Small Businesses Need New Skills, Resources for Evolving Times
While the adage is that nothing is certain but death and taxes, the current reality vexing small businesses is the “boom and bust” cycle that has been aggravated by the still-ongoing COVID-19 pandemic.
Prior to the arrival of the pandemic in January 2020, the U.S. economy was for the most part faring well. There were certainly pockets of stress, such as in retail malls and on Main Street. But then inside just 60 days, a national emergency was declared. Ripples from COVID-19 quickly impacted virtually every facet of the U.S. economy. Non-farm payrolls shed 22.1 million jobs between January 2020 and April 2020,” as reported by the Congressional Research Service.
Two years later, the pandemic continues mutating, but employment has rebounded. The U.S. Bureau of Labor Statistics reported that at the end of the first quarter of 2022 the employment rate declined to 3.6%, approaching pre-pandemic levels. The tight labor market has resulted in an increase in average hourly earnings of 5.6% as of March 31, 2022. Yet those wage increases have not kept pace with inflation, which was 8.5% for the year ending March 31, 2022 ― the highest rate since February 1981. The Bureau of Labor Statistics reports, “... earnings that have been adjusted for changes in consumer prices — decreased 2.6% from February 2021 to February 2022. The change in real average hourly earnings combined with a 0.3 percent increase in the average workweek resulted in a 2.3% decrease in real average weekly earnings over this period.”
Small business entrepreneurs today are navigating an unusual storm fraught with supply chain disruptions and workforce shortages. Populations are migrating out of urban areas, resulting in a greater demand for hybrid or remote work options. Cloud computing allows small businesses to use software to outsource routine administrative tasks, enabling them to take on larger competitors. But to continue being competitive, those business owners must embrace technological advances to deal with the disruption that comes hand-in-hand with innovation.
Some economic headwinds, such as high interest rates, unemployment, and inflation, blow harder during boom or bust business cycles. But aside from the usual headwinds, one of the greatest challenges facing small businesses is the shift in consumer preferences driven by evolving technological advances.
For example, consider a delicatessen that during normal times must determine menu pricing, staffing and supply needs. Additionally in today’s environment, the delicatessen owner must devise digital and other marketing tactics as well as ecommerce delivery strategy. Even though the business is small, the delicatessen owner must manage enterprise risk exposure ― including cyber risk, workers’ comp, general liability and property insurance. Add COVID-19’s supply chain disruption and higher interest rates, and operating that delicatessen becomes a formidable task.
Out of every period of adversity comes challenges and opportunities. Small business owners need to objectively review their capabilities to deliver on their business plan. They may need to acquire new skills or add resources to remain competitive.
And for the would-be entrepreneur who sees a better way to provide a product or service, this is an opportune time to start a business ― if they have the right skill set and work ethic. There may be a new normal to contend with, but the old recipe of inspiration and perspiration is still as valid as ever.
It’s a good time to review your business plan, in light of emerging risks and opportunities for growth. Our free SizeUp Competitive Analysis Tool can help you take a critical look at your company and give you valuable insight to make well-informed decisions.