A small business that plans conferences for corporations and organizations is feeling the pain. Three conferences were cancelled just last week. So is a small business retailer who just found out she can’t get any more of her most popular item, a signature baby blanket, for the foreseeable future because her Chinese manufacturer has “temporarily closed.” And a janitorial company was having trouble purchasing cleaning supplies and was fighting off price gauging amid shortages of supplies.
These are all small businesses in South Florida, but their stories are not unique. You don’t have to be a Fortune 500 hotel company, a major healthcare organization, or an airline or a cruise line to be feeling the effects of the coronavirus on your business.
To be sure, small businesses are on the front lines. Many are already feeling the hits of the rapidly spreading global epidemic, whether it is a direct assault on their business, such as cancellations, or disruptions in supply chains, or jittery consumers. While there have only been a small handful of confirmed cases of Coronavirus, or COVID-19, in South Florida as this is being published, the Centers for Disease Control has warned of that the spread is inevitable and a significant disruption to our lives should be expected and that these changes will has direct economic reverberations. Small businesses in the hardest-hit U.S. area, the Seattle area, are already reporting distress.
RECESSION FEARS MOUNT
It’s still too early to see widespread impact in the U.S. economic data, but large companies such as Apple, Microsoft, GE and a host of others have already signaled that their earnings will likely be hit. What’s more, a survey of the Federal Reserve’s business contacts released last week, known as the Beige Book, found that half the bank’s 12 districts were reporting consequences from the coronavirus.
And the economic impact will likely extend much further, because now some economists are predicting there is a 50% to 75% chance of a recession in the U.S. within the next year. The U.S. could already be in a recession but it is not showing in the numbers yet. That would end the e longest economic expansion in economic history.
There are steps small businesses can take now to prepare for an economic downturn. But before we get to that, here’s some good news:
CONGRESS’ BILL HELPS SMALL BUSINESSES
Small businesses that are already struggling because of the novel coronavirus will likely see some help in an emergency spending bill signed today morning by President Donald Trump.
Language in the $8.3 billion bill says “coronavirus shall be deemed to be a disaster.” That means, similar to the impact of a hurricane, struggling businesses can apply for a low interest loan from the government to get by during and after the “disaster.” Examples may include restaurants in hard-hit areas hurting due to lack of customers, manufacturing businesses that can’t get parts, and offices that close because employees get sick.
The Washington Post reported the bill includes $1 billion in loan subsidies for small businesses aimed at allowing the Small Business Administration to issue an estimated $7 billion in low-interest loans.
Another helpful move: The Fed cut interest rates this week by the biggest margin since the Great Recession.
WAYS TO PREPARE NOW
So help is on the way, and in the meantime, NFIB has some tips that small businesses can do right now, including encouraging sick employees to stay home, reassessing workplace cleanliness and hygiene etiquette and allowing work-at home solutions.
According to SmallBizTrends, citing a survey from Veem, “27% of businesses expect the coronavirus to have a moderate to high impact on their revenue. Another 30% expect the virus to have a moderate to high impact on their supply chain. Even more revealing, 52% say they are taking measures to prepare for an economic slowdown. They are increasing pricing, changing suppliers, decreasing operational costs or protecting cash flow.”
Those are all smart moves. Last fall, Growbiz published a posts about recession-proofing your small business, such as taking a hard look at your books, diversifying revenue streams, renegotiating with vendors, and collecting on past dues. It might be a good move to give it another read now. If your company is an early-stage business that was counting on venture capital to help power it, you might want buckle down the hatches and take a look at this advice also — and perhaps taking another path to profitability — as investors also pull back in hard times.
In future posts, Growbiz will cover more about how small businesses can prepare now for an economic downturn. We’ll also try to keep you abreast of developments in small business disaster assistance. As always, we’d love to hear from you if you’d like to share your strategy for weathering these challenging times.