What is the future of small businesses in the pandemic era?
As of this posting, the coronavirus is once again rampaging through the country, with the number of cases on the rise. The pandemic pressure is increasing—and small business owners are significantly impacted. According to a report, Emotional Metrics: Small business mindsets during the pandemic, conducted by Xero, two-thirds of small business owners have reported being concerned about their and their employees’ mental health and wellbeing. The report shows the mental health ups and downs we’ve all been going through while the coronavirus seesawed between spiking out of control and declining.
How are small businesses coping?
I talked to Ben Richmond, U.S. country manager at Xero, where he is responsible for driving growth, to find out more about the report and what it reveals about the future of small businesses.
The pandemic is lasting longer than most of us initially expected. How do you see that impacting small business owners?
Ben Richmond: The indefinite and uncertain nature of the pandemic has created its kind of stress, and it’s more important than ever that we ask how people are doing, listen and take any action in this atypical situation.
When asked about their biggest concerns, the small business owners in the study ranked the mental health and wellbeing of their employees fifth and their own sixth out of six, though I suspect it weighs more heavily on their minds than they admit. How can companies like Xero and small business advocates and mentors help them through these tough times?
Richmond: The crisis revealed a fundamental difference between big and small business—small business is more personal. There are no degrees of separation. The choices are devastatingly difficult because there’s a face and a family attached to every decision on employment, compensation, and whether the business can go on or not. Yet, it’s hard for small business owners to put their hands in the air and ask for help.
In our recent survey of issues and attitudes directly related to the health crisis, nearly 40% said they’ve never even asked an outside advisor for guidance on financial issues related to the virus. Now is the time for small business advocates, mentors, and advisors to reach out to businesses and show how they can help. For us at Xero, this means empowering our community of accountants and bookkeepers to guide and support business owners through recordkeeping and maintaining compliance, business continuity planning, or scenario forecasting.
For employees to flourish, sometimes they need to take time off when they feel stressed or overwhelmed. Last year, we repositioned our sick leave as “wellbeing leave”, so it recognizes that people’s well-being can be physical, mental, spiritual, or emotional. We want our employees to feel comfortable taking leave for whatever reason. And especially now, with the uncertainties of the pandemic, we’ve seen how important it is to take time off to care for your own needs.
The study showed some small business owners were looking for “alternate ways to grow.” Can you share some examples of how they’re pivoting?
Richmond: According to another study conducted by Forrester Consulting on behalf of Xero, The Next Chapter for Small Business, there are six consistent themes [shared by] businesses that thrived during the pandemic:
- Offered a range of products and services. Thriving businesses were most likely to increase their range of products and services offerings during COVID-19 and are likely to continue doing so.
- Customer engagement strategy. These businesses have been more likely to engage with their customers on different digital channels and adopt strategies to acquire and retain customers, including customer engagement tools.
- Operations. They have been more likely to adopt solutions to improve their finances, supply chain, and employee management.
- Technology adoption. They have also shown a higher percentage of online revenue as well as cloud adoption.
- Ecosystem engagement. These companies have been better at leveraging help from governments, partners, and communities, understanding the ecosystems in which their companies exist, the parties involved, and where to go to get help.
- Decision-making drivers. They are more likely to look at customer insights and consult advisors, such as accountants and bookkeepers, before making important business moves.
One of our customers, Museum Hack, based in New York, used to lead small group tours at museums, collecting revenue from public ticket sales, private tours, team building tours, and museum consulting. With their in-person tours on hold due to the pandemic, they’ve gone virtual, pivoting to virtual corporate team-building events. They’ve more than doubled their previous monthly revenue. The company now offers unique virtual experiences, such as events like “tiny campfire,” where they send s’mores kits to corporate employees and bring everyone together for a video call with camp games and ghost stories.
The report indicates most business owners did not think PPP (Paycheck Protection Program) was very successful. They say they need help with cash flow.
Richmond: Cash flow is the lifeline of any business, and when faced with economic uncertainty, maintaining a healthy cash flow can make all the difference to a business’s survival. To maintain a healthy cash flow, we recommend that small businesses work together with a trusted advisor. Small businesses are used to a “do it yourself” mentality, but embracing a “do it together” approach by working alongside an advisor can help them gain a competitive edge.
The PPP loan program was/is complicated, and many businesses needed additional support. Accountants and bookkeepers play a critical role in helping business owners make well-considered decisions to operate successfully. And at Xero, we fast-tracked the release of two new features: Business Snapshot and Short-Term Cash Flow to help COVID-affected businesses stay on top of cash flow.
What’s next? How do you think small businesses will fare in 2021?
Richmond: History has shown that following downturns, there is a business resurgence, coupled with incredible feats of creativity and ingenuity, [leading to an increase in new businesses].
[One way] to help those new businesses set up for success in a digital environment is to lower the barriers to entry to help sole proprietors and new small businesses get started, manage cash flow, and grow during and beyond the pandemic.
Looking at how quickly technology adoption advanced during the pandemic, I believe 2020 became 2025. Right now, there’s no better time for businesses to get online and into the cloud. In the early days of the pandemic, we saw businesses make moves to operate remotely and get set up with the right collaboration tools. While there are many unknowns around when the pandemic will end, business owners now need to shift from surviving to thriving so they can accelerate growth.