Alignable: Road to Recovery Report (December 2021)

Q4 Brings Major Recovery Boost: But, Will It Last?

• Significant Negative Impact Drops Below 20%
• Customers & Revenue Return for the Holidays
• Inflation Concerns Persist
• Then there’s Omicron: 44% Fear its Effect on Biz
• And Twice as Many Worry About Govt. Shutdowns

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Table of Contents:

• COVID’s Current Impact
• Reopening Status
• Customers and Revenue  
• Operating and Employee Costs
• Alignable Research Center and Poll Demographics

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Overview

This month’s report features data collected from 5,818 small business owners between 12/4/21 to 12/26/21, along with historical data from over 660,000 responses collected since March 2020. We’re tracking how the Coronavirus Crisis has impacted the Small Businesses Economy across the United States and Canada, because we believe locally owned businesses are the backbone of the global economy.

For more details about our research, including the methodology behind our polls, please contact Chuck Casto at chuck@alignable.com.

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COVID RECOVERY REIGNITES 

• Significant Negative Impact Drops 14% to 19%
• 42% Are Still Experiencing Some Negative Impact
• Anticipated “Full Recovery” Q2 2023

The holiday spirit was reflected in this month’s report with a significant positive shift in COVID’s impact. Those experiencing significant negative financial effects from the pandemic dropped below 20% for the first time since it started.   

Overall, 42% of business owners report still feeling some negative impact on their businesses, which is a decrease of 21% since last month! 

While this news is very encouraging, it seems that every time we start to feel some semblance of relief, another challenge comes our way. 

As we get ready to enter 2022, the concern looming on the horizon is clearly the Omicron variant: how it’s spreading, and what impact it might have on our overall small business recovery. 

This is our first month tracking concerns around this latest variant and at this point opinions are split right down the middle -- with 44% expressing some concern, and 44% saying they have no concerns at all.  Not surprisingly, the industries with small business owners expressing the greatest worries include: travel, restaurants, personal services/massage therapy, sports/gyms, & event planners.

And those with the lowest levels of concern include: SMBs in finance, real estate, and religious organizations.

Here are a few direct quotes from small business owners representing both sides of the Omicron debate:

“We have two restaurants and an event space in the NYC area – and we still haven’t recovered from the first two waves of COVID. And now this one is causing cancelations left and right. Our staff is worried we’ll be forced to close again because of how fast Omicron is spreading and how fearful patrons are again. This might be the final nail in the coffin for our businesses.”

“Every time they ‘find’ something new, it impacts the travel business. We cannot keep living in fear.”

“I own a wedding dress shop in Pennsylvania. As of today, we have not seen any effects with regard to brides canceling their appointments and our staff is fully vaccinated and masked. Business is quite busy. We’ve taken great strides to make sure each client is made comfortable and everyone is socially distanced. Has it been daunting, yes. But after going through COVID and weathering that shutdown, I honestly have no fear as I did last year. I’ve been in the retail space for over 30 years and I’ve learned that you can't let fear drive you. We learn, we adjust, our hours have been modified, as well, and all of my employees are back with me serving our clients.”

“We’re sick and tired of worrying about COVID. Politicians better not start shutting down some businesses again and leaving others open. Look how well that worked! We still have this thing terrorizing people almost two years later.”

“It’s not the disease – it’s the helpless governments. They’ve changed their tune on this latest variant every couple of days. They don’t really know what to say.”

“Having had the original COVID, I no longer pay attention to COVID news.”

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STATE OF THE SMALL BUSINESS ECONOMY 

• Fully Open Businesses Rise to Highest Level Yet
• Inflation Is The No. 1 Worry…But Reclosure Concerns Double
• Customers & Revenue Rebound

Recovery of the Small Business Economy happens when businesses are open, customers and revenues return to pre-COVID levels, and margins return to levels which enable a business to sustain itself without outside relief or support.  So, how are we are doing across that basic formula?  Much better than last month.

Are Businesses Open?

This month’s data showed a rebound in businesses fully reopened with 78% now reporting they’re fully reopened. We had hoped to see this number climb towards 80% before the end of the year in order to see a holiday rebound – we saw that, for sure.  The jury is still out, though, on whether or not we can springboard from these new levels to grow from here in 2022. 

What’s Most Concerning?

Inflation continues to be the leading recovery concern with government reclosures close behind.  With worries growing over the Omicron virus case levels rising and supply-chain challenges continuing, it seems as though these two concerns will be with us for quite some time.

Compared to November, news of Omicron doubled the fears of potential government reclosures among poll-takers – jumping from 11% to 23%. In fact, that concern ranked fourth last month and now is second. 

However, it’s unclear to what extent the Omicron case surge will have on the supply chain. 

These quotes from business owners tell us what’s really going on out there and amplify members’ frustrations about inflation, the cost of supplies, related supply chain issues, and the Omicron threat.

“Still having major supply chain issues. Can’t get some of the products I want and there are delays for others. Not sure when it’ll get better.”

“Inflation’s closing a lot of small businesses.”

“I don't want businesses to close because of this new Omicron variant. It's not fair to responsible people who have worn face masks, socially distanced and got vaccinated.”

“I’m slowly shutting down.”

“I am not recovering.”

“Inflation’s going up, but my revenues aren’t.”

“I need new customers.”

“Tired of government getting in the way we run our business.”

“All of the above is my answer here. Are you joking?  It’s all terrible.”

“Inflation’s not a big problem for my business, but it is for me. I have a large family and costs are going way up for what they need. But I’m still making the same.

“I never lost income, so I don’t have to recover.”

Are Customers Returning?  

Customers

What we’ve been looking for is continued movement down on the left side of the chart with increases on the right.  This month, our wish was granted. All of the categories below 90% declined and the 90%+ category saw its largest (and most significant) increase since the outbreak began. 

Looking out 30 days, prospects remain strong with business owners anticipating continued strength in the number of customers returning. 

How About The Money?

Customers coming through the door is a critical first step; however, getting them to open their wallets and spend at levels on par with pre-COVID levels is what matters most. 

Here, too, we’re looking for an ongoing shift from the left to the right, and this past month we got it. 

We saw significant improvement for all businesses reporting less than 75% of pre-COVID revenues and significant growth in those reporting revenues in excess of 90%. 

When Can We Claim Mission Accomplished?

It’s clearly different by industry. And many still have a long, long way to go.

What we do know is during each of the past 6 months that we’ve been tracking recovery predictions, the prospects have continued to shift out signaling a longer overall recovery period. 

Right now, 43% of all businesses say they’re already at pre-COVID levels (and that was up 16% from 27% last month), which clearly tells us that the holidays have paid off for many.

Looking ahead, the picture appears even brighter in the eyes of our poll-takers, as 50% anticipate being at pre-COVID levels of revenue in Q1 2022.

While that’s all terrific, we still need to put this in its proper perspective. Our internal level where we feel confident saying “Mission Accomplished” is 80%, and currently businesses don’t anticipate hitting that level until sometime in mid-2023. 

Drilling down into the industries you see even more of the “great news, meh news” story here.  The fact that almost every sector showed recovery improvement from November to December is astounding -- and truly wonderful to behold below.

However, the “meh” news is that very few of these industries cross the 50% mark at this point, which means the majority still have a lot of work ahead of them, especially given the Omicron issue.

So, let’s look at some of the comments our poll-takers made to amplify the true sentiments behind the data.

Overall, there was much better news in terms of customer counts and revenue than we’ve seen in nearly two years. However, many still struggle, and for some, this burst of consumer activity just wasn’t enough to stay afloat.  Others are already bracing for the worst with Omicron having negative effects already.

“More husbands are at home screwing up projects. I get called in to fix them. Sales are up!”

“There’s a construction boom. Construction and home sales have increased in my area.”

“As a therapist, I have more clients than I can see. Sadly, the more fear there is out there, the more people want to see me.”

“I’m a physician, so as new variants like Omicron appear, my business goes up.”

“People have COVID cabin fever and they just had to get out and shop. Was good for me, as a lot of my competitors gave up earlier this year or retired.”

“I’m a realtor in a rural area, and I’m seeing another surge in people moving out of the cities and relocating out here. For residential real estate, it has helped propel the market. People want their own space that’s safe. They don't want to live in a crowded apartment building.”

“I’m in the wine industry, and sales go up the more depressed people are. I’m doing well.”

“Elective surgery might be suspended again. That’s not good for plastic surgeons.”

“During the last shutdown, we were inundated with collectible cars. Since then, we’ve been able to sell more and total revenue is somewhat higher, too.”

“Golf is a sport where you can be socially distant. I’ve had more parents register their children because of that.”

“I’m having the busiest year in auto sales ever.”

“Extra money is being spent on renovations instead of travel. That’s hurting my travel business.”

“I’ve seen a lift in sales and just acquired a new catering business.”

“My business is up, because I can do even more work remotely.”

“My bike shop is busier than average, and just a bit down from pre-pandemic times.”

“I had to give up my business.”

“COVID has closed my business, as I received zero help from the government.”

“We’re close to closing after 35 years.”

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Watching The Bottom Line 

Operating margin provides the extra cash flow to pay down debts, reinvest in the business, and build up cash reserves for the next challenging time.

Here’s our deep dive into the margin busters of today’s small business economy:  

• The cost of supplies and inventory
• The ability for businesses to pass along increased costs to customers
• The cost and availability of labor

Cost of Supplies & Inventory

This month, 87% of businesses are reporting inventory and supplies costing more than pre-COVID levels with 31% indicating their costs were more than 25% higher. These figures are just a tad lower than last month (87% vs. 89%, and 31% vs. 34%), but that doesn’t show much improvement, when supply issues are feeding the No. 1 recovery issue in N. America. Here’s the overall distribution: 

Passing Costs Along to Customers

One of the only ways to counter inflation is by raising costs passed along to customers.  However, when you’re trying to attract new customers and generate repeat business in a competitive market, it’s not always possible. Simply comparing the distribution on the chart to the one above, once can see the current imbalance with only 10% of businesses reporting having raised prices more than 25% compared to the 31% of businesses above hit with major spikes in supply costs.  

Employee Costs

One of the other well-reported challenges is finding employees and the increased burden higher wages have on economic recovery. Especially, with the costs of most consumer goods on the rise, employees are looking for higher wages simply to maintain their lifestyles.

Shown below, 43% of business owners are finding it challenging to find or rehire employees in comparison to pre-COVID levels. 

And for those fortunate enough to find employees, 62% are reporting having to pay higher wages:

As we continue to track the financial impact and recovery of the small business economy from this pandemic, we learn for the first time what to expect as we encounter similar situations down the road. 

In short, there are many similarities to other natural disasters with regard to the duration and ebbs and flows of economic recovery.

We look towards 2022 with renewed optimism for the future and the realization we still have quite a journey ahead of us before the small business economy is back on firm ground across the board.  

Here’s hoping 2022 can be a year of strong recovery for small business owners across the globe, and through it all, we’ll be here tracking its ups and downs and bringing it to you for as long as the recovery takes! 

Here’s to a Happy and Healthy 2022! 

And as always… remember to keep it local. #OneMainStreet

The Alignable Team

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ABOUT THE ALIGNABLE RESEARCH CENTER 

Alignable is the largest online referral network for small businesses with 7 million+ members across North America. 

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.

For more details about any of these findings, please contact Chuck Casto at chuck@alignable.com.