link for ordering.
Customers place their orders on Wednesdays or Thursdays, depending on their location, and pick them up the following day. Every week Small World Seafood offers 15 to 18 fresh seafood items including 10 staples like shrimp, crab meat and salmon, in addition to a handful of special items available in limited quantities.
“There’s a built-in urgency to the list and each week’s offerings,” says Andy.
The newsletter and website not only serve to reach and educate customers but also have helped to create a sense of community.
Stuck at home because of the pandemic, many have embraced the opportunity to buy and prepare more elaborate dishes themselves, and tap Andy and Robert as something of a sounding board.
“Everybody’s community has gotten closer through this,” Robert says. “We wanted to be closer and more connected with customers.”
As restaurants begin to reopen, some among Small World Seafood’s loyal fan base are starting to worry about the future of a service they’ve come to rely on and love.
“People keep asking: Are you going to keep doing this when restaurants open back up?” Andy says. “We say, ‘If you keep showing up, we will keep showing up.’”
Restaurants Can Tap $29 Billion Covid-19
Aid Program Beginning in May 2021
The Wall Street Journal
The Small Business Administration’s grant program for the food-service industry was created by Congress as part of a pandemic-aid package
The Small Business Administration will begin accepting applications May 3 for a $29 billion grant program aimed at boosting the restaurant industry, according to the agency.
The program, officially known as the Restaurant Revitalization Fund, is the first federal pandemic aid exclusively for restaurants, bars and other food-service businesses. It was authorized by Congress as part of its $1.9 trillion coronavirus-aid package that became law last month, and will be a key source of aid to an industry that has been hard hit by the pandemic.
Restaurants and bars reported sales of $659 billion last year, down by nearly a quarter from 2019, according to the National Restaurant Association. More than 110,000 bars and restaurants closed at least temporarily, according to the trade group’s estimates.
Restaurant owners lobbied Congress for months for dedicated funding for the industry, arguing that restrictions imposed on in-person dining to curb the virus’s spread harmed their ability to do business.
Grant recipients are eligible to receive funding equivalent to their pandemic-related revenue loss, up to $10 million per business, according to the SBA website. A single physical location can receive no more than $5 million.
Interested businesses can begin registering for the grant application portal on Friday, April 30, and applications will open at noon EST on the following Monday, according to the SBA. The agency earlier this month said it was testing the portal to address any technical issues ahead of the initiative’s public launch.
That announcement followed the rocky rollout of a $16 billion grant program for the live-events industry. The SBA was forced to close applications for the live-venue program shortly after launching on April 8 due to technical glitches. Following efforts to address the issues and additional testing of the application portal, the agency reopened that program on Monday.
The restaurant grants will add to several pandemic-aid programs the SBA is overseeing. The largest of those programs is the popular Paycheck Protection Program, which has approved 5.1 million forgivable loans worth roughly $248.5 billion to small businesses in 2021, according to SBA data as of April 25.
Beyond restaurants and bars, the SBA is allowing food trucks, caterers, cafes and some distilleries, breweries and inns to apply for the grants. Business owners can have up to 20 locations, and franchisees for major chains may apply. Public companies aren’t eligible, nor are live-music venues that have applied for funding through the SBA’s program targeting those establishments.
Justin Anthony, co-owner of two bars in Denver, said he had been repeatedly hitting refresh on the SBA’s grants portal to make sure he didn’t miss out on its opening.
“We have compiled every piece of potential documentation that they could require so we have it at the ready,” said Mr. Anthony, who tapped his personal savings to stay afloat during the pandemic. His business partner refinanced her home as sales at their bars fell by more than 60% last year.
Mr. Anthony said he hopes to tap the federal funds to keep going until more customers are fully vaccinated and demand improves.
The grant funds may be used for expenses such as payroll costs, business supplies and construction of outdoor seating.
Restaurant sales have improved from steep declines during the winter, when many states imposed fresh restrictions to try to curb the virus’s spread. Still, food businesses have continued to suffer. Nearly 14,200 restaurants closed for good this year through March, according to market-research firm Datassential.
Patrick Kelley, associate administrator of the SBA’s Office of Capital Access, said during a recent training with restaurant owners that funding for the grants will likely run out in its first phase without all eligible applicants receiving money. Mr. Kelley said the agency was working to ensure business owners got their grants as quickly as possible without it being distributed irresponsibly.
“The guiding principle is that the most amount of relief goes to as many businesses in as short amount of time,” Mr. Kelley said.
If funding is exhausted, Congress would need to allocate additional money for the program to continue.
The SBA has said it would process and fund certain priority groups through the first 21 days of the grant program. Those groups include businesses that are majority owned by women, veterans or people who are socially and economically disadvantaged. Following the priority period, the agency will fund other applications on a first-come, first-served basis.
The SBA earlier announced a new type of partnership to allow businesses to use their point-of-sale service providers to fill applications for the grant program. The collaborating providers are Clover, NCR Corp., Square and Toast.
SBA Administrator Isabel Guzman in a statement said the partnerships are an effort “to meet small businesses where they are, instead of waiting for them to come to us.”