Popular summer vacation spot Provincetown, Massachusetts, is taking Covid-19 seriously, mandating mask-wearing and limiting the number of customers in stores, but consumers are still out. (Photo by Zach D Roberts/NurPhoto via Getty Images)
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Small businesses are feeling somewhat more optimistic, adapting operations to the new economic and public health normal as coronavirus cases continue to rise around the county. But even in the face of progress, the worst is far from over for Main Street, which is facing an unprecedented and rocky recovery.
Small business confidence ticked up in the third quarter of the year, to 53 from a record low of 49 in Q2, according to the CNBC|SurveyMonkey Small Business Survey. Even with the rebound, the confidence reading is the second-lowest score in the survey’s history and eight points off where confidence stood to start the year.
“This is not the V-shaped recovery we were hoping for. Things are certainly better than they were last quarter, but far off their marks from what we had seen earlier this year and last year,” said Laura Wronski, research scientist at SurveyMonkey. “These small businesses are going to have long-lasting effects from this pandemic.”
The operating environment on Main Street has been bleak, even with government loan assistance like the Paycheck Protection Program meant to offer a lifeline to struggling businesses. The House Small Business Committee last month reported 110,000 small businesses had closed permanently and another 7.5 million across the country were facing the same fate. Enhanced unemployment benefits that gave consumers more spending power in recent months also expired at the end of July, which stands to impact businesses of all sizes.
Just 36% of businesses say that current operating conditions are “good” in this quarter’s survey, which is a major improvement from last quarter’s 18%. But nearly one-fourth say conditions are bad — three times the number who said conditions were poor to kick off the year.
The survey was conducted from July 20-27 among more than 2,000 small business owners nationwide.
“I think that small business owners see that economics are opening and we are not going to be moving backwards,” said Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, a Main Street advocacy group. “They see a light at the end of the tunnel.”
The smallest small businesses are the most likely to describe business conditions as “bad.”
CNBC|SurveyMonkey Q3 Small Business Survey
More business owners are also reporting they will be able to stay afloat for a longer period of time, with nearly two-thirds reporting they are able to continue to operate for more than a year under current conditions, doubling from May. The outlook has been buoyed, at least in part, by government assistance, but the PPP expired Saturday for businesses who have not yet applied for a loan. Lawmakers in Washington, D.C., have yet to reach any agreement over a new aid package for Americans, including new loan programs and second-draw PPP loans for businesses in need. President Trump’s executive orders signed over the weekend, which include unemployment assistance, a payroll tax hiatus, student loan relief and eviction protection, do not cover small business.
“These business owners have learned to do more with less,” Kerrigan said. “And do more with technology, which has allowed many of them to operate more efficiently to innovate more and think of new ways to serve customers, while also cutting costs.”
A quarter of entrepreneurs surveyed who had to lay off or furlough workers due to shutdowns have hired workers back, with a third saying they’ve hired some workers back, and 15% reporting they have not hired anyone back and do not plan to.
The pandemic has altered business operations in a major way for many. The survey finds that nearly 70% expect the pandemic will likely have permanent impacts on the way they run their businesses, with more than half saying they’ve had to spend money on new virus-related safety measures. A third say these new precautions are eating directly into profits, but only 9% have passed those costs on to customers.
“People are making changes to adjust for all of the turmoil in recent months,” Wronski said, and she added that optimism may be increasing simply because we know a bit more about Covid-19 as a nation than we did in the previous survey period.
“A significant minority of businesses [13%] report that they are still shut down, and most who have laid off workers have hired back some or all of them,” said the SurveyMonkey research scientist. “Last quarter, businesses were shut down and most were sheltering in place — we didn’t know all that we know now about how to prevent the spread of Covid. As a country, we don’t have the virus under control, but we have more information on what we can all do as individuals—wearing a mask, keeping six feet apart — to keep everyone safe. Taking those precautions is what’s allowing businesses to reopen.””
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The CNBC|SurveyMonkey Small Business Survey for Q3 2020 was conducted across over 2,000 small business owners between July 20-July 27. The survey is conducted quarterly using SurveyMonkey‘s online platform and based on its survey methodology. The Small Business Confidence Index is a 100-point score based on responses to eight key questions. A reading of zero indicates no confidence, and a score of 100 indicates perfect confidence. The modeled error estimate for this survey is plus or minus 2.5 percentage points.