We are living in unprecedented times where the new normal now includes social distancing, staying and working from home.
These headwinds have changed all aspects of our lives, and we are still adjusting to the new normal.
Small businesses are no different, and the cataclysmic changes we’re still working through threaten to change their landscape forever.
To give you an idea of the scale of what has already happened: A new study by economists at the University of Illinois, Harvard Business School, Harvard University and the University of Chicago projects that more than 100,000 small businesses have permanently closed since the coronavirus pandemic was declared in March, The Washington Post reports.
For comparison, Detroit was home to 62,000 small businesses as of 2012. The country has already lost more businesses than the city has. It seems certain more will fail.
Small businesses are one of the engines of America’s economy and major sources of employment. The Small Business Administration reports that small businesses account for 1.5 million new jobs annually. This translates into another source of revenue while providing employment opportunities millions of Americans.
And with 62,000 small businesses and 152,000 in Detroit and Michigan (2012 U.S. Census), respectively, entrepreneurs provide a revenue and jobs for across the city and state.
Succeeding in a small business is difficult in the best of times. In a “normal” economy, 50 percent of small businesses will not make it beyond 12 months after starting while 80 percent, according to Bloomberg, don’t survive beyond 18 months.
This is no longer a “normal” economy.
And the fact is, many small businesses will struggle and quite frankly, many more will fail.
In a battle for survival, what can small businesses do today?
Understand cash flow: Now’s the time to closely examine current cash flow needs. Identify short-term resource opportunities, including grants, loans, et. al. based on financial gaps. If you haven’t already, seek to work with your financial institutions to renegotiate current terms, i.e. rent, payment terms, etc. These institutions will be willing to work with you because they have a vested interest in your success.
Examine all costs and expenses: Review financials and determine what’s really necessary to support your business versus what’s more aspirational. It’s time to analyze and reduce costs which you don’t need.
Double-down with customers and business partners: Be there for customers and business partners. Show empathy, compassion, flexibility and understanding. People appreciate knowing “we’re all in this together.”
Evaluate and adjust your business model, if necessary: Is your business model still relevant? Technology is an enabler. Does your business effectively integrate it as part of its overall operational model? Just like schools are now using online learning tools, is your business leveraging technology effectively, and are there new ways to reach your customers?
Stay home, healthy and be engaged: Use this time to reach out to others and plan for the future. Have online meetings, check on each other and don’t be afraid to ask for advice.
Though many small businesses have taken advantage of programs that offer financial lifelines. But more of them should be exploring the options
The Paycheck Protection Program has received by far the most attention (and it still has money available), but other sources of support are out there and more programs are being created by governments, foundations and others every day.
The Michigan Small Business Relief Program is offering $20 million, $10 million each for loans and grants, to those businesses impacted by COVID-19.
Immediate loans to small businesses are available to one or more Community Development Financial Institutions or a licensed SBA not-for-profit institution. These loans, for eligible borrowers, range from $50,000 and cap at $200,000.
MEDC Grant funding, which are non-repayable funds with compliance and reporting requirements, is available for specific projects. It offers funding up to $10,000 to one or more local economic development organizations or nonprofit economic development organizations to support certain small businesses statewide experiencing financial hardship due to the coronavirus situation.
The SBA is offering the Economic Disaster Loan program for distressed businesses. Up to $2 million of financial assistance are available to small businesses or private, nonprofit organizations facing financial hardships stemming from this disaster. Additionally, Michigan Women forward announced in partnership with the Michigan Economic Development Corp. (MEDC), a new $1.5 million fund geared toward struggling small businesses.
And as with the aforementioned programs, you are encouraged to contact your local MEDC, SBA office or other funding agencies for more information.
Remember, we’re all in this together!
Mark S. Lee is Founder, President & CEO, The LEE Group, and can be heard “In the Conference Room”, Sundays, 11 am, on 910am, and you can listen to “Small Talk with Mark S. Lee” podcasts at leegroupinnovation.com/
We are living in unprecedented times where the new normal now includes social distancing, staying and working from home.
These headwinds of change are significant and require adjustments to our daily routines.
Small businesses are no different.
They provide a major source of employment and are economic generators across the overall landscape. To wit, the Small Business Administration (SBA) reports that small businesses account for 1.5 million jobs annually and approximately 64% of new jobs created in the U.S. This translates into another source of revenue while providing employment opportunities millions of Americans.
And with 62,000 small businesses and 152,000 in Detroit and Michigan (2012 U.S. Census), respectively, entrepreneurs provide a revenue and jobs for across the city and state.
In a “normal” economy, 50% (SBA) of small businesses will not make it beyond 12 months after starting while 80%, according to Bloomberg, won’t survive beyond 18 months.
This is no longer a “normal” economy.
And the fact is, many small businesses will struggle and quite frankly, some won’t survive.
In a battle for survival, what can small businesses do today?
- Understand cash flow: Now’s the time to closely examine current cash flow needs. Identify short-term resource opportunities, including grants, loans, et. al. based on financial gaps. Additionally, begin working with your financial institution(s) to renegotiate current terms, i.e. rent, payment terms, etc. These institutions will be willing to work with you because they have a vested interest in their client’s success.
- Examine all costs and expenses: Review financials and determine what’s really necessary to support your business versus what’s more aspirational. It’s time to analyze and reduce costs which you don’t need.
- Double-down with customers and business partners: Be there for customers and business partners. Show empathy, compassion, flexibility and understanding. People will appreciate knowing “we’re all in this together.”
- Evaluate and adjust your business model, if necessary: Is your business model still relevant? Technology is an enabler and does your business effectively integrate it as part of its overall operational model. Just like schools are now using online learning tools, is your business leveraging technology effectively.
- Stay home, healthy and be engaged: Use this time to reach out to others and plan for the future. Have online meetings, check on each other and don’t be afraid to ask for advice.
And what resources are currently available?
Federal, state, regional and local programs are becoming available, but here are a couple which were recently launched. The Michigan Small Business Relief Program is offering $20 million, $10 million each for loans and grants, to those businesses impacted by COVID-19.
Immediate loans to small businesses will be available to one or more Community Development Financial Institutions or a licensed SBA not-for-profit institutions. These loans, for eligible borrowers, will range from $50,000 and will cap at $200,000.
Grant funding, which are non-repayable funds with compliance and reporting requirements, is available for specific projects. It offers funding up to $10,000 to one or more local economic development organizations or nonprofit economic development organizations to support certain small businesses statewide experiencing financial hardship due to the corona virus situation.
The SBA is offering the Economic Disaster Loan program for distressed businesses. Up to $2 million of financial assistance are available to small businesses or private, non-profit organizations facing financial hardships stemming from this disaster.
And as with the aforementioned programs, you are encouraged to contact your local MEDC and/or SBA office or other funding agencies for more information.
Remember, we’re all in this together!
Mark S. Lee is Founder, President & CEO, The LEE Group, and can be heard “In the Conference Room”, Sundays, 11 am, on 910am, and you can listen to “Small Talk with Mark S. Lee” podcasts at leegroupinnovation.com
