How Coronavirus Can (and probably will) Affect Small Businesses
As I’m sure most of you are aware by now, the Coronavirus has spread like wildfire across the majority of Europe and Asia, devastating countries such as China, Italy, and Spain. Unfortunately, it has also found its way here, to our home, the United States. Along with sickness and death, Coronavirus has brought with it, a sense of panic. The worst affected areas so far have been in the pacific Northwest and the areas surrounding New York City, where life and business have essentially come to a halt. Which brings me to the point of this piece; how does this all shake out from the small business owner’s perspective? And how does that affect the population in general?
A small business owner myself, I have the opportunity to witness first hand how this outbreak has, and will continue to, affect the small business owner’s ability to create capital. Luckily, DiPietro Landscape LLC is involved in an industry that is not nearly as affected in our ability to work, as other small businesses. We seldom work in conjunction with a large number of people, nor do we work in super busy areas. Therefore, we don’t have to completely shut down our operations. That being said, there is still a sense of urgency in this trying time. People are holding onto cash, unwilling to spend on nonessential products and services, making it more difficult to attract new leads and book more jobs. Fortunately, landscaping, and DiPietro Landscape LLC in particular, is a low overhead business. We don’t have monthly payments on equipment, our work is low risk so the insurance costs aren’t insane, and we don’t have to keep inventory on hand. The same cannot be said for restaurant owners, bar owners, or owners of essentially any venue that specializes in entertainment.
These people are forced to essentially shut down their operations. With nobody coming in to eat, drink, or enjoy their entertainment, cash flow is down to nothing. Without ample savings, we could see these business owners close their doors for good in less than a month. The mortgage/lease payments are still due, insurance providers expect their money, unsold inventory expires, loans for equipment and furnishings still need to be paid. These costs add up quickly and providers/lenders don’t care if the small business owner isn’t making any money. The financial strain on these business owners would be enough to make most people wave the metaphorical white flag. Now add the emotional burden of no longer being able to provide their employees with a steady income either.
Roughly forty-eight percent of jobs in the United States are created through small businesses, according to the US Census Bureau, 2014. When times are tough, the two easiest ways to cut costs are through labor and marketing. Companies don’t want to cut their marketing and advertising budgets, because that’s what brings money in the door. Therefore, the most logical thing to do in these cases is cut people’s hours or lay them off. That presents a problem for small businesses however, because they need the employees they have to complete the work that needs to be done. Large businesses can decrease their labor costs by cutting benefits and incentives or automating jobs that they previously needed human beings to complete. Small businesses typically don’t have the benefit packages or research and development budgets of the larger businesses. This is due to the fact that they need to operate at larger profit margins than the big businesses in order to sustain the business as well as provide a living for the owner(s). For example, a business doing 500k a year in gross sales would need to make an 8% profit for the owner to take home 40k.
For a business doing 50 million dollars a year in gross sales, that figure drops to .008% profit margin for the business owner to take home that same 40k. This may bring up the question of: why support small businesses in the first place? Wouldn’t we be better off with only big businesses since everybody would receive better benefits, pay, etc? Well, that is a whole discussion for another piece but in short, small businesses play a large part in stimulating local economies by providing jobs and tax dollars, particularly in smaller communities where big businesses don’t want to open up shop. Small businesses end up caught between a rock and a hard place in times like now. Do they lay people off, cut their marketing budgets, or do neither and hope to bounce back quickly? Any or all of these routes could very likely lead to the demise of the business. Without small businesses, countless people would become unemployed. With greater unemployment, comes greater numbers of businesses folding, and the economy just spirals the drain into a depression.
Really, what I’m trying to say with this piece is, support your local businesses. The Ford Motor Companies and McDonalds of the world will be fine. They can cut costs and if worst comes to worst, somebody will invest or bail them out. However, your neighbor, the local shops around town, and the great community establishments we all love and enjoy, may not be so fortunate. Until things get better and the Coronavirus has run its course, order out, shop local, and check in on your neighbors.
Written by Anthony DiPietro, Owner and Founder of DiPietro Landscape LLC
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