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Small Business Saturday is just around the corner again. In a year that was far from normal, many of us may think long and hard about whether and how we will follow the 10-year tradition of patronizing local small businesses. How we shop is very important. The economic health of our country at home and abroad is based in large part on the health and wellbeing of our last great economic engine: small businesses.
Small businesses are completely dependent on incoming revenues for their survival. The average small business got caught in this pandemic with a month or two in reserve. Those who are still hanging get by, but they need your earnings to keep going. Did you know that 75% of online and brick-and-mortar stores expect the fourth quarter to have the highest earnings of the year? For many SMEs, the fourth quarter is a business district.
There is a saying: As small businesses go, so do business
Unfortunately, much of what we read in the news is about public companies because their data is readily available. But that's less than half the history of our economy. Small, privately owned, owner-managed businesses offer opportunities. Small to medium-sized businesses, also known as SMBs, make up 99% of all US businesses. They employ half of our workforce, provide first and last jobs for most of our population, make up 85% of US exporters, are the source of most innovation, and generate half the annual revenue for the US economy. SMB owners are directly connected to their communities and their employees and create value through welding capital. Without a healthy, growing small business economy, we all suffer.
This Covid crisis hits SMEs like a neutron bomb
Many SMEs have already closed for good. If these losses are not verified, we will likely see effects that can last a generation or more.
In normal years, 42% of SMB failures occur because owners cannot find enough customers. That number is likely to be higher this year as customers steer clear of local retailers or move away from online shopping at easy-to-use large retailers and ordering platforms. The SMEs that are still open urgently need our support.
Are you looking for proof of this? Consider the 2008 financial crisis: the main burden was confined to banks and other financial institutions, insurance companies, automakers, and construction companies. In this cycle, SME failures outpaced small business beginnings, and economists at the time wondered, "Did we kill entrepreneurship?" It wasn't until 2015-2017, seven to nine years later, that we got back on track economically. In comparison, the Covid crisis is hitting virtually every sector of our SME economy as more business closings are reported every day.
Consider the social upheaval that comes with a business closure. Suppliers lose too. For every company that is forced to close, another three to eight companies are likely to go under. The average small business employs four to five people, so every time it closes, another four to five people will be unemployed and another four to five families who may not be able to pay their mortgage or put groceries on the table. Local communities report SMB shutdowns between -18% and -65%, and many have disappeared for good. Think about it: half of the stores and businesses in your city could be closed. And could never open it again. Many who continue to work for the time being do so at a significantly reduced pace and are doing their best to find out how to open up new sources of income. And at the moment we are faced with rising Covid infection rates. More than half of the states report peaks two to four times as high as before. There is no question that this will have an increasingly negative impact on small businesses.
Related Topics: 10 Ways For Small Businesses To Dominate Local Markets
I hope I have your attention What can you personally do to help? Much!
Buy locally. Avoid the temptation to simply shop online at the major retailers and shopping platforms. Instead, look for small businesses that make the goods and services you need and buy directly from them – on Saturday and every day after that. Keep income, jobs, profits and tax dollars in local communities.
Look for ways to spend money on site, however much you can afford it (and of course taking into account Covid's safety precautions). Find a project that needs to be done and hire a local architect, engineer and construction company to carry out the work. Buy supplies from local stores. Build a BBQ or patio, paint a room, or buy new furniture. Go to the local farmers market. Get a haircut. Rent a limo for a private tour of the Christmas lights. Look for local artists and galleries, and buy artwork to decorate the new home office. Get new clothes to freshen up your work-at-home wardrobe.
When you think about donating, write more than just a check. Pursue a multiplier effect. Buy goods from a small business to donate – clothing, groceries, protective gear, pet supplies – then find a local charity to get those contributions. If you're looking to write checks, check out Crowdfunding Gifts and Crowdfunding Loans.
Organize a meeting for small business owners (again with social distancing and other mitigating measures) and bring people together to tackle this crisis as a community. Offer part-time work to an unemployed neighbor. Volunteer to help an SME. Visit local businesses and take time to meet the owner. Really talk about what's going on. So many times a word of encouragement or good advice can mean the difference between throwing in the towel and moving on. Help local organizations that encourage aspiring entrepreneurs to do business. We will need all of the new participants we can get.
Write letters to Congress and encourage your neighbors to do the same. You must act now to save small businesses. Instead of giveaways that our children and grandchildren pay the bill for, encourage them to implement a TARP for Small Business program. TARP worked brilliantly in 2008. The federal government has loaned billions to large companies and got their money plus interest back within 10 years. We can do the same now for SMEs. When we save SMEs, we save jobs and keep the economy moving. But we must act now before we lose another million SMEs.
Andi Gray is President of Strategy Leaders (www.strategyleaders.com), a management consultancy. Gray began his career in sales, marketing, and new business development at Xerox, American Express, and Contel. Gray earned an Executive MBA from Columbia University and did research on drivers of success and failure for entrepreneurial companies. Gray writes a weekly column called "Ask Andi," offering practical advice to business owners. She also writes a monthly column in Chauffeur Driven Magazine. Gray is also a co-founder of the BOHCA (Business Owners Hemp and Cannabis Association) network group, where she helps industry-specific owners grow their business through strategic planning.